Omaha: Billionaire Warren Buffett warned people not to think investing is an easy way to make a fortune as he answered a variety of questions at Berkshire Hathaway's annual meeting Saturday.
Buffett said it can be tough to pick the long-term winners. He pointed out that in 1903 there were more than 2,000 car companies, and nearly all of them failed even though cars have transformed the country since then.
``There's a lot more to picking stocks than figuring out what will be an incredible industry in the future,'' Buffett said. ``I just want to tell you that it's not as easy as it sounds.''
Buffett has said that most people will fare better by owning an S&P 500 index fund instead of betting on individual stocks. He said many of the novice investors who jumped into the market recently and drove up the value of video game retailer GameStop are essentially gambling.
Buffett said the stock trading platforms that allow people to buy and sell stocks for free, such as Robinhood, are only encouraging that gambling.
Buffett spent several hours answering questions Saturday afternoon at an online version of Berkshire's annual meeting alongside vice chairmen Charlie Munger, Greg Abel and Ajit Jain.
Buffett said the policies of the Federal Reserve and the stimulus packages passed by Congress have done a tremendous job of propping up the economy because interest rates remain low. He said the government clearly learned lessons from the Great Recession in 2008 and acted quickly, but it's hard to predict what the long-term consequences of those policies will be.
``This economy right now _ 85% of it is running in a super high gear _ and you're seeing some inflation and all that. It has responded in an incredible way. We learned something out of 2008 and 2009 and then we applied it. But I don't think it was a sure thing that it would happen,'' Buffett said.
Buffett said he doesn't regret selling off Berkshire's $6 billion stake in all the major airlines last year even though those stocks have grown significantly since he sold them last spring. Buffett also said he thinks the airlines might not have been able to secure as much government aid as they have during the pandemic if they still had ``a very rich major shareholder like us.''
Omaha, Nebraska-based Berkshire is sitting on $145.4 billion in cash and short-term investments because Buffett has struggled to find major acquisitions for the company for several years.
Investor Cole Smead said he would love to see the company get more active the next time the market swoons.
``We do not question whether Buffett and Munger have patience. That's obvious. The question is do they have any aggression. That's not obvious,'' Smead said.
Buffett said he wants to invest more of Berkshire's cash, but the current competition he faces from private equity and other investment funds has made it difficult for Berkshire to find reasonably priced acquisitions. And he said that a year ago, it was hard to predict how the economy would respond to the pandemic and all the government stimulus.
Slammed crypto currencies
Buffett declined to answer a question about Bitcoin, but Munger openly questioned the value of cryptocurrencies.
"I don't welcome a currency that is so useful to kidnappers and extortionists and so forth,'' Munger said. ``Nor do I like shoveling out a few extra billions and billions and billions of dollars to somebody who just invented a new financial product out of thin air. I think I should say modestly that I think the whole damn development is disgusting and contrary to the interests of civilization.''
This was the second year in a row that the annual meeting was held online because of the coronavirus pandemic. This year's event was moved outside of Omaha for the first time _ to Los Angeles to be near where the 97-year-old Munger lives.
On Saturday morning, Berkshire reported its first-quarter earnings and said it made $11.7 billion, or $7,638 per Class A share, as the paper value of its investment portfolio rebounded. A year earlier, Berkshire reported losing $49.7 billion, or $30,653 per share.
The conglomerate said that besides the investment gains, profit also improved at all of its major divisions _ including insurance, utility, railroad, manufacturing and retail companies _ as the economy continued to recover from the pandemic during the first three months of this year.
CFRA Research analyst Cathy Seifert said she was surprised that Berkshire's many economically sensitive businesses didn't improve more given how much the economy has recovered, but that it looked like the company controlled costs well at its major divisions.
Buffett has long said Berkshire's operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary widely. By that measure, Berkshire's operating earnings improved to $7.018 billion, or $4,577.10 per Class A share. That's up from $5.87 billion, or $3,617.62 per Class A share a year ago.