A year after Warren Buffett first warned that Robinhood was tapping new investors’ gambling instincts, he and his right-hand man Charlie Munger almost said “we told you so” at Berkshire’s annual meeting Hathaway Saturday.
With tens of thousands of shareholders meeting in person in Omaha, Nebraska for the first time since 2019, Buffett again likened the stock market to a casino or a gambling hall and warned that big corporations have become ” poker chips” during a five-hour question and answer session. Munger couldn’t help but feel a certain schadenfreude now that many traders are watching their portfolios plummet and Robinhood shares are down 70% since its IPO, calling his payment for the business a flow of “hidden bribes” orders.
“Look at what happened to Robinhood from its peak to its trough. Wasn’t it pretty obvious that something like this was going to happen?” Munger said. “It was disgusting. Now it’s falling apart. God becomes just.
Munger, 98, vice-chairman of Berkshire, was blunt with his onstage rebukes – he called bitcoin “dumb because it’s very likely to go to zero” and “wrong” at some point in the end of day. Buffett, 91, compared his lack of tangible value in his eyes to investments he could justify in farmland or apartment buildings.
Buffett generally offered more meandering and diplomatic criticisms, but reserved much blame for Wall Street market makers who generate more profits as stock trading volume rises, rises or falls.
“Wall Street makes money by picking up the crumbs that fall off the table of capitalism,” he said. “They make a lot more money when people play than when they invest.”
Both Buffett and Munger have boasted that the trading frenzy makes their job of buying up mispriced stocks easier, and Berkshire eagerly strolled through the casino in the first quarter, buying $51 billion worth of stock. $41 billion of that came in just three weeks between Feb. 21 and March 15, Buffett said.
The Oracle of Omaha said he was surprised that the market was so liquid. Berkshire was even able to build a 14.6% stake in Occidental Petroleum worth more than $7 billion in such a short time, saying it would be impossible to do the same with Berkshire’s own stock. . Berkshire also significantly increased its stake in Chevron to $25.9 billion from $4.5 billion in the first quarter.
Buffett hinted in his February annual letter that he would look for opportunities to spend some of Berkshire’s $144 billion in cash and US Treasuries, calling such a cash-heavy position “never pleasant” and “never permanent”. That cash fell to $103 billion after the first-quarter stock-buying spree, not including its deal to buy insurance company Alleghany for $11.6 billion.
But don’t expect Berkshire to empty the piggy bank — Buffett’s annual letter pledged the company will still hold more than $30 billion in cash, and he reinforced on Saturday his belief in the value of money, even in an environment of high inflation.
“We believe in having money. There have been times in history where if you don’t have it, you can’t play the next day,” Buffett said. “Some of our companies have bank lines – I don’t know why they have bank lines. We are better than the banks. We will give them money if they need it.
Berkshire’s moves have been well received by the market, and its stock’s 7.5% gain this year has far exceeded the S&P 500’s 13% decline. Its compound annual gain of 20.1% from 1965 to 2021 surpassed the 10.5% annualized return of the S&P 500, and Buffett’s estimated net worth of $117 billion makes him the sixth-richest person in the world.
The conglomerate’s first-quarter earnings raised some concerns – its operating profit was flat at $7 billion, although a 38% drop in insurance profits was offset by gains in its other businesses. Vice Chairman Ajit Jain lamented that Berkshire subsidiary Geico had fallen behind Progressive in car insurance and needed to catch up in the use of telematics, a technology that can track the movements of a car and to offer customers lower fares.
Jain and Greg Abel, Buffett’s pending successor as CEO who runs Berkshire’s energy business, joined the nonagenarians on stage for the morning half of the Q&A, but neither Buffett nor Munger said they would. were planning to retire from the business. Calpers, the nation’s largest pension fund, said in April it would back a proposal that would bar Buffett from serving as both chairman and CEO of Berkshire, a motion that seems highly unlikely to pass.
“That’s the most ridiculous criticism I’ve ever heard,” Munger said. “It’s like Odysseus coming back after winning the battle of Troy and so on and some guy saying, ‘I don’t like the way you held your spear.'”