LIVE: Warren Buffett weighs in on the banking fiasco, his Japan bets, and Berkshire Hathaway’s future

By Pro Web Design

2023-04-12 14:26:36

  • Warren Buffett spoke about the banking fiasco and his massive Japanese bets in a rare TV interview.
  • The Berkshire Hathaway CEO discussed his company’s unique culture and Greg Abel, his successor.
  • We’re live-blogging the interview, scroll down to follow along with our coverage.

Warren Buffett is discussing the banking debacle, his multibillion-dollar bets on five of Japan’s biggest trading houses, and a range of other subjects, live from Tokyo in a CNBC interview today. We’re live-blogging the conversation.

The famed investor and Berkshire Hathaway CEO confirmed that he’s raised his stakes in Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo to 7.4%. Berkshire originally disclosed roughly 5% positions in the five companies in August 2020, and bolstered them last November.

Here’s our live blog of Buffett’s interview, follow along below:

8:18 a.m. Berkshire spent an estimated $4 billion on stocks in the first quarter, Buffett says. He notes that Berkshire generates around $100 million per working day. 

8:17 a.m.: The investor says that hiring an economic forecaster is throwing money away.

8:15 a.m.: Buffett says he loves figures, and has been looking closely at See’s Candies sales across different states.

8:12 a.m.: The Berkshire boss notes that several subsidiaries are facing a “tougher world out there in a great many businesses.” He notes the bosses of the economically-sensitive businesses in Berkshire have been surprised by how their businesses are performing now compared to how they thought they’d be doing six months ago.

8:06 a.m.: Buffett says Occidental Petroleum CEO Vicki Hollub is an “extremely competent, good citizen for America,” noting she understands oil and political realities. “She is extremely concerned with ways to have carbon capture.”

Buffett adds the clean-energy transition will likely cost well over $20 trillion, and shifting the world to renewable fuel sources will take time.

8:04 a.m.: Buffett underlined the danger of both inflation and recession.

“Either one can cause a lot of trouble, and recessions can turn into depressions,” he says, noting a depression can wreck the economy and its financial markets. “You can disrupt an economy a lot easier than you can put it back together again.”

“Fiscal policy scares me more than monetary policy,” Buffett says, noting that excessive spending is something that concerns him.

8:02 a.m.: “Extreme inflation is always a possibility,” Buffett says. He notes it can lead to terrible things, and points to hyperinflation in Germany.

“Currency is one of the greatest inventions of mankind,” the investor says, noting its superiority to bartering as a means of exchange.

7:55 a.m.: Buffett cautions against excessive government spending, warning it may help politicians stay in office but it can be harmful for future generations.

7:53 a.m.: “It’s fun sending money out to people if you want to stay in office, if you want their vote,” Buffett says when asked whether too much government spending was a driver of inflation.

“Inflation is a constant threat to a country but so far the United States has done pretty well,” he says. “The effects of inflation can be wild,” he continued, noting it affects prices of different things very unevenly. “It’s not a good thing for society,” he adds.

Buffett also reflects on the rapid inflation in the 1980s. “The country went crazy because they were afraid of cash,” he says.

7:51 a.m. “I never go to bed worried about Berkshire,” Buffett says, adding that he feels very lucky to be born in the US and for Berkshire to be an American company, given the country’s economic prosperity during his lifetime.

7:45 a.m.: Buffett praises the Federal Reserve, saying he doesn’t believe he could do as good a job as Fed Chair Jerome Powell. The investor applauds the US central bank for taking decisive action in the spring of 2020 to shore up the economy at the height of the COVID-19 pandemic.

Buffett said he doesn’t know whether the Fed kept interest rates too low for too long as the virus threat faded.

7:42 a.m.: Buffett is asked about commercial real estate. He says that banks can handle losses on their loans. His comments suggest he thinks lenders could face a higher rate of defaults as higher interest rates, pressure on asset prices, and tighter lending standards weigh on the owners of office buildings, shopping malls, and other commercial real estate.

7:40 a.m.: The investor says he will bet $1 million to anyone who calls him that no depositor in a US bank will lose money in the next year.

7:38 a.m.: Buffett notes that the mistakes of 2008 and 2009 have affected how people behave today. “Lazy money in 2008 doesn’t exist in the same way at all, and we’ll see how it plays out.” 

“The people that have run banks the wrong way, their shareholders are going to lose money, but the depositors aren’t going to lose money.”

7:36 a.m.: The Berkshire chief expects bad actors to be exposed in the weeks and months ahead as a tougher economic and market backdrop takes hold. “When the tide goes out, you learn who’s been swimming naked. We actually ran into a nudist colony here, in terms of banks all over do that sort of thing.”

7:34 a.m.: Buffett underlines the painful impact of rising interest rates on consumers and businesses. He celebrates the value of 30-year mortgages to society, noting Berkshire can’t get as good a deal as that despite its exceptional credit rating.

7:19 a.m. Buffett dismisses concerns that the federal government won’t get approval from Congress to guarantee all bank deposits. He compares it to what are, in his view, unfounded concerns about the US debt ceiling.

7:18 a.m. Buffett suggests Berkshire sold a bunch of bank stocks because their bosses got greedy. “I don’t like it when people get too focused on the earnings number and forget banking principles,” he says.

“It’s important that banks retain the confidence of the public and they can lose it within seconds,” noting that Silicon Valley Bank’s collapse ignited fears of bank runs in a matter of days.

Buffett also described the FDIC as a “very peculiar neutral insurance operation that is run by the government but financed by the banks,” and notes that bailing out the banks doesn’t cost the government or taxpayers.

7:10 a.m.: Buffett, who reportedly spoke to the Biden administration about how he could help with the banking fiasco, says he speaks to White House officials, but hasn’t that recently.

“Some of the dumb things that banks do periodically become uncovered during this period,” Buffett says, recalling someone jokingly telling him that banks keep finding new ways to lose money.

“They expect to make some mistakes in making loans, but they haven’t made the same sort of mistakes that they made back in 2008 or ’09, but they have mismanaged assets and liabilities and bankers have been tempted to do that forever, and then it bites them in a big way.

Buffett calls out questionable accounting among banks designed to flatter their earnings. He notes that nobody was talking about the dangerous trend of disguising losses.

“It’s happened before, it’s happened this time, it’ll happen again some day.”

6:57 a.m.: “It’s my job to think about risks that nobody else thinks about,” Buffett says. “I’ve got 99% of my net worth in Berkshire, I’ve got all my relatives in, I’ve got everybody in. If I thought that I wasn’t going to be able to do a better than decent job of managing the risk, I’d be crazy to take on that responsibility.” 

Buffett adds that he wouldn’t risk his and all of his family’s money if he wasn’t confident he could do a good job protecting it.

6:56 a.m.: Buffett dismisses the idea of having a risk committee, as he believes the CEO should identify the risks and stop the company getting into trouble.

6:54 a.m.: Buffett jokes about how prolific Abel is on a daily basis. “He has found apparently some little area in Des Moines where there’s 48 hours in the day. That’s the only explanation for how he gets everything done that he does.”

6:51 a.m.: Abel says he spends more time at Berkshire Hathaway Energy than the BNSF Railway, as he has deep ties in the energy industry that lead to more opportunities. He also notes that Berkshire’s 12 largest subsidiaries account for around 85% of the company’s underlying cash flow, so he prioritizes spending his time helping the dozen largest businesses.

6:47 a.m.: It’s safe to say that Buffett won’t want to overshadow Berkshire’s shareholder meeting on May 6th by saying too much about Berkshire’s non-Japanese investments. Thousands of shareholders travel to Omaha to hear Buffett and Munger answer questions on a broad range of topics during a marathon Q&A that usually lasts around six hours.

6:45 a.m.: Berkshire’s billionaire boss reflects on the challenges of the railroad business, from carrying hazardous chemicals to lethal incidents. Berkshire owns the BNSF Railway.

6:40 a.m.: Buffett touts Berkshire’s recent $8.2 billion purchase of a majority stake in Pilot Travel Centers, a gas-station business and previously one of the largest private companies in the US. He also underscores his faith in the company’s incoming CEO, Adam Wright.

6:24 a.m.: Buffett praises Abel for putting $100 million of his own money into Berkshire at the same terms as any other shareholder, with no discount or preferential terms. He underscores how rare that is in corporate America.

6:23 a.m.: “We’ve got a unique organization which now has tremendous resources, and nobody can really copy our style,” Buffett says, noting that Berkshire can say whether it’s interested or not in acquiring a company in five minutes.

6:20 a.m.: Berkshire famously has a decentralized, autonomous structure with a very small headquarters and scores of effectively independent subsidiaries. Buffett notes that while his managers enjoy their autonomy, they also get “lonesome” and Abel has bolstered communications with them.

6:16 a.m.: Abel says he enjoys spending time with the 92-year-old investor and his 99-year-old business partner and Berkshire’s vice-chairman, Charlie Munger.

“He does all the work and I take the bows,” Buffett jokes about Abel. “The difference is he likes to work and I like to sit around.”

“He’s probably tougher than I would be in terms of getting things done,” Buffett says. “He’s a big improvement on me but don’t tell everybody.”

6:13 a.m.: “Iscar will never stop, Berkshire will be proud of it in 2050,” Buffett says, referring to the Israeli metal cutting tools company owned by Berkshire.

6:07 a.m.: Abel notes that he and Buffett have encouraged all of the Japanese companies to phone Berkshire with any potential business opportunities, and reassured them that Buffett will “pick up the phone on the first ring” and Berkshire will never run out of money.

6:05 a.m.: Buffett confirms that Berkshire’s sale of yen-denominated bonds is intended to “insulate” the company from exchange-rate risks. He notes that he and Greg Abel, the head of Berkshire’s non-insurance operations and Buffett’s planned successor as CEO, are meeting with the bosses of all five Japanese companies this week.

6:00 a.m.: Buffett says he made his Japanese bets because the companies were big enough for Berkshire, he understood what they did, like Berkshire they were well-diversified with lots of different interests, and they were trading prices that were “ridiculous” relative to the prevailing interest rates at the time.

Read more: Warren Buffett’s Berkshire Hathaway faces a brutal mix of economic headwinds. It will capitalize on the chaos, 8 experts say.

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