Warren Buffett FINALLY Breaks His Silence (2025 Berkshire Annual Meeting)

Summary

In this transcript, Warren Buffett and Charlie Munger discuss Berkshire Hathaway’s approach to cash reserves, market volatility, and long-term investment strategies. They emphasize the importance of opportunistic investing, being patient during market downturns, and focusing on long-term value rather than short-term market fluctuations. The conversation touches on fiscal policy concerns, currency risks, and the role of trade in global prosperity. Buffett also reflects on the emotional aspects of investing, advising against letting fear or greed dictate investment decisions, and stressing the importance of maintaining discipline and a clear strategy.

Takeaways

• 😀 The U.S. fiscal deficit is unsustainable in the long term, and actions that are not sustainable eventually lead to consequences. This echoes Herbert Stein’s quote on unsustainable behavior.
• 😀 Warren Buffett’s approach of holding large cash reserves at Berkshire Hathaway (over $300 billion) is strategic, providing liquidity for unexpected opportunities while avoiding unnecessary investments.
• 😀 Buffett emphasizes the need for patience in investing, advising against being fully invested and advocating for waiting for 'fat pitches' in the market.
• 😀 Currency devaluation, especially of the U.S. dollar, poses risks to earnings. However, Buffett suggests that Berkshire focuses on long-term value rather than short-term market fluctuations.
• 😀 Foreign currency risk management is crucial. Berkshire Hathaway mitigates it by borrowing in foreign currencies like yen, demonstrating a sophisticated approach to global investment.
• 😀 Buffett's shift in perspective on trade barriers shows his evolving view: while he once supported import certificates, he now advocates for global cooperation over trade weaponization.
• 😀 Balanced trade is crucial for global prosperity. Buffett stresses that prosperity should be a global goal, benefiting all nations, not just one.
• 😀 Market volatility is inevitable, and investors must remain steady. Buffett and Munger emphasize the importance of adhering to a long-term investment philosophy despite market fluctuations.
• 😀 Successful investing requires controlling emotions. Buffett and Munger both stress that investors must check their emotions at the door when making investment decisions.
• 😀 Buffett advocates for a mindset that adapts to market conditions. Rather than expecting the market to align with personal preferences, investors should adjust their strategies accordingly.

Q & A

What is Warren Buffett's perspective on the sustainability of the U.S. fiscal deficit?

Warren Buffett cites Herbert Stein's famous quote, 'If something can't go on forever, it will end,' emphasizing the unsustainable nature of the U.S. fiscal deficit over a long period. He notes that it is uncertain whether this issue will resolve in two years or twenty, but acknowledges that such fiscal imbalance is not sustainable in the long run.

Why has Berkshire Hathaway accumulated a significant cash pile?

Berkshire Hathaway holds over $300 billion in cash and short-term investments, which represents about 27% of its total assets. Buffett explains that this cash position is primarily for liquidity to meet insurance obligations, but also gives Berkshire the flexibility to seize investment opportunities when they arise. He stresses that they do not want to be fully invested at all times, as attractive opportunities do not present themselves regularly.

What is Buffett's view on making investment decisions at Berkshire Hathaway?

Buffett emphasizes that the investment business is highly opportunistic. He and Charlie Munger prefer making a few key investments over a lifetime rather than many smaller ones. While they have significant cash reserves, they do not feel pressured to invest simply to reduce cash levels. They wait for opportunities that provide good value and low risk.

Does Berkshire Hathaway focus on short-term earnings or long-term growth?

Berkshire Hathaway does not focus on quarterly or annual earnings. Buffett asserts that the company’s approach is based on long-term value, and they do not manipulate or focus on short-term financial numbers. They are concerned with where the company will be in five, ten, or twenty years, rather than quarterly fluctuations.

How does Buffett view the relationship between currency debasement and government policy?

Buffett expresses concern about the natural tendency of governments to debase their currencies over time, which he sees as a common issue worldwide. He believes that fiscal policies often lead to weaker currencies, which can have significant economic consequences. He specifically mentions his concerns about U.S. fiscal policy, but also acknowledges that this problem is global.

What steps is Berkshire Hathaway taking to minimize currency risk?

Berkshire Hathaway has taken steps to hedge currency risks in specific cases, such as its investments in Japan. The company borrows in Japanese yen to offset the currency risk of its Japanese stock holdings. However, Buffett notes that this is not a general policy, and that the company does not focus on currency risks for quarterly or annual earnings.

What is Buffett's opinion on trade barriers like tariffs?

Buffett has shifted his view on trade barriers, acknowledging that tariffs are detrimental to global trade. He believes that trade should not be used as a weapon and that countries should specialize in what they do best and trade with others to promote global prosperity. He mentions his past idea of import certificates as a way to balance trade, but he no longer sees them as a viable solution.

How does Buffett view the long-term effects of U.S. fiscal policy on the economy?

Buffett is concerned that the U.S. fiscal deficit, if it continues, could lead to uncontrollable economic consequences in the future. He warns that persistent fiscal imbalances, if unchecked, could lead to inflationary pressures and undermine the stability of the economy. He believes that the problem of managing government revenue and expenditures is a significant challenge for future generations.

What is Buffett's take on the recent market volatility and Berkshire Hathaway's response?

Buffett downplays the significance of recent market volatility, suggesting that it is not out of the ordinary. He points out that Berkshire Hathaway has experienced similar market downturns in the past, and the company’s long-term strategy is unaffected by short-term fluctuations. While they did come close to making a large investment recently, he stresses that they are patient and opportunistic.

What does Buffett mean when he says that 'emotions need to be checked at the door when investing'?

Buffett emphasizes that successful investing requires a rational approach, free from emotional reactions to market fluctuations. He advises that investors should not be swayed by fear during downturns or by greed during market booms. The key to good investing is maintaining discipline and sticking to a long-term strategy, rather than reacting impulsively to short-term market movements.