Warren Buffett says markets have become a ‘gambling hall’ 2022-04-30 16:56:00


OMAHA, Neb. Last February, Warren Buffett lamented that he did not find much worth buying.

This is no longer the case.

After a decade-long drought, Mr. Buffett

Berkshire Hathaway company

BRK.B -2.55%

Spending tap opens again. He. She A deal worth $11.6 billion To buy an insurance company

Rich Foundation.

s -0.62%

, to be Berkshire’s largest acquisition in six years. He. She Bought millions of shares from


HPQ -2.53%


Occidental Petroleum Company.

OXY -3.40%

And that’s pretty much boosted its share at

Chevron Corporation.

CVX -3.16%

making the energy company one of the four largest investments in Berkshire.

The big question: why?

“It’s a casino,” Buffett said Saturday of the markets over the past few years. He added that he blamed the financial industry for spurring investors into risky behaviour. While he finds guess bets “obscene”, the pickup was in fluctuations in the markets He said it had one good effect: It allowed Berkshire to find an undervalued business to invest in again after a period of relative calm.

“We rely on companies with the wrong pricing through a mechanism in which we are not responsible for mispricing,” Mr. Buffett said.

Buffett, 91, shared his thoughts on the state of the markets, the insurance business in Berkshire and recent investments at the company’s annual shareholder meeting in downtown Omaha.

Berkshire also held votes on shareholder proposals, with investors eventually canceling measures that had asked Berkshire to make its chairman independent and called on the company to disclose climate risks across its business.

Shareholders eager to score major seats queued for hours before the doors opened in the plaza where Mr. Buffett is; right-hand man Charlie Munger, 98; Vice-Presidents Greg Appel, 59, and Ajit Jain, 70, took the podium. When Mr. Buffett entered, one member of the audience took the opportunity to send a message. The person shouted, “We love you.”

Mr. Buffett seemed equally excited to see thousands of shareholders sitting in front of him.

He said it was a lot better to be with everyone in person.

Until recently, Berkshire was pretty much sitting on its cash pile. Her business flourished. economic recovery Roaring stock markets helped push net earnings to a record high in 2021. But it didn’t announce any big deals, which prompted many analysts and investors to question its next moves. Berkshire ended the year with near-record cash on hand. (After the Berkshire buying spree, the company’s war fund size shrank to $106.26 billion at the end of the first quarter, from $146.72 billion. three months ago).

Mr. Buffett’s sense of the lack of attractive investment opportunities for Berkshire quickly gave way to excitement in late February, he said Saturday, when he obtained a copy of Ghana’s CEO Joseph Brandon’s annual report.

The report piqued his interest. He decides to follow up with Mr. Brandon, heading to New York City to talk about a possible deal over dinner.

Warren Buffett headed to speak to shareholders at Berkshire Hathaway’s annual meeting in Omaha, NE, on Saturday.


Scott Morgan/Reuters

Had the CEO not reached out to the CEO, Buffett said, “It would not have occurred to me to write to him and say, ‘Let’s get together.

Berkshire’s decision to build a 14% stake in Occidental also reported a report. Mr. Buffett said he read an analyst note about the company, whose stock is still trading below its 2011 high, and decided that casino-like market conditions made it a good time to buy the stock.

Over the course of just two weeks, Berkshire acquired millions of shares of the company.

“I don’t think we’ve had anything like what we have now in terms of the amount of net gambling activity going on daily,” said Mr Munger. “It’s not pretty.”

But the amount of speculation in the markets gave Berkshire an opportunity to identify the undervalued business, Munger said, allowing the company to put its $106 billion cash reserve to work.

“I think we made more because of crazy gambling,” said Mr. Munger.

Another work that caught the attention of Berkshire? Chevron. Berkshire’s stake in the company was $25.9 billion as of March 31, up from $4.5 billion at the end of 2021, according to the company’s filing. This makes Chevron one of the four largest stock companies in Berkshire, along


American Express and Bank of America Corp.

Neither Mr. Buffett nor Mr. Munger specifically addressed Berkshire’s decision to increase its stake in Chevron.

But the two men offered to defend the oil industry. Buffett said it’s a good thing for the United States to produce more of its own oil. Mr Munger went further, saying he could hardly think of a more useful industry.

At the meeting, Mr. Buffett also revealed that Berkshire had increased its stake in

Activision Blizzard company

The company now holds a 9.5% position in Activision, a merger and arbitrage bet that Berkshire would profit from if

Microsoft corp

Suggestion to get video game maker passes.

Share your thoughts

Do you agree with Warren Buffett’s market forecast? Why and why not? Join the conversation below.

At the end of the day, Berkshire isn’t trying to make its investments based on what it thinks the stock market will do when it opens every Monday, Buffett said.

“I can’t predict what [a] Stocks will do the trick… We don’t know what the economy will do.

What Berkshire is focused on, Buffett said, is doing what it can to maintain returns for its shareholders. Berkshire generated 20% compound annual gains between 1965 and 2020, compared to the S&P 500, which generated 10% including dividends over the same period.

“The idea of ​​permanently losing other people’s money…that’s just a future I don’t want to have,” Mr. Buffett said.

Write to Akane Otani at akane.otani@wsj.com

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