OMAHA, Nebraska, May 6 (Reuters) – Warren Buffett on Saturday criticized the handling of recent turmoil in the banking sector and said raising the debt ceiling could cause “chaos” in the financial system, even as -offered him a vote of confidence in the United States and his conglomerate Berkshire Hathaway Inc (BRKa.N).
Speaking at Berkshire’s annual shareholder meeting, Buffett criticized how politicians, regulators and the press handled the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank, saying their “very tough” messaging was not necessarily frightening depositors.
“Fear is contagious,” he said, adding that “you can’t run an economy” when people are worried about whether their money is safe in the banks.
Buffett also warned about growing “tribalism” in Washington where partisanship causes people to talk to each other.
“We have to refine, in a certain way, our democracy as we go along. But if I had a choice, I’d like to be born in the United States. It’s a better world than the one we have.”
Buffett spoke hours after Berkshire posted a $35.5 billion quarterly profit and said it bought back $4.4 billion of its own stock, a sign it considers the shares undervalued.
By contrast, it sold $13.3 billion of other companies’ stocks, in a quarter in which the S&P 500 Index (.SPX) rose 7%.
The sixth-richest person in the world, Buffett has since 1965 run Berkshire, whose dozens of businesses include Geico car insurance, the BNSF railroad and consumer names such as Dairy Queen and Fruit of the Loom. .
Berkshire also owns $328 billion of stocks, close to half in Apple Inc ( AAPL.O ).
The meeting featured Buffett, 92, Berkshire’s chairman and chief executive, and Vice Chairman Charlie Munger, 99, who answered five hours of shareholder questions. Vice Chairmen Greg Abel, 60, and Ajit Jain, 71, joined in the morning.
Buffett reiterated Saturday that Abel will succeed him as CEO, while adding that he has no plans if Abel can’t.
Buffett said regulators were right to bail out Silicon Valley Bank depositors, saying that not doing so “would be catastrophic.”
He also said shareholders and bank executives should bear the risks of mismanagement, with Munger criticizing executives who are more concerned with getting rich than customers.
“A lit match can be a fire or it can be blown out,” Buffett said. “You have to have punishment for people who do wrong.”
Buffett also said he doesn’t think politicians or regulators are willing to “disrupt the world’s financial system,” including if Washington fails to break its deadlock over raising the debt ceiling, or how much can be borrowed. of the government.
Anticipating questions about banking, Buffett prompted laughter by placing in front of him a sign reading “AVAILABLE FOR SALE” and one reading “HELD-TO-MATURITY” in front of Munger.
They refer to how lenders account for their securities, a key issue in the recent banking crisis.
Buffett said Berkshire is cautious about banks and has sold some bank stocks over the past six months.
Saturday’s meeting is the centerpiece of a weekend that Buffett calls the “Woodstock for Capitalists” that draws thousands of people to Omaha, Nebraska, his hometown.
Attendance increased from 2022. Unlike last year the downtown arena hosting the meeting was filled to capacity.
BUFFETT: “APPLE IS A BETTER BUSINESS”
Discussing Berkshire’s performance, Buffett said that perhaps most of its operating businesses could do worse in 2023 than in 2022 as economic activity slows.
But he said Berkshire could offset this with more income from investments, including $7 billion of Treasury bills it bought in April.
Buffett defended the size of Berkshire’s $151 billion Apple investment, saying consumers are more likely to drop their $1,500 iPhone than, say, their $35,000 second car.
“Apple is different than other businesses we’ve owned,” Buffett said. “It just happens to be a better business.”
Berkshire recently held a 5.6% stake in Apple, and Buffett said it could buy more.
“Portfolio management practices suggest that there is certain concentration risk in having too much Apple in that portfolio,” said Cathy Seifert, vice-president at CFRA Research.
He also said that while Berkshire owns about one-fourth of Occidental Petroleum Corp ( OXY.N ), it has no plans to take control of the company.
Munger, a longtime China bull who led Berkshire’s investment in electric car company BYD Co , called for a reduction in tensions and increased trade between that country and the United States.
Buffett addressed those tensions by saying he was more comfortable deploying capital in Japan than in Taiwan.
WAITING IN LINE
Before the meeting, dozens of uniformed pilots at Berkshire-owned NetJets demonstrated outside the arena, protesting low pay and long hours.
Meanwhile, thousands of shareholders lined up outside the arena before it opened at 7 am CDT (1200 GMT). Many recognized that this might be one of their last chances to see Buffett and Munger, given their age.
Vidhya Vivekananda, an investment associate from Vancouver, Canada, said she and her husband showed up 30 minutes before their first meeting.
“It’s been on our bucket list for a long time,” she said. “We don’t know how long Warren and Charlie were together before they passed it on.”
Yongsheng Zhao, who lives in Shanghai and is a researcher for an asset management firm, said he showed up at midnight with a chair to see Buffett and Munger for the eighth time.
“I was inspired by their passion and normalcy,” he said. “I hope they can go another five years, or more.”
Reporting by Jonathan Stempel in Omaha, Nebraska; additional reporting by Carolina Mandl and John McCrank in New York; Editing by Megan Davies, Ira Iosebashvili and Diane Craft
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