Warren Buffett is arguably the most influential person on Wall Street, and investors hang onto his every word. Some may even make investment decisions based on his opinions and observations.
The 92-year-old investor always has a thing or two to say about the market, and he uses Berkshire’s annual letter to shareholders as a forum to express his views. This year he talked about everything from the state of the economy to bank stocks, money printing, investing in China and even AI – among other subjects. The letter was very timely, as Wall Street is on edge about these points and clearly worried about what may follow.
As expected, considering that Buffett serves as Berkshire Hathaway’s CEO, he discussed some of its financial highlights. Among them: Berkshire reported net earnings of $35.5 billion in the first quarter, a number that is certainly making most CEOs turn green with envy. Moreover, their portfolio is valued at $328 billion.
Also noteworthy is that they sold more than $13.3 billion of stock in the first quarter of 2023, while purchasing only $2.9 billion – not exactly a ringing endorsement of its outlook for the market. The company, however, did spend $4.4 billion repurchasing its own shares.
Being Cautious Is Being Wise
“Caution is preferable to brash bravery,” in the words of Falstaff in Shakespeare’s King Henry IV. This sentiment has apparently made quite an impression on both Buffett and Charlie Munger, his right-hand man, as they’ve incorporated it into their investment strategy.
Buffett said he was not surprised by the number of recent bank failures, considering how complex the banking system has become. In addition, he feels that some bankers and some people serving in Congress have made “dumb” decisions.
“The American public doesn’t understand their banking system, and some people in Congress don’t understand it any more than I understand it,” he said. However, if that’s the case, Buffett must have a sixth sense, as his firm began and continues to sell bank stocks since 2020.
Berkshire, however, continues to hold on to its 13% share in Bank of America, as well as a $2.8% share of Citigroup.
Munger’s Warning
Charlie Munger, Berkshire’s vice chair, certainly worried investors when he said the golden age for investing was over and that investors would have to deal with a period of lower returns.
Munger also said that banks and the banking system also have problems, “as US banks are full of bad commercial property loans. Troubles happen to banking just like it happens everywhere else,” he said. He added, however, that the challenges are not quite as bad as they were in 2008.
On a related subject, Buffett added this warning: Bank runs are becoming easier in the modern world thanks to technology, which enables “bank customers to withdraw deposits virtually.” That’s a nice way of saying “there could be a bank run in a few seconds.”
Praise For Government
Government is often is criticized, and these days in particular, as economic problems and uncertainties are increasing. Bucking this trend, Buffett praised the government’s recent decision to guarantee deposits above the FDIC’s limit of $250,000 after Silicon Valley Bank collapsed in March. He said that without that guarantee, the consequences would have been “catastrophic,” and led to a “run on every bank in the country.”
Regarding the debt ceiling, which continues to generate a great deal of investor concern, Buffett said he expects the issue will be resolved before Congress runs out of money and defaults on its obligations. Anything less than that “would cause the world to go into turmoil.”
Sounding The Alarm
When Buffett and other influential people speak about serious matters, they measure their words very carefully to make certain they don’t upset investors and markets. AI is one of those subjects, so his recent comment should be studied carefully. AI, he said, was “an atom bomb.”
Because AI has the capability of replacing so many jobs, his atom bomb analogy suggests that once invented, it cannot be “uninvented.”
“Einstein said after the atomic bomb, ‘This has changed everything in the world except how men think.’ And I would say the same thing about AI,” he explained. “It can change everything in the world except how men think and behave.” Buffett appeared to be adding his voice to tech experts like Elon Musk and hundreds of others who recently warned that the technology driving AI was advancing faster than society’s ability to keep up with it.
Nothing Like The Dollar
Buffett also waded into some areas of national and foreign affairs, which have captured news headlines. For one, he urged both the US and China to reduce tensions. “It’s imperative that China and the United States both understand what the game is and that you can’t push too hard. Both (countries) are going to be competitive and both can prosper,” he said.
And he had harsh words for Washington’s money printing “madness,” pointing out that people in and outside of the US are losing faith in the dollar.
“Although it’s easy for America to print a lot of money, printing too much will create problems. People (will) lose faith in the currency” if they’ll worry about the dollar losing its purchasing power. “It changes the economy,” he said.
And he did not appear to be concerned by the dollar being replaced as the world’s reserve currency any time in the near future. And he readily dismissed the idea of Bitcoin or any other crypto currency posing a challenge to the greenback, referring to them as toys. “It’s a joke to think of any tokens serving that role,” he said. ‘That’s madness.”
Sources: bloomberg.com; cnbc.com; sputnikglobe.com; yahoofinance.com. YouTube: Breaking Points: Charlie Munger’s Dire Banking System Warning
Gerald Harris is a financial and feature writer. Gerald can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.
