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It particularly doesn’t feel like an annual meeting because my partner of 60 years, Charlie Munger, is not sitting up here.
Virus:
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Have faced bigger challenges in the past like world war, 9/11, Spanish flu & financial crisis. America always came out stronger.
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YouTube 6/17/15, former senator and founder of nuclear threat initiative. “Germs don’t have border”. Only 831 views.
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October 2019. Global wealth security index. John Hopkins, Nuclear Threat Initiative, The Economist.
“Opening line, “Biological threats – natural, intentional or accidental – in any country
can pose risks to global health, international security and the worldwide economy”
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Buffett on the Fed's coronavirus response: "The [Fed] did the right thing and they did it very promptly... I salute them for it but that means that a lot of companies that needed money... got the chance to finance in huge ways.
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Buffett remains strong on America:
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“If you were to pick one time to be born and one place to be born and you didn't know what your sex was going to be, intelligence, special talents, you would not pick 1720, 1820, 1920. You would pick today, and you would pick America”.
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Added age of Charlie and Buffett 185. America is very young at 231.
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Population in 1790: 3.9 millions, of which 0.6 million were slaves. About 1⁄2 of 1% of the population of the planet lived in our 13 states. Even the most optimistic person could not in their wildest dreams have thought that in 3 lifetimes we would be looking at a country with 280 million vehicles, airplanes, great universities, great hospital systems and entertainment.
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Wealth of country in 1789 estimated at $1 billion. Louisiana purchase in 1803, $15 million. Wealth of country in 2020. Well over $100 trillion – at least $100,000 per each original $1. Perhaps a 5,000 for 1 gain in real terms.
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16 million males in 1861, perhaps 10 million between ages 18 and 60. About 6% of that group killed in civil war (1861-1865). 2020 equivalent: about 4 million males between ages 18 and 60 killed.
Nobody knows anything:
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DJIA 9/3/29 – 381.17. United states at that time 140 years of age.
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DJIA 11/13/29 – 198.69. Low for the year. Decline of 48%. Rahm Emanuel: “You never want a serious crisis to go to waste”.
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DJIA 8/29/30 – 240.42. Last trading date before my birth. Up 20% from 1929 low. Not yet apparent that US headed for depression.
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DJIA 7/8/32 – 41.22. Low point after my birth. $1000 becomes $170 in less than two years.
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Great depression lasted longer in the minds of people that its impact.
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Debt to GDP highest during world war 2 highest, and hasn’t reached their since.
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DJIA 1/04/1951 - 240.85. After more than 20 years, a buyer on my day of birth finally gets even (though dividends had been received).
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1964 DJIA at 280 to 400, end of the year. People wondered if it was 1929 and were about to fall off another cliff. But it was a different country at 1964. 20 smartest minds were hired and testified if we were again in 1929.
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American tailwind at full force. Today the DJIA is above 24,000. $100 for every $1 since the fellow you are looking (Warren Buffett) at finished college. All you have to believe America was intact. This is done without reading Wall Street Journal and paying fees to experts.
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Never bet against America. Tested during depression and may test again. America will come out stronger.
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In 2020, we are now a better country as well as an incredibly more wealthy than we were in 1789.
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1776: “We hold these truths to be self-evident, that all men are created equal”
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1790: first census counts more than 15% of population held as slaves.
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131 years until women were guaranteed the right to vote for our country’s leaders. Then
it took 61 more years until a women was allowed to join 8 males on the supreme court. In the meantime, 33 men had been appointed. We still have a long was to go creating an even wealthier and more equitable society.
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But never – never – bet against America.
Stocks:
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I don’t know where [stocks] are going to go in the next day, month, year but I hope that really everybody will buy stocks with the idea that they’re buying partnerships in business and not chips that they can move up or down.
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Anything can happen in terms of markets. Be-careful about how you bet. Markets have gone down 22% in one-day. Nobody knows what will happen tomorrow. If you're going to look at the price of the stock and think that you have to act. You've got to be in the right psychological position. Some people are more subject to fear than others.
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Equities will outperform bonds, treasury bill and the money under the mattress over the long run unless you see them as gambling instruments. Stock get quoted minute-by- minute and people make an opinion on them minute-by-minute. Think of stocks as businesses.
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Stocks have the enormous advantage that people sell it for cheaper. If you like the business and like the management before the virus, and if economic value hasn’t changed, nobody’s forcing you to sell because the number keeps coming in lower.
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American businesses will have interruption and nobody can forecast interruptions.
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Not saying this is the right time to buy stocks but I hope everybody will buy stocks with
a thought of being a partner in a business.
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Fear is the most contagious disease you can imagine.
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My general advice [is] people should avoid using credit cards as a piggy bank to raid. It just doesn't make sense. You can't go through life borrowing money at those rates and be better off. Paying 18% interest doesn’t make sense.
Money management business versus passive investing:
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Is passive investing dead? "If you say the day of investing in America is over, I would disagree quite violently. "Index funds reflect the market.
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People will try and sell you other things because there’s more money in it for them. Most good sales people believe their own baloney. That’s part of being a good sales person.
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Only buy if you are Financially and psychologically ready. Nobody can pick bottom for you. Be prepared to see it go down 50%. Three times Berkshire went 50%+ down. If you don’t understand well, you will be affected by next person you talk to.
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Buffett sticks with his recommendation for laymen to own the index as a cross section of businesses: Most people are not stock pickers, would do well to own a cross selection of America, in my view most people should own the S&P500 index.
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Businesses:
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Bought 10% of top well run American airlines. Made a mistake as airlines business changed in a way. 4 airlines had to borrow $10-12B each and pay it back, and that takes away from the upside And don’t know if as many people may / not fly as much as they did. Even if business comes back 70-80%, aircraft doesn’t disappear.
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No fault of airlines in this, just a low probability event. I don’t envy anyone with the job of being CEO of an airline.
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Sold all 4 major airlines. Prospects look changed.
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It'll be great to find a great business that doesn't require capital when it grows. Top 4-5
business in market cap (Apple, Google, Facebook etc) don't require much capital to grow.
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Willing to do something very big worth $30-40 billion if we like the idea.
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On Occidental investment, “We said right from the beginning, essentially when you buy into a huge oil production company, how it works out is going to depend on the price of oil to a great extent”
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Started with 2000 people now employs 390,000. Will grow.
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Retailers example See’s, Jewelers closed, at some point when they open we will rehire our people. It’s very seasonable business during Christmas and Easter – we produced a great deal of Candy, couldn’t ship, couldn’t put in stores.
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There are few businesses we may think are good but may not turn out to be good. And there are few businesses we do not like but may turn out to be good.
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The banks were very involved with the problem in 2008 and '09, Warren Buffett says. "The banking system is not the problem in this particular [situation]. it was not the fault of anyone that it happened.
Federal Reserve:
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The [Fed] did the right thing and they did it very promptly. I salute them for it but that means that a lot of companies that needed money got the chance to finance in huge ways.
Psychology:
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"It's interesting that IQ does not always translate into rationality and behavioural success or wisdom. I know some people that are extraordinarily wise who would not be in the top three on an IQ test.
Capitalism:
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Buffett on capitalism: “The market system works wonders and it's also brutal if left entirely to itself...I do not want to come up with anything different than capitalism, but I certainly do not want unfettered capitalism.