Omaha, Nebraska: Billionaire Warren Buffett said it was unlikely that the United States and China would come to loggerheads on trade and believed the countries would avoid doing “something extremely foolish.”
“The United States and China are going to be the two superpowers of the world, economically and in other ways, for a long, long, long time,” Buffett said, and that any tensions should not jeopardise the win-win benefits from trade. He was speaking at the Berkshire Hathaway Inc’s annual shareholder meeting on Saturday.
“It is just too big and too obvious ... that the benefits are huge and the world is dependent on it in a major way for its progress, that two intelligent countries [would] do something extremely foolish,” he said. “We both may do things that are mildly foolish from time to time.” The Trump administration has drawn a hard line in trade talks with Beijing, demanding a $200 billion (Dh734 billion) cut in the Chinese trade surplus with the United States, sharply lower tariffs and advanced technology subsidies, people familiar with the talks said on Friday.
Buffett suggested US President Donald Trump should be an “educator-in-chief” on the invisible benefits of trade.
Munger, meanwhile, answered a question on steel tariffs imposed by the White House by acknowledging that US producers are hurting. “Even Donald Trump can be right on some of this stuff,” he said.
Buffett further predicted “bad endings” for cryptocurrencies, such as bitcoin, and said long-term US government bonds were a terrible investment because inflation would consume their returns.
More Apple share
Buffett has been buying a boatload of Apple Inc shares and on Saturday suggested he would buy even more shares at the right price.
At the shareholder meeting, Buffett credited Apple with developing “extremely sticky” products to which consumers become attached and endorsed Apple’s decision to buy back its own stock, saying it was the technology company’s most productive use of cash.
“We would love to see Apple go down in price,” Buffett said.
Berkshire is now Apple’s third largest shareholder, behind Vanguard Group and BlackRock Inc.
“I’m delighted to see them repurchasing shares,” Buffett said, just two days after he revealed having bought 75 million additional Apple shares, and four days after Apple said it may repurchase $100 billion of stock. At the end of 2017, Berkshire had owned 165.3 million shares.
“I love the idea of having our 5 per cent, or whatever it is, maybe grow to 6 or 7 per cent without our laying out a dime.” And Buffett described it as a mistake that he never thought Alphabet Inc’s Google and Amazon.com Inc made sense as investments for Berkshire.
Buffett, 87, and his longtime partner and fellow billionaire Charlie Munger, 94, also took pointed questions on China, Wells Fargo & Co, guns, health care and their investment choices from shareholders, journalists and analysts at the more-than-six-hour meeting in Omaha, Nebraska.
Cash stockpile
Buffett faces a challenge investing Berkshire’s more than $108 billion of cash and equivalents, including for acquisitions, saying his “phone is not ringing off the hook with good deals.” Shortly before the meeting, Berkshire ended its more than year-long stretch of falling operating profit, while a new accounting rule caused the conglomerate chaired by Warren Buffett to suffer an overall net loss. Buffett said the net results were not representative of the business.
The accounting change required Berkshire to report unrealised losses in its equity portfolio, which totalled $170.5 billion at year end, regardless of whether it planned to sell those stocks.
Berkshire’s net loss was $1.14 billion, compared with profit of $4.06 billion a year earlier.
But operating profit, which excludes investment and derivative gains and losses, rose 49 per cent to a record $5.29 billion, or about $3,215 per Class A share, higher than the $3,116 per share analysts had expected, according to Thomson Reuters I/B/E/S.
Shortly before the meeting, Berkshire ended its more than year-long stretch of falling operating profit. The company posted a first-quarter net loss of $1.14 billion (Dh4.18 billion), or $692 per share, compared with net income of $4.06 billion, or $2,469 per share, a year earlier.
Wells Fargo
Buffett defended Wells Fargo and its chief executive, Tim Sloan, when asked when Berkshire would ditch the bank, one of its largest common stock holdings. Many shareholders applauded the question.
Buffett said the bank had committed the “cardinal sin” of incentivising employees into “kind of crazy conduct.” US regulators imposed $1 billion of fines last month over lending abuses. But he maintained that the bank was not “inferior,” as an investment or morally, to its main rivals.
Berkshire owned $25.2 billion of Wells Fargo stock as of March 31, down 14 per cent from year end as a series of scandals weighed on the bank’s reputation.
Wells Fargo investors last week gave strong backing to the bank’s directors and executives on Tuesday, indicating confidence in its overhauled leadership to rebound.
Factbox: Warren Buffett fields questions about successor, investing
Billionaire Warren Buffett deflected questions about his eventual successor at Berkshire Hathaway on Saturday and instead encouraged the thousands of people at his annual meeting to focus more on big picture investing principles than day-to-day events.
Buffett doesn’t plan to retire, even though he’s 87 years old, but he invited more questions about his eventual successor earlier this year when he promoted Greg Abel and Ajit Jain to vice chairmen and expanded their responsibilities. Both men now oversee about half of Berkshire’s operating companies.
Buffett and Munger both said little has changed because Berkshire’s businesses largely run themselves day-to-day. Buffett said he still spends most of his time reading about businesses, thinking and fielding the occasional phone call.
“Part of the Berkshire secret is that when there is nothing to do, Warren is very good at doing nothing,” Munger said.
Many shareholders say they trust that Buffett has a solid succession plan in place. “He’s done a phenomenal job for his shareholders,” said Gary Gocken, of Lincoln. “I think they’ve got it all taken care of as far as what will happen when they eventually retire or move on.”
Longtime Berkshire board member Ron Olson told Yahoo Finance he thinks the new roles for Abel and Jain will take some pressure off of Buffett and make it easier for him to continue running Berkshire, which includes an eclectic mix of more than 90 companies.
— AP
