My wife called me Saturday asking what I was up to. I told her I had to call her back. Warren Buffett was giving his annual meeting talk and it was just getting juicy. She laughed and said go to work.
What made it outstanding?
Let me count the ways.
First, Warren told you this wasn't the time to be ecstatic about the market. When you compare an environment to the Civil War or the Great Depression and remind us that we got through those and we will get through these, you have visions of Antietam or Hoovervilles. Not reassuring. But it's not his job to reassure us. It's his job to call it like it is, and by not describing this as some sort of garden variety squall, he set us straight about how uncharted the waters really are but that we will get to the other side.
If that's the case, I know I would rather be closer to the other side. Yet, that's the real issue how will you know we will be closer.
Which brings me to point No. 2. Unless Buffett felt there just wasn't enough time, the fact that he didn't buy anything when the market crashed in March, is telling. It says that we are further from the other side than you think. Of course, Buffett could be wrong. But he has always said to buy when there's blood on the streets. When the Dow Jones Average drops from 29,000 to 18,000, I would think that qualifies as blood. If you go back to point No. 1, though, if you think this period is as perilous as the Great Depression or the Civil War, you ain't seen nothing at 18,000. Worrisome to say the least.
Third, Buffett, in his folksy way addressed the airline loss head on. I thought he might want to avoid it give than it's not his first unsuccessful dalliance with the group. He invested in US Air back in 1989 and while he apparently managed to breakeven if was pretty harrowing.
Nope, he went right there, emphasizing over and over again that he was wrong and he made a mistake by taking 10% stakes in the four biggest airlines. Nevertheless, when you think about it, this one was impossible. You can't say "the airlines were cheap for a reason, a pandemic was coming." Who would have thought they would almost all go out of business or that now they owe so much to the U.S. government.
But even here there was a lesson. He sold all of the stocks, he told Becky Quick, and didn't try to take half measures because the thesis he bought them for -- that they were going to make more than a billion dollars -- changed. So what's the point? So many people, including me with my charitable trust, just decide to hang on nor not look at or sell a little and hope when the thesis changes that it will change back again. The Oracle from Omaha reminded us there's no substitute for owning up and going.
Finally, Buffett reminded us that it is a sucker's bet to take the other side of America. You want to be long it. That brought me thinking about the vaccine. The president is adamant that we will have one by the end of the year. Me? I think it's going to be longer than that, maybe much longer. I don't think that when Buffett says don't bet against America he is thinking of betting against Trump. But I did think that I could be too negative, in that I would be betting against our scientists. Historically, betting against our scientists has been wrong. Historically. That said, if we only had a Manhattan project to solve Covid-19, then I would truly believe that investing with America would be the only way to go.