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Warren Buffett says Berkshire is benefiting from the surprising energy of the US financial system

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© Reuters. FILE PHOTO: Warren Buffett (left), chairman of Berkshire Hathaway, and Charlie Munger, vice chairman, at the Berkshire Shareholders' Annual Shopping Day in Omaha

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By Jonathan Stempel and John McCrank

(Reuters) – Warren Buffett said Saturday that Berkshire Hathaway (NYSE 🙂 Inc is being lifted from a U.S. economy that is faring far better than he predicted at the start of the coronavirus pandemic, despite investor euphoria making it difficult To use cash.

At the annual meeting in Berkshire, Buffett said the economy had been "extremely effectively revitalized" by monetary incentives from the Federal Reserve and tax incentives from the US Congress.

"It did the job," said Buffett. "In this economy, 85% of them are currently in full swing."

Buffett lamented that an influx of so-called special-purpose acquisition firms and inexperienced investors hoping for quick fortune has made the markets feel like a casino, making it hard for Berkshire to get more of its $ 145.4 billion -Dollar cash supply to use.

However, the 90-year-old remained optimistic about the future of the company he has led since 1965, even after his death.

"We've seen some strange things in the world in the last year, 15 months," Buffett said. "It reaffirmed our desire to find out everything we can to ensure that in 50 or 100 years, Berkshire is in all respects the organization and some more that it is now."

REINFORCEMENT

The annual meeting was held in Los Angeles, where Buffett joined 97-year-old Berkshire Vice Chairman Charlie Munger to answer questions for shareholders for more than three hours.

Greg Abel and Ajit Jain, Berkshire’s other vice chairmen and potential Buffett’s successors as directors, also asked several questions.

When asked about their relationship, Jain said they don't interact with each other as much as Munger and Buffett, but they talk about companies they oversee every quarter.

Berkshire scrapped its annual shareholders weekend in its hometown of Omaha, Nebraska, for a second year, an extravaganza that typically draws around 40,000 shareholders.

Saturday's meeting, streamed online on Yahoo Finance, was "exactly what you love about Berkshire," said Steve Haberstroh, partner at CastleKeep Investment Advisors in Westport, Connecticut. "It's a little less about learning new things than about being reminded of the old things."

Many of the dozen of operating units in Berkshire, which include Geico Motor Insurance and BNSF Railroad, have rebounded as fear of COVID-19 subsides, more people are vaccinated, stimulus checks are issued, business restrictions are relaxed and confidence in the economy is growing.

According to a forecast by the government, the gross domestic product grew by 6.4% on an annual basis from January to March. Some economists predict that in 2021 the economy will grow at the fastest rate in nearly four decades.

Buffett admitted that the rebound last year had made his decision to abandon stakes in the four major U.S. airlines – American, Delta, Southwest and United.

Meanwhile, Munger downplayed concerns that Congress and the White House might raise the corporate tax rate to 25% or 28%, saying this was not the "end of the world" for Berkshire.

Shareholders opposed proposals requiring Berkshire to disclose more about its efforts to combat climate change and promote diversity and inclusion in its workforce.

However, both proposals received about a quarter of the votes cast, suggesting greater dissatisfaction than Berkshire shareholders have shown in the past. Buffett, who controls nearly a third of Berkshire's voting rights, turned down both proposals.

The meeting on Saturday came after Berkshire announced that first quarter operating income rose 20% to about $ 7 billion, while net income, including investments, was $ 11.7 billion.

CAUTION, SPACS AND ROBINHOOD

But there were signs that Berkshire has become more cautious about the markets.

While Berkshire bought back $ 6.6 billion of its own stock from January through March, the pace of buybacks slowed.

Berkshire also said it sold $ 3.9 billion more shares than it bought, even though it still owned $ 151 billion in shares of only two companies, Apple Inc (NASDAQ 🙂 and Bank of America Corp. (NYSE :).

Buffett acknowledged that low interest rates made Berkshire's $ 140 billion insurance policy, which is used for investments and acquisitions, less valuable.

He also said the growth of SPACs, which take private companies public, has made buying entire companies expensive for Berkshire, which hasn't made a major acquisition since 2016.

"It's a killer," Buffett said, referring to SPACs. "We have probably $ 70 billion or $ 80 billion, maybe something like that, that we'd like to get to work … but we're not going to get a chance to do it under these conditions."

Berkshire leaders also criticized trading in apps like Robinhood. Buffett said they were promoting a "gambling impulse," and Munger said it was "just godly that something like this would attract investment from civilized people and decent citizens. It's deeply wrong." ""

Buffett stood by Apple and described the iPhone manufacturer as an "extraordinary business" with "indispensable" products. He admitted he was wrong when he sold a small percentage of Berkshire stock late last year.

As the meeting ended, Buffett said the chances were "very, very good" that the meeting would return to shareholders next year.

"We look forward to meeting you in Omaha," he said.

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