OMAHA,
Neb. (AP) — Billionaire investor Warren Buffett doesn’t know how or
when the economy will recover from the coronavirus outbreak shutdown,
but he remains optimistic in the long-term future of the United States.
Buffett
said Saturday at Berkshire Hathaway’s online annual meeting that
there’s no way to predict the economic future right now because the
possibilities are still too varied. Berkshire’s meeting was held without
any of the roughly 40,000 shareholders who typically attend because of
the virus.
“We
do not know exactly what happens when you voluntarily shut down a
substantial portion of your society,” Buffett said because it has never
been done. He said it may take several years to understand all the
economic implications of the coronavirus outbreak, but it hasn’t changed
his long-term view because the country has endured wars and depressions
before.
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“In the end, the answer is never bet against America,” Buffett said.
It’s
not clear how long the virus will continue to weigh on the economy,
Buffett said. He said there could still be unpleasant surprises from the
virus and the way people react to it.
“You’re
dealing with a huge unknown,” Buffett said, so businesses and investors
can’t be certain of what will happen in the near future.
Buffett
said he doesn’t expect major banks to have significant financial
problems during the virus crisis because they are in much better shape
than they were during the financial crisis of 2008.
All
of the events surrounding the annual meeting, including a trade show
where Berkshire companies sell their products, were cancelled this year
because of the coronavirus pandemic, and Buffett had a different partner
for the question session.
Instead
of sitting next to business partner Charlie Munger in an arena filled
with shareholders, Buffett was joined this year by Berkshire Vice
Chairman Greg Abel, who oversees all of the company’s non-insurance
businesses, to answer questions in front of a Yahoo Finance camera.
“It’s
certainly a break with years and years of tradition with Buffett and
Munger,” said Andy Kilpatrick, a retired stockbroker who wrote a Buffett
biography and has attended every annual meeting since 1985.
The
fact that Abel appeared alongside Buffett will add to speculation that
he could one day succeed the 89-year-old billionaire as CEO, but it
likely also reflects the fact that Abel is based relatively close to
Omaha, in Des Moines, Iowa. Abel and fellow longtime executive Ajit
Jain, who oversees Berkshire’s insurance businesses, are seen as the two
most likely successor candidates although Buffett has no plans to
retire.
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Omaha
missed out on the profits that comes from all the out-of-town visitors
attending the meeting. Local economic development officials estimate
that Berkshire Hathaway’s annual meeting normally provides a $21.3
million boost to the area.
Buffett
and Abel discussed the nearly $50 billion loss that Berkshire reported
Saturday morning and the huge pile of cash the company is holding.
Berkshire
said it lost $49.7 billion, or $30,653 per Class A share, during the
first quarter. That’s down from last year’s profit of $21.66 billion, or
$13,209 per Class A share.
The
biggest factor in the loss was a $54.5 billion loss on the value of
Berkshire’s investment portfolio as the stock market declined sharply
after the coronavirus outbreak began.
Berkshire’s
revenue grew 1 percent to $61.27 billion. The company said revenue
slowed considerably in April as the virus outbreak negatively affected
most of its businesses. Berkshire closed several of its retail
businesses, such as See’s Candy and the Nebraska Furniture Mart, this
spring while BNSF railroad and its insurance and utility businesses
continued operating while adjusting to reduced demand.
Berkshire
is sitting on a pile of more than $137 billion cash because Buffett has
struggled to find major acquisitions for the company recently and he
wants to be prepared to endure any crisis. Edward Jones analyst Jim
Shanahan said it was striking that Buffett didn’t find any bargains to
invest in at the end of the first quarter.
“The lack of investment activity really sticks out,” Shanahan said.
Buffett
said that Berkshire sold roughly $6.5 billion of stock in April when it
unloaded his company’s roughly 10% stakes in the four largest airlines.
Buffett said he decided that he made a mistake in how he valued
airlines, so he sold all of Berkshire’s American, Delta, Southwest and
United Continental airline stock.
Buffett
said he hasn’t made any big deals during the coronavirus crisis because
he hasn’t seen any on attractive terms. He said many companies have
been able to borrow money in the market in the past two months because
the Federal Reserve stepped in to keep markets moving, so they haven’t
turned to Berkshire for help.
Berkshire
Hathaway Inc. owns more than 90 companies, including the railroad and
insurance, utility, furniture and jewelry businesses. The company also
has major investments in such companies as Apple, American Express,
Coca-Cola and Bank of America.
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