Warren Buffett: Never Bet Against America [VIDEO]
In 2011, my Dad, a career insurance stock analyst, took me along for the pilgrimage to Omaha for the annual Berkshire Hathaway shareholders meeting where Warren Buffett and Charlie Munger hold court discussing both their company's investment performance and their philosophies on the economy at-large. At the time, they had an optimistic outlook for America that was not consensus during the recession.
I was therefore interested to see what they'd say today as we collectively battle the coronavirus epidemic. As it turns out, Munger, 96, did not make the trip. Buffett explained that there was nothing wrong with him other than it would not be wise for him to travel at this age, and promised he'd be there next year.
Nonetheless, Buffett expressed optimism at least in the long run. He didn't pretend to have a firm grip on what this epidemic combined with the voluntary sidelining of large swaths of our economy would do in the short run, but had a favorable long run outlook based pretty much entirely on his belief in the tailwinds of America.
"If you were to pick one time to be born and one place to be born and you didn't know what your sex was going to be, you would not pick 1720… 1820… 1920… you would pick today, and you would pick America," he said.
Buffett weaved through a narrative that began by explaining how America is only 231 years old -- the span of three long lifetimes -- and talked about the exponential growth in population, territory, and wealth in that time. The 1815 Louisiana Purchase, for example, cost 3 cents per acre. He discussed the deaths of 6% of the male 18-60 male population during the Civil War, and how the stock market slide of the Great Depression took over 20 years to get back to even before the ensuing 65 years from 1954 to present in which an investment in the Dow would've returned about 100 to 1.
"You can bet on America, but you have to be careful how you bet," Buffett said. He believes that most people are better off buying a cross-section of America (such as index funds) "and forgetting about it" rather than individual stocks. Nonetheless, Buffett emphasized his belief that equities will outperform treasury bonds, and the money under your mattress, provided you're not using stocks as a "gambling device" or doing so on margin (i.e. buying with borrowed money).
He reiterated that he will continue to bet on America in the form of buying full or partial businesses, and that his successors at Berkshire Hathaway will be tasked with doing the same. He doesn't know what stocks will do in next day, month, or year but thinks he can do "fine" over the next 20-30 years (his age notwithstanding as part of that optimism).
One interesting aspect of this rhetoric in which Buffett will presumably explain as this conference goes on is the juxtaposition between his confidence in America, and the fact that Berkshire not only did not buy stocks on the dip in March, but actually sold $6 billion of equities in April. The company now sits on a $137 billion cash stockpile and there are a number of critics who think they should've better capitalized on the world's economic growth over the past decade. Update: Berkshire sold all its airline stocks due to coronavirus uncertainty.
Yahoo Finance, which is airing the meeting live, has been publishing lots of highlights videos which you can watch below: