May 5, 2022 4 min read

Last week, Berkshire Hathaway held their annual shareholders meeting. What makes this story interesting is Berkshire is headed by legendary investor Warren Buffett.

Many people consider Buffett the best investor of all time. He is now 91 years old and still as sharp as a tack. He and his 98-year-old co-executive Charlie Munger stood on stage and answered questions for five hours.

From the start of 1965 through the end of 2021, the per-share market vale of Berkshire Hathaway had an average compound annual gain of 20.1%, according to the firm’s annual letter. This is nearly double the S&P 500’s 10.5%, including dividends.

Before you rush out and try to buy some stock, the A shares closed today at $480,837 for one share. Buffett does not believe in spitting the stock. There are some other classes of the stock at lower price points.

Buffett does not try to time the stock market, and believes no one else can do it consistently either. He buys value companies and works to make them better. He is not chasing the new shinny object in the investment world. Some of his many companies include Kraft-Heinz, Geico Insurance, Duracell and Dairy Queen.

Buffett and Munger do not believe in Bitcoin. They say cyber currencies do not produce anything of value, and doubt governments will allow these alternative investments to replace their currencies. Buffett has called Bitcoins “rat poison” in the past.

They are also skeptical of Robinhood, the brokerage firm behind much of the meme stock crazes of the last year. This app soared in value early on, but has since come crashing down. During the pandemic, groups of young investors would communicate in chat rooms and then use Robinhood to purchase stocks such as Game Stop and AMC. Robinhood does not charge sales commissions, but receives “hidden kickbacks” from market makers for order flow.

Buffett and Munger are also concerned about the proxy voting by large mutual fund companies. They estimate that index funds vote about 50% of the shares of public companies. Creating short term profits may make America less prepared for long term economic growth. Perhaps we are seeing some of this now with micro chip shortages making auto parts and many other things scarce?

According to Buffett, the root of our inflation is all of the stimulus money printed during the pandemic.

He does not fault the Federal Reserve System though, as he said they did what they had to during the crisis. We will be seeing soon if they can unwind all of the stimulus and zero interest rates without causing a recession. Buffett says companies will need much more money during a time of inflation, and it is just not as easy as raising prices to deal with it. There will likely be less stock buy backs as we deal with this new financial crisis. This was a large driver of increasing stock prices.

We can learn a lot from listening to what Warren Buffet says. He started a tradition decades ago where here would auction off a chance for a lucky someone to eat lunch with him and donate the funds to charity.

This year is scheduled to be the last year he is going to do this. Originally, the winning bid was around $25,000. Last year, the winner paid $4.3 million.

People do like to hear what Warren Buffett has to say.

Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.