Takeaway Buffett meeting: banks, real estate, Oxy, AI, Apple, dollar

• Warren Buffett and Charlie Munger are wary of bank stocks and bearish on commercial real estate.
• The Berkshire Hathaway duo are pessimistic about the US economy and fear the government is spending too much.
• They also discussed Apple, AI, Japan, Taiwan and Occidental Petroleum at their annual meeting.

Warren Buffett and Charlie Munger revealed at Berkshire Hathaway’s annual shareholder meeting on Saturday that they are wary of owning bank shares, bearish on commercial real estate and pessimistic about the US economy.

The two investment icons who are respectively the CEO and the vice president of Berkshire, also touted their massive stake in Apple, ruled out a takeover bid for Occidental Petroleum and discussed the risks posed by artificial intelligence and from de-dollarization.

The couple, who are both in their 90s, also offered advice on success, marriage and inheritance.

Here are the 10 key takeaways from Berkshire’s annual meeting:

1. Banking and debt ceiling fears

Buffett said allowing Silicon Valley Bank to fail would be “catastrophic”. He said Americans shouldn’t worry about the safety of their bank deposits or the federal government violating the lending limit.

“If the government allowed depositors to lose money, it would cause bank runs across the country and disrupt the global financial system,” he said. “This is not how the United States will behave, any more than it will let the debt ceiling cause the world to turmoil.”

Buffett has also criticized politicians, federal agencies and the media for leaving people unnecessarily scared.

“A lit match can be turned into a conflagration, or it can be blown out,” he said.

The investor also stressed that Berkshire stands ready to provide liquidity if a financial crisis grips the US economy.

“We want to be there if the banking system gets temporarily blocked in any way,” he said. “It shouldn’t, I don’t think it will, but I think it might.”

Buffett added that he is currently wary of holding bank stocks, given the industry’s current challenges.

2. Commercial real estate issues

Rising interest rates, tougher lending standards and falling asset valuations are putting pressure on commercial real estate developers.

Buffett criticized the industry’s overreliance on debt and argued that recklessness must be penalized “if you’re going to change the way people behave in the future.”

Meanwhile, Munger has predicted a devastating blow to the commercial heart of the cities.

“The emptying of inner cities in the United States and other parts of the world is going to be pretty significant and pretty unfortunate,” he said.

3. The economy is cooling down

Buffett described the pandemic era of record-low interest rates and freewheeling government spending as the most extraordinary time for business since World War II.

However, he warned that the boom is now over and the US economy is poised to take a downturn this year.

“It didn’t end with the job plummeting or anything like that, but it’s a different climate than it was six months ago,” he said.

4. Dollar disaster

The US dollar’s status as the world’s reserve currency is secure for now as there is no clear replacement, Buffett said. He shrugged off the risk of de-dollarization and rejected the idea that bitcoin or another cryptocurrency usurped the greenback.

“It’s a joke to think of any token,” he said.

However, the Berkshire boss has warned that excessive US government spending could lead to sustained inflation. This would inexorably erode the purchasing power of US dollars and make people think twice before saving money or increasing their pensions.

“We have to be very careful,” he said. “It’s very hard to see how you bounce back once you get the genie out of the bottle and people have lost faith in the currency.”

5. Buffett won’t buy the Occidental

Berkshire has spent about $11 billion building a nearly 24% stake in Occidental Petroleum since last spring. He also owns nearly $10 billion of preferred stock in the oil and gas company and holds warrants that he can exercise to buy more common stock at a fixed price of $5 billion.

Additionally, Buffett and his team have been given the green light by regulators to own up to 50% of the company. Yet the investor ruled out a takeover bid for the fossil fuel giant on Saturday.

“We will not make any bids for control of Occidental,” Buffett said.

6. Concerns about AI

Munger said he was skeptical that artificial intelligence will change the world and joked that human intelligence works well.

Buffett expressed his amazement at what ChatGPT and other AI tools can already do. But he also questioned what artificial intelligence could be used for in the future and compared it to the splitting of the atom as a potentially dangerous technological advance.

7. Higher rates are helping

The Federal Reserve has hiked interest rates from near zero to over 5% over the past 14 months in an effort to curb historic inflation.

Experts have warned that steeper rates could curb demand and drag the US economy into a recession, but they’re at least partly good news for Berkshire.

Buffett’s company is set to collect about $5 billion in interest from its roughly $130 billion in cash and treasuries this year, up from a $50 million return a few years ago, the investor said.

8. Nothing beats Apple

Berkshire owns dozens of companies including Geico, See’s Candies, Duracell and the BNSF Railway. Apple outclasses each of them from Buffett’s point of view.

“It just so happens to be a better business than anything we own,” he said, emphasizing how indispensable the iPhone and other Apple devices are to consumers. Berkshire holds more than $150 billion of Apple stock, making it by far the most valuable holding in its stock portfolio.

Buffett also celebrated the fact that Berkshire doesn’t have to buy more Apple stock to increase its ownership of the company, thanks to the tech titan’s share buybacks.

“The good thing about Apple is that we can go up,” he said.

9. Prefer Japan to Taiwan

Berkshire recently increased its stakes in Japan’s five largest trading companies to about 7.4% across the board. In contrast, it reduced Taiwan Semiconductor’s holdings by nearly 90% in the fourth quarter of last year.

Buffett invested in the Japanese quintet because they were big enough to move the Berkshire needle, valued cheaply, paid dividends, bought back shares and operated in familiar industries, he said Saturday.

Berkshire was also able to offset currency risks by issuing yen-denominated bonds that offered minimal yields, he noted.

Meanwhile, Buffett has exited most of his TSMC position due to Taiwan’s geopolitical tensions with China, he said.

“I don’t like its position and have reevaluated it,” Buffett said of the chipmaker. He prefers to find big managers and companies in the United States and feels more comfortable investing his money in Japan than in Taiwan, he added.

10. Life lessons

Buffett and Munger shared several tips on personal finance, wedding and estate planning.

Berkshire’s CEO warned people not to live beyond their means, rack up credit card debt or invest recklessly. The vice president of the company added that having the right collaborators and performing well is also essential.

“It’s so simple to spend less than you earn, invest wisely, avoid toxic people and toxic activities, and try to keep learning throughout your life,” Munger said. “If you do all of these things, you’re almost certain to be successful.”

Buffett stressed the vital importance of finding the right partner in life as well.

“If you make the right decision about a spouse, I mean, you win the game,” she said.

The billionaire investor added that people should instill the right principles in their children, to make sure they pass on not only their wealth, but also their approach to using money.

“Don’t think that an intelligently designed will will replace your behavior in teaching your children the values ​​you hope they have,” she said.

Buffett also dispensed some wisdom to people trying to figure out what to do with life. He encouraged them to write their own obituaries and figure out how to live up to it.