Warren Buffett: Highlights of 2018 Shareholder Meeting

On May 5th, legendary investors Warren Buffett, 84, and investing partner Charlie Munger, 94, held court at the annual Berkshire Hathaway shareholder meeting.  Affectionately known as “Woodstock for Capitalists”, the weekend culminates in Warren and Charlie answering questions for over 5 hours in front of an auditorium of fans and shareholders alike (with occasions of Charlie taking a cat-nap in between humorous one-liners). Below are quotes from the Berkshire Hathaway Shareholder Letter, Annual Meeting, and various media interviews we found interesting (emphasis by Madison):

On lack of acquisition activity in 2017 (from the shareholder letter):

Warren: “In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price. That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high. Indeed, price seemed almost irrelevant to an army of optimistic purchasers. Despite our recent drought of acquisitions, Charlie (Munger) and I believe that from time to time Berkshire will have opportunities to make very large purchases. In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.”

When asked if Warren is semi-retired now that Ajit Jain and Greg Abel manage the operations while Ted Weschler and Todd Combs handle investments (from the annual meeting):

Warren: “I’ve been semi-retired for decades. The jobs now done by Ajit and Greg have been great for us. As for the investing sub-part by Ted and Todd, each manage $12-13 billion of Berkshire’s $170 billion of equities and $20 billion of bonds and $110 billion of cash, so I still have responsibility for other $300 billion with float. Charlie would say nothing has changed that much. Ajit and Greg are smarter and more energetic than we are and bring more to the job every day, but they don’t bring too much to hurt the culture with our managers. Ted and Todd are doing well and do a number of things cheerfully and skillfully. I sometimes steal their ideas.” Charlie: “Warren sits around reading and thinking, and every once in a while talks to someone on the phone. When you have nothing to do, Warren is very good at doing nothing.” Warren: “I am still looking forward to being a mattress tester.”

Thoughts on an impending trade war with China (from the annual meeting):

Warren: “The US and China will be two superpowers of the world for a long time. We have a lot of common interests, and there will be times when there are tensions. But its win/win when the world trades, and those countries are two big factors in that. The nice thing about this country is that both republicans and democrats, on balance, believe in the benefits of free trade and will have disagreements, we will have disagreements with other countries, but this is too big and too obvious. The benefits are huge, and the world is dependent on it in a major way for its progress. These two intelligent countries won’t do something extremely foolish.”

Comments relating to the cryptocurrency/Bitcoin market (from the annual meeting):

Warren: “Nonproductive assets remain that way. Gold at the time of Christ to now has a compound rate of a couple tenths of percent. These assets won’t deliver anything other than supposed scarcity, but so what, what does it produce itself? All this is counting on someone else later trying to buy a nonproductive asset because they can sell it for a higher price. Think of raw land. The Louisiana Purchas was $15 million for 800 square miles, so we paid 3 cents an acre. That’s a pretty good purchase of what was then a nonproductive property. We can buy stamps like Bill Gross, but that’s dependent on someone else buying from you. In the end, you make money on productive assets. You go based on what an asset will produce versus hoping tomorrow morning the price will be higher, and you need more people coming than going. And it can feed on itself for a while, but cryptocurrencies will come to bad endings. There are a lot of charlatans who are just trying to create things. People of less than stellar character see an opportunity to get rich, because their neighbor is, and neither understands it.” Charlie: “I like cryptocurrencies a lot less than you do. To me, it’s just dementia, and I think the professional traders that go into trading cryptocurrencies are disgusting.  It’s like somebody else is trading turds and you decide you can’t be left out.” Warren: “To the extent we are being broadcast around the world, I hope that your comment doesn’t translate.”

Important Note: This material is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. The opinions expressed herein are those of the named advisors at the time written.  Actual economic or market events may turn out differently than as presented.