Breaking his silence: Warren Buffett’s upcoming letter has investors on edge

It’s been different since he spoke up at last year’s annual meeting in May, when he said his near-record cash pile wasn’t that huge when considering the “worst-case” possibilities of the COVID-19 pandemic. The CEO has since shared few, if any, of his opinions, even last year as President Joe Biden and former president Donald Trump squared off in one of the most contentious elections in US history. The 2020 letter made no mention of the topic.

Loading

“Maybe he just decided that there was no upside to getting into that fray,” Seifert said. “He was a little more open when the level of general discourse was a lot more civil, and I can certainly understand a desire to sort of pack up your tent and go home and not partake. It’s not a parlour game anymore. It’s a bloodsport.”

If he decides to weigh in, there are plenty of topics on which he could expound. How did he view the riot at the US Capitol in early January? What did he say to Biden during his chat just weeks ahead of the election? What are investors to make of the recent drama involving short sellers of GameStop and other stocks? How about the surging equity market? And how should corporations address racial inequality?

His business partner, Charlie Munger, didn’t shy away from talking about stockmarket speculation on Wednesday at the annual meeting for the Daily Journal, where he’s chairman. He bashed brokers such as Robinhood Markets, saying that they’re essentially offering gambling services – a “dirty way” to make money.

There are also more nuts-and-bolts questions for Buffett. Despite handily beating the S&P 500 over more than 50 years at the helm of Berkshire, Buffett has underperformed the index for at least a decade. And his cautious stance last May at Berkshire’s annual meeting drew questions from some who wanted to see him be more aggressive in making new investments.

Still, investors such as Darren Pollock said the strategy, in retrospect, was admirable given Buffett’s desire to maintain Berkshire’s “Fort Knox” balance sheet.

“The fact that he was more cautious was perfectly fine,” said Pollock, a portfolio manager at Cheviot Value Management, which counts Berkshire as its largest holding. “It’s better to miss an opportunity and remain in great financial condition than it is to take a large swing, and swing and miss and strike out.”

Berkshire is also plagued by its size. The company has grown so large that only massive acquisitions can move the needle. But they’ve been hard to find amid high prices and competition from buyers such as private equity firms. Even the company’s $US6 billion in Japanese stock purchases last year would account for just 4 per cent of Berkshire’s cash pile at the end of the third quarter. Now, Buffett can add the recent boom in SPACs, or special purpose acquisition companies, as another competitor swamping the deal-making space.

Loading

“There’s so many things right now that I think the market would benefit from, in terms of his wisdom,” Jim Shanahan, an analyst at Edward D. Jones & Co., said in a phone interview. He listed the rise of SPACs as well as “GameStop, short-selling, Reddit and the whole episode. But even just things like the underperformance of the stock, inflation, the stimulus – the size and maybe perhaps the necessity of another stimulus.”

Bloomberg