“ ‘We do not know exactly what happens when you voluntarily shut down a substantial portion of your society.’ ”
That’s Warren Buffett, Chairman and CEO of Berkshire Hathaway, on Saturday offering his first public statements since the coronavirus pandemic ravaged the stock market and economy, putting a record number of people—some 30 million and counting—out of work over the course of the past few, short months.
Widely considered one of the most respected investors in the world, the 89-year old investor (he turns 90 on Aug. 30), has shied away from speaking about the most significant public-health crisis in more than a century, until now.
The billionaire investor, instead, chose to use his annual shareholder meeting, typically an extravaganza that brings nearly 20,000 people flocking to Berkshire Hathaway’s headquarters in Omaha, Neb., as a history lesson on American resilience.
Appearing on stage in an empty auditorium, along side possible heir Greg Abel, and without his No. 2 Charlie Munger at his side, Buffett said that he has been reluctant to discuss COVID-19, the pandemic that has killed more than 240,000 people globally and infected more than 3.3 million, according to data compiled by Johns Hopkins University as of Saturday.
Drawing some comparisons to the Spanish flu of 1918-19, Buffett said he doesn’t “know a parallel” in terms of “a huge population…sidelining its economy and its workforce…and obviously and unavoidably creating a huge amount of anxiety.”
Still, the investor said: “I remain convinced that nothing can basically stop America.”
And he added: “The American miracle, the American magic has always prevailed and it will do so again.”
The illness derived from the novel strain of coronavirus that was first identified in Wuhan, China, brought the financial world to its knees, sending the Dow Jones Industrial Average DJIA, -2.55% into a bear market, defined as a drop of at least 20% from a recent peak, at the fastest clip since when the U.S. was in the throes of the Great Depression, quashing one of the longest bull-markets in history. For the S&P 500 index SPX, -2.80% and the Nasdaq Composite COMP, -3.20%, it was their fastest plunge from a record high in their histories.
Buffett’s comments come after Berkshire BRK.A, -2.74% BRK.B, -2.50% reported a huge first quarter loss of $49.7 billion, or $30,653 per Class A share. However, Berkshire’s first-quarter operating earnings were $5.9 billion or about $3,619 per Class A share. Buffett is holding an annual shareholder meeting Saturday where he may offer more clues on his strategy during this public-health crisis.
His remarks on Saturday may serve to explain why his conglomerate spent the first quarter stockpiling cash to record proportions. Public filings showed that the company’s holdings of cash and equivalents ballooned to a record $137.2 billion at the end of the first quarter, up from about $128 billion at year-end.
He added in his Saturday comments that investors need to be careful about “how you bet” on this current crisis, because “markets can do anything.” “Nobody knows what’s going to happen.”
Perhaps for that reason, Buffett was hesitant to venture predictions on the future given the virus, a uniquely unpredictable exogenous factor. “I don’t know anything you don’t know about health matters,” he said.
However, he did offer this: “I do think the range of possibilities has narrowed down: We know we are not getting a best case and we know we are not getting a worst case.”