Berkshire Hathaway’s Warren Buffett and Charlie Munger spend hours at every annual meeting taking shareholders’ questions. These were some takeaways from 2018.
Every year at Berkshire Hathaway’s (BRK.A, BRK.B) annual meeting, CEO and Chairman Warren Buffett and Vice Chairman Charlie Munger spend hours answering questions on investing and life in general. Even though many of the questions asked are pertinent to Berkshire’s businesses, there are always a few takeaways for investors.
For tens of thousands of shareholders, it’s a can’t-miss event and people travel to Omaha from all over the world to get Buffett and Munger’s perspectives.
Below are four of them that stood out.
When asked about his outlook for interest rates on U.S. Treasurys, Buffett said nobody knows where they’re headed, himself included. But, he did say U.S. Treasury Bonds are a “terrible investment at current rates or anything close to current rates.”
Buffett’s reasoning against long-term Treasury bonds is that the Federal Reserve has been vocal about targeting 2% inflation and U.S. Treasury bonds yield a little over 3%, which would drop to somewhere around 2.5% after taxes. Therefore, individual investors are getting only about a 0.5% return after inflation and taxes.
The prospect of a trade war, as well as political back-and-forth between global leaders, added some volatility to markets over the past few months. Ahead of the shareholders’ meeting, U.S. officials were in China to negotiate trade between the two countries.
When asked about the current situation between the U.S. and China, Buffett said that global trade is a “win-win situation,” but he acknowledged that you do run into some problems when “one side or the other may want to win a little bit too much and then you have a certain amount of tension.”
Later, when asked about the impact of steel tariffs on Berkshire’s businesses, Buffett said: “I don’t think either country will dig themselves into something that precipitates and continues any kind of real trade war.”
“Cryptocurrencies will come to bad endings,” Buffett said. And Vice Chairman Charlie Munger has crudely summed up his negative opinions on several occasions.
Buffett and Munger’s opinions on bitcoin really aren’t much of a surprise. Bitcoin is often referred to as digital gold, and Buffett isn’t a fan of gold either. Over the course of thousands of years, gold’s compound rate has been only a “couple tenths of a percent,” Buffett pointed out.
Throughout his investing career, Buffett has typically shunned unproductive assets. Instead, Buffett prefers productive assets like a bond that generates an acceptable level of income or a stock that represents ownership in a business.
Shares of health insurers, pharmacy benefit managers, and some drugmakers took a beating when JP Morgan (JPM), Amazon (AMZN) and Berkshire Hathaway announced they would be teaming up to improve healthcare for their employees, specifically with the goal of improving employee satisfaction and lowering costs.
The healthcare partnership came up a few times and Buffett said the three companies are in the process of finding the right CEO for the job, and they should be able to announce who that is “before too long”.
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