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Berkshire's 2023 annual shareholder meeting: Watch the full afternoon session with Warren Buffett

CNBC Television・113 minutes read

Sales are breaking records, and a discussion takes place regarding the banking industry's safety. Warren Buffett emphasizes proper bank regulation and the importance of understanding the banking system, expressing caution about the future of bank ownership.

Insights

  • Sales are thriving, breaking records, with a focus on banking safety, FDIC's role, and public understanding.
  • Warren Buffett stresses proper bank regulation, accountability, and the evolution of banking practices.
  • Buffett expresses confidence in Bank of America despite uncertainties in the industry and emphasizes the importance of sound banking principles.
  • The discussion covers various topics, including streaming competition, renewable energy investments, oil industry dynamics, and the challenges faced by Sees Candies and NetJets in expanding their brands.

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Recent questions

  • What is the importance of the FDIC?

    The FDIC, or Federal Deposit Insurance Corporation, plays a crucial role in ensuring the safety of deposits in banks. Established after numerous bank failures post-World War I, the FDIC provides insurance coverage for depositors' funds, instilling confidence in the banking system. In times of economic uncertainty, the FDIC's role becomes even more significant as it safeguards depositors' money up to a certain limit, promoting stability and trust in financial institutions.

  • How does Warren Buffett view bank regulation?

    Warren Buffett emphasizes the importance of proper bank regulation and accountability for those causing financial problems. He stresses the need for sound banking practices and expresses caution about the uncertainties and changing dynamics in the banking industry. Buffett's views underscore the significance of effective regulation to maintain the integrity and stability of the banking sector, protecting both consumers and the overall economy.

  • What are the risks associated with excessive money printing?

    Excessive money printing poses risks such as inflation and economic instability. The discussion highlights the potential impact of printing money on the value of currency and the overall economy. Warren Buffett stresses the need for careful management of inflation and the risks associated with excessive money supply, emphasizing the importance of maintaining faith in the currency to prevent adverse consequences.

  • How does Berkshire Hathaway approach acquisitions?

    Berkshire Hathaway prefers acquiring great businesses over distributing cash, aiming for acquisitions worth billions. The company focuses on making rational decisions and seeks opportunities when companies face financial difficulties, allowing Berkshire to make strategic deals. Warren Buffett and Charlie Munger emphasize the significance of acquisitions in expanding Berkshire's portfolio and generating long-term value for shareholders.

  • What is the significance of NetJets in Berkshire Hathaway's portfolio?

    NetJets holds a unique position in Berkshire Hathaway's portfolio, offering exclusive and luxury private jet services catering to the very wealthy. Warren Buffett praises the exceptional performance of Adam Johnson in managing NetJets and expresses confidence in the company's future success. The comparison of NetJets to Ferrari in terms of exclusivity and success underscores the importance of this high-end service in Berkshire's diverse business holdings.

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Summary

00:00

Banking Industry Discussion with Warren Buffett

  • Sales are doing well, breaking records, and the discussion begins with question 26 directed to station 21 and Charlize.
  • The banking industry's outlook is discussed, highlighting the historical fear and contagion in banking, with a personal anecdote from 1931.
  • The establishment of the FDIC after many bank failures post-World War I is praised for ensuring deposit safety.
  • Concerns are raised about poor messaging and understanding among the public regarding banking safety and the FDIC's role.
  • Warren Buffett emphasizes the importance of proper bank regulation and accountability for those causing financial problems.
  • The discussion shifts to the evolution of banking practices, including the involvement of banks in investment banking and the changing role of the Federal Reserve.
  • The distortion of banking practices, such as high leverage and derivative trading, is criticized for deviating from sound banking principles.
  • The impact of implicit guarantees on all deposits across banks, big and regional, is discussed, with a focus on sound banking methods.
  • Buffett shares his positive experience with owning a bank in the past and expresses caution about the uncertain future of bank ownership.
  • Despite uncertainties and changing dynamics in the banking industry, Buffett expresses confidence in Bank of America and his involvement with the bank.

18:35

Buffett on Banking, Currency, and Inflation

  • Warren Buffett discusses the lack of understanding of the American public and some members of Congress regarding the banking system.
  • Buffett reflects on the evolution of banking, from the early Bank of America to the introduction of credit cards.
  • A story is shared about hiring a replacement for a retiring individual at a bank, highlighting differing motivations and priorities.
  • A young attendee at the Berkshire Hathaway meeting questions Buffett and Munger about the U.S. national debt and the potential shift away from the U.S. dollar as the global reserve currency.
  • Buffett expresses skepticism about the possibility of another currency replacing the U.S. dollar as the global reserve currency.
  • The discussion delves into the risks associated with excessive money printing and the potential impact on inflation and the economy.
  • The importance of maintaining faith in the currency and the potential consequences of losing that faith are emphasized.
  • Buffett stresses the need for careful management of inflation and the risks associated with excessive money printing.
  • The conversation touches on the impact of wealth management and the importance of investing in oneself rather than hoarding dollars.
  • Buffett discusses the acquisition of Pilot and the structuring of the deal in stages, highlighting the advantages and disadvantages of such arrangements.

36:31

"Buffett, Munger share life and business advice"

  • Warren Buffett discusses purchasing 80% of Furniture Mart, preferring to write a check and keep management in place.
  • Adam Wright's rise from a public school graduate to running a major business is highlighted.
  • Buffett advises writing one's obituary to guide life decisions and avoiding business mistakes that could jeopardize one's game.
  • Tom Murphy's advice on handling criticism and kindness is shared, emphasizing the importance of kindness in life.
  • Charlie Munger stresses the importance of spending less than you earn, avoiding toxic people, and continuous learning for success.
  • Munger advises against manipulation and resisting the temptation to manipulate others.
  • Buffett and Munger discuss dealing with negative family members, suggesting minimizing interactions or tactfully handling the situation.
  • Buffett explains the strategy behind exclusive product distribution and the importance of brand recognition for better margins.
  • The discussion shifts to the importance of owning products with strong customer appeal, like See's Candy, over generic alternatives.
  • Buffett and Munger decline to offer stock advice, emphasizing the importance of not giving away investment strategies for free.

54:43

"Streaming, Energy, and Disney: Investor Concerns"

  • Companies passing or reducing dividends is concerning for investors
  • Streaming business is popular due to people's love for entertainment on screens
  • Competition in the streaming industry affects pricing and customer retention
  • Disney's unique approach to content creation and rejuvenation
  • Challenges in the movie industry with talent and theater business
  • Berkshire Hathaway Energy's investment in renewable energy and coal plant retirement
  • Iowa's success in wind energy production and varying county attitudes towards wind power
  • Berkshire Hathaway Energy's competitive pricing and record in wind and solar energy
  • Warren Buffett's cautious stance on global warming and oil industry outlook
  • Berkshire Hathaway's significant holdings in Occidental Petroleum and Chevron, influenced by Occidental's position in the Permian Basin and oil market dynamics

01:12:54

"Occidental's Innovative Oil Production Techniques Praised"

  • Occidental is drilling new wells that produce a different type of oil, with half of the oil in the US being produced in a similar manner.
  • Occidental has been working on extracting more oil from wells for 50 years, using complex technology and specific sand types.
  • The process involves drilling horizontally for miles underground, requiring mastery of intricate technology.
  • Warren Buffett praises Occidental's efforts and leadership, particularly Becky's role in running the company.
  • Buffett mentions the importance of oil prices in the economic aspect of short-lived oil.
  • Berkshire Hathaway prefers buying great businesses over distributing cash, aiming for acquisitions worth billions.
  • Buffett discusses the challenges of buying public companies due to shareholder voting processes.
  • Opportunities for acquisitions may arise when companies face financial difficulties, allowing Berkshire to make deals.
  • Berkshire aims to make rational decisions and emphasizes the significance of the Permian Basin for oil production.
  • Buffett and Munger share insights on Elon Musk's success, highlighting his extreme objectives and dedication to achieving them.

01:31:39

Tax Avoidance and Compliance in Corporations

  • Deferred tax significantly decreased, allowing for tax avoidance under the law.
  • Tax rate was 52%, but the company decided to comply with the tax code.
  • Belief that corporations in the US are not overtaxed.
  • Mention of a new law with pending regulations.
  • Plan to pay 15% annually, similar to what has been paid previously.
  • Suggestion that if a thousand corporations paid like Berkshire Hathaway, no one else would pay taxes.
  • Desire to control spending and the need for Congress to address it.
  • Anecdote about a lawyer during a business deal in Baltimore.
  • Enjoyment of work and the ideal working conditions at Berkshire Hathaway.
  • Emphasis on finding managers who love their business but dislike certain aspects of public companies.

01:49:53

Buffett discusses Sees Candies and NetJets success.

  • Warren Buffett discusses the performance of Sees Candies, highlighting the challenges of expanding a brand with limited magic and regional preferences for chocolate types.
  • He mentions the success of Sees Candies in the West compared to the East, emphasizing the importance of observing consumer behavior and experimenting with different strategies.
  • Buffett delves into the unique service provided by NetJets, emphasizing the exclusivity and luxury associated with the service, catering to the very wealthy.
  • He compares NetJets to Ferrari in terms of exclusivity and success, highlighting the growth and quality of the NetJets fleet.
  • Buffett praises Adam Johnson for his exceptional performance in managing NetJets, expressing confidence in the company's future success.
  • Buffett and Munger express skepticism towards the auto industry, citing historical challenges faced by major companies like Ford and General Motors.
  • They discuss the rise of electric vehicles and the challenges and risks associated with the industry's transition.
  • Buffett dismisses concerns about the Federal Reserve balance sheet, focusing on the functions it fulfills and the implications of inflation objectives.
  • He finds the growth of currency in circulation intriguing, particularly the increase in hundred dollar bills, speculating on the reasons behind this trend.
  • Buffett and Munger share their views on the Federal Reserve's role and the broader economic landscape, emphasizing the importance of understanding and observing financial trends.

02:08:20

Economic challenges and strategies for growth

  • Printing money excessively can lead to economic trouble, as seen in Latin America's currency devaluation.
  • During World War II, the U.S. issued war bonds, leading to a significant increase in national debt and subsequent inflation.
  • The balance between employment and inflation is crucial, with the government facing challenges in managing both.
  • Moving production to cheaper locations like Mexico is logical for businesses but can lead to job displacement domestically.
  • The tension between economic growth and social safety nets is ongoing, with progress made but challenges remaining.
  • Free market capitalism generates GDP growth but also causes pain, necessitating government safety nets.
  • Mark-to-market accounting for banks differs from Berkshire Hathaway's approach, with the latter showing market values on the balance sheet but not in the income statement.
  • Banks must monitor the value of their assets closely due to the nature of their liabilities.
  • Shareholders should focus on understanding the true value of their investments, with management obligated to provide clear and honest information.
  • The accounting change regarding fair value reporting seems illogical and not conducive to understanding businesses' true operations.

02:27:07

"Rules for Safety, Wisdom in Investing"

  • The speaker discusses the importance of following rules to ensure safety in the marketable Securities sector, highlighting the quarterly income account changes as a peculiar decision made for unknown reasons.
  • A question is posed to Charlie regarding how he imparts wisdom to his grandchildren about investing, with Charlie expressing a philosophical approach of leading by example rather than imposing his views on them.
  • Reflecting on personal growth and past experiences, the speaker acknowledges the need for improvement and recounts a significant professional oversight in the past, emphasizing the value of learning from mistakes and experiences.
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