Buffett says market ‘almost totally a casino’ as it rallied in recent years

Warren Buffett On Saturday it was said that the US financial markets had become “almost entirely a casino” as millions of new traders were flooded into the financial system during the plague.

The Berkshire Hathaway billionaire and CEO, who spoke at Omaha to thousands of shareholders gathered for the company’s annual meeting, added that “extraordinary” activity was “encouraged by Wall Street because the money transfers shares.”

The comments follow a dramatic change in the way people around the world interact with their finances. Americans have opened millions of brokerage accounts since the onset of the plague, with many turning to options markets to gamble on the rise or fall of companies such as Apple And Tesla.

Buffett and his envoy, Berkshire Vice President Charlie Monger, have credited the rapid pace of trading and the fact that many of the holders of certain shares would not have invested long-term thanks to the company’s ability to make large bets of their own this year.

In the first quarter, the company released $ 51.1 billion in share purchase Of companies, including big bets on the Chevron and Oxidental Petroleum companies. Buffett said it was “amazing” that Berkshire had managed to buy more than 14% of Oxidental in a matter of weeks.

“But companies are sweeping big in America, they have become poker chips and people have bought and sold like three-day calls, two-day calls,” he said, referring to derivatives that have become the instrument of choice for many new day traders in the market. “Wall Street makes money one way or another, catching the crumbs that fall from the table of capitalism.”

There are signs that much of the enthusiasm that sent US stocks to highs last year has evaporated. Stock trading has collapsed and the amount of loans investors make to trade has fallen, according to the watchdog of US broker Finra traders.

Munger specifically targeted Robinhood, the online brokerage that has led many Americans to the financial markets, but its estimate dropped from nearly $ 60 billion last August to $ 8.5 billion last week, following a slowdown in trading activity.

“Short-term gambling and big fees… It was disgusting,” he said. “Now it’s falling apart. God has become just.”

Saturday is the first time since 2019 that Berkshire shareholders have had the opportunity to hear directly from the billionaire investor and the company’s senior management in person.

There were questions ahead of the annual meeting, often referred to as Woodstock for the wealthy, whether the epidemic would affect attendance levels. Executives at a number of Berkshire subsidiaries said the turnout at the Omaha Convention Center on Friday, a day when shareholders could buy Fruit of the Loom panties or get home products at a discount at The Pampered Chef, was lower than in recent memory.

But when Buffett opened the meeting, in his usual one-word line, “OK,” a crowded crowd at the CHI Health Center got to its feet.

Investors have a few more hours to wait before they hear the actual business results of the day – whether shareholders have succeeded in promoting proposals that will require Berkshire to disclose the environmental impact of its dozens of subsidiaries or whether they will split the chairman and CEO. title. Analysts predict that the bids will fail given Buffett’s ownership of high-end voting stocks.

The company reported earlier on Saturday that its operating profits had changed slightly from the previous year, when the strength of its railway and manufacturing units BNSF offset a sharp decline in profitability from its insurance business.

In total, net income fell more than half of the previous year to $ 5.5 billion. The decline was mainly due to changes in the value of its investments, which Buffett Malin described as a “generally insignificant” index given its stock portfolio, which overshadowed its $ 390 billion value.

Buffett was questioned about the recent jump in stock buying after lamenting the lack of attractive investments in his annual letter to investors in February. He said that during the sale in the market this year, “some stocks made us very interesting and we also spent a lot of money”.

But he added that the mood at the company’s headquarters had become more “dormant”, especially compared to the rate recorded between mid-February and mid-March, when it spent more than $ 40 billion on shares.

Berkshire pulled a significant portion of its cash pile to execute these transactions, with its cash holdings and treasury bills dropped to $ 106 billion, the lowest level since 2018.

Buffett said the company will always have a fair amount of cash on hand, given its insurance operations should be prepared for large claims in the event of a catastrophe. He added that he wanted Berkshire Hathaway to be “in a position to act if the economy stops and that can always happen”.

“We had a lot of money on March 20,” he said, referring to the days when the S&P 500 reached its lowest levels of the plague. “But we were not very, very far from anything that would repeat 2008 or even worse.”

Words of sages from Omaha

Buffett on inflation

“Inflation is also deceiving the investor in bonds. It cheats the person who keeps his money under the mattress. It deceives almost everyone. “

“You print a lot of money and money will be worth less. Not worthless.”

Buffett on the Fed

“In my book Jay Powell is the protagonist.

Munger on a proposal to split the role of chairman and CEO of Berkshire

“To me this is the most ridiculous critique I have ever heard. It’s like Odysseus would come back from a battle victory over Troy and some guy would say, ‘I do not like the way you held the spear when you won.'”

Manger on investing in China

“There is no doubt about the fact that the Chinese government has worried investors from the United States. . . In recent months and years and so in previous periods. There was a certain tension. It affected Chinese stocks. “

Manger on Bitcoin

“In my life I try to avoid stupid and mean things and make me look bad compared to someone else. And Bitcoin does all three.”

Ajit Jane, Berkshire Vice President, on the threat of nuclear attacks

“The other thing that worries me about the nuclear situation is my inability to really assess what our true exposure is in the event of a nuclear event.”

“When it comes to the nucleus, I kind of give up.”

Buffett says market ‘almost totally a casino’ as it rallied in recent years Source link Buffett says market ‘almost totally a casino’ as it rallied in recent years

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