We attended the annual Berkshire Hathaway meeting again this year. We came away with many pages of notes and summarized our key takeaways from Charlie Munger and Warren Buffett below:
- We are leaving the incredible 2020-21 period where the government poured money into the economy. Inventories are now building, sales will likely come, and they expect 2023 to be slower than 2022. They noted that this was not a prediction and that humbly they could be wrong.
- They felt the debt ceiling would pass. No politician wants to explain to voters why they created a potential catastrophe or why a social security check was missed. This makes short-term Treasury bills at 5+% attractive for now. They don’t have the faintest idea where rates go next. They don’t see the US losing its dollar supremacy soon, but warned there is a limit to fiscal profligacy.
- Banks can be great businesses, but bank shareholders face an unknown future. Deposits are a lot less sticky than previously thought. More regulations are potentially coming. Certain bank CEOs and directors should be punished. Commercial real estate is also not a buy yet. Real estate prices are often set by how much banks are willing to lend, and they are willing to lend a lot less now.
- The energy transition is a valid idea, but it will take time. The biggest issue is that America has no national electricity plan. Most grids are impacted by local regulators and nimbyism. In the meantime, we still need fossil fuels, and it is not un-American to produce them responsibly.
- They had mixed views on international stocks and yet again warned investors not to bet against America in the long term. Warren noted that Taiwan Semiconductor is one of the best managed companies in the world and likely will be for years to come, but its location made him uncomfortable. Charlie praised China-based BYD’s robotics. They hold BYD despite a negative view on autos broadly which they see as a tough, competitive business. Don’t read too much into their recent Japan investments. They may do some more, but it is a rounding error compared to their investments elsewhere. Buffett has avoided picking countries save for America.
- They both read and think a lot, which keeps them from making impulsive decisions. They have fun looking at investments and even rolling Treasury bills. They also rub their noses in their mistakes and admit when they were dumb. Golf would not be fun if you aced every hole.
- They provided some general life advice. Write your obituary now and reverse engineer it. Avoid debt and don’t put yourself in a position where you get taken out of the game. Buffett never knew anyone who was kind who died without friends. Spend less than you earn, defer gratification, invest wisely, get away from toxic people and situations asap. Your best hedge on inflation is your own earnings power. No one estate plan works for all families, but the worst thing you do is have your kids read your will for the first time after you die. That is a mistake you cannot correct.
- Finally, Munger mentioned that there are too many wealth managers, many of whom are no better than fortune tellers. At Sentinel, we try hard to differentiate ourselves by being employee-owned, aligned with your long-term goals and true fiduciaries fighting for every penny of return.
This material is published solely for the interests of clients and friends of Sentinel Trust Company, L.B.A. and is for discussion purposes only. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies or individuals mentioned.
