Buffett and Munger charge against SPAC, bitcoin, and free brokers

Berkshire Hathaway earned $ 7 billion in the first quarter, up 20%

Warren Buffett is 90 years old. His right hand man, Charlie Munger, is 97 years old. Both are the tandem at the helm of Bershire Hathaway , a financial holding company that has a market value of 631,000 million dollars and that in 2019 earned 81,000 million dollars. On Saturday they both participated in the company’s annual convention (held this time in Los Angeles, instead of Omaha -Nebraska-, Buffett’s hometown).

His words, as always, have been a world event. The three and a half hours of questions from investors have given time to occupy the covers of the Financial Times to the channels with the highest audience. In fact, the Yahoo Finance portal had acquired the exclusive rights to broadcast the conference of the two stock market gurus.

The adage “eternal hatred of modern football” (which comes from a song by the  Fundación de Raperos Aípicos de Cádiz, FRAC) has penetrated into the slang of football nostalgics to talk about the good times of football. Similarly, Buffett and Munger declared their ” eternal hatred” of modern finance on Saturday .

Saving the distances, the oracle of Omaha (Buffett) and his Sancho Panza, dispatched against the cryptocurrency fever , on the rise of the IPOs of empty companies to make acquisitions ( SPAC , for its acronym in English), or on the coordination of small retail investors to buy a near-bankrupt company, GameStop , to bend the arm of the big sharks of Wall Street. 

Asked about investments in bitcoins and other virtual currencies , Munger was restrictive: “I believe that all the damn development is disgusting and contrary to the interests of civilization.” Proponents of crypto assets consider it a good thing that there is an alternative to fiat money, a counter-power to states and central banks. The old rocker does not endorse that vision and thinks it absurd to pay hundreds of thousands of dollars for electronic codes.

Warren Buffet, who has a net worth of $ 103 billion (from his stake in Berkshire Hathaway) and has been among the 10 richest men in the world for more than a decade, also expressed his opinion on the SPACs . This type of company goes public with the intention of buying unlisted businesses. It is an indirect way of making a stock market premiere, but meeting fewer requirements. Of course, investors end up giving a blank check to the executives of the firm, hoping that they will use it wisely. 

“It’s terrifying. Generally [the SPAC] have to spend their money in two years, as I understand it. If you put a gun to my head to buy a company in two years, I would buy it,” explained Buffett, horrified, faced with the obligation to spend the money raised yes or yes.

Berkshire Hathaway, Warren Buffett’s holding company, released its results on Saturday, indicating that it has already recovered from the worst effects of the Covid-19 pandemic. In addition, it has expanded its aggressive $ 6.6 billion share buybacks.

First-quarter results suggest that the Omaha, Nebraska-based conglomerate, whose dozens of operating businesses include the BNSF railroad and Geico auto insurance, may have already weathered the worst effects of the pandemic, including the loss of tens of thousands. Of jobs.

Another question was about the Robinhood free broker. During the confinement experienced last year, due to Covid-19, there were many people who approached the world of investment for the first time through the new stock brokers. These come to offer programs in which there are no commissions for buying and selling shares.

The users of one of these brokers, Robinhood, coordinated through a forum website, Reddit, coordinated in early 2021 to buy the shares of GameStop, an electronic games chain that was on the verge of bankruptcy. This company had accumulated many short positions (large investment funds that were betting on the bankruptcy of the company), but the entry of new investors sent the price up and doubled the hand of hedge funds , which lost billions of dollars.

Despite the story that reached the general public, of David’s victory over Goliath, Charlie Munger considers that the activity of these free brokers is like “putting a c apote in front of a bull. It is terrible that something like this attracts investments from civilized and decent citizens. It is deeply wrong. We don’t want to make money selling things that are bad for people. “

Share buybacks have allowed Buffett to use excess capital, while acquisitions of entire companies have become more difficult, reflecting the high valuations and growth of the so-called SPACs. Berkshire bought back 24.7 billion of its own shares in 2020.

First quarter operating profit increased 20% to 7,002 million, or about $ 4,600 per class A share. Additionally, it posted 11,710 million in revenue.

In Berkshire Hathaway, profits nearly doubled at the Clayton Homes mobile home unit as sales revenue increased and credit losses decreased. Meanwhile, the pre-tax earnings of retailers such as Nebraska Furniture Mart and See’s Candies more than doubled as Berkshire auto dealers sold more vehicles and some results exceeded pre-pandemic levels despite disruptions from Supply Chain.

One unit still struggling is aircraft parts maker Precision Castparts, which in 2020 suffered a writedown of $ 9.8 billion and cut 13,400 jobs.

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