- Buffett’s Berkshire posted a record quarterly net loss of nearly US$50 billion
- Company sells entire stakes in US airlines, Buffett says ‘world has changed’
Billionaire investor Warren Buffett said Saturday he’s confident the US economy will bounce back from its pummelling by the coronavirus pandemic because “American magic has always prevailed”.
The 89-year-old made the sanguine prediction about the world’s largest economy as his holding company Berkshire Hathaway reported first-quarter net losses of nearly US$50 billion.
Buffett also announced Saturday that his company had sold all its stakes in four major US airlines last month, as the pandemic clobbered the travel industry.
“It turns out I was wrong,” he said of his acquisitions of 10 per cent stakes in American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.
Berkshire Hathaway had paid US$7 billion to US$8 billion, and “we did not take out anything like that,” he said.
Between the purchases that took place over months, and the sale, “the airlines business I think changed in a very major way” and could no longer meet Berkshire criteria for profitability, he said.
Buffett’s announcement may further hurt airlines already pushed to the brink by coronavirus lockdown measures, now looking to the US government for US$25 billion in relief funds.
Berkshire Hathaway, based in Omaha, Nebraska, called its first-quarter setback “temporary” but said it could not reliably predict when its many businesses would return to normal or when consumers would resume their former buying habits.
“But we faced tougher problems, and the American miracles, American magic has always prevailed and it will do so again.”
“We are now a better country, as well as an incredibly more wealthy country, than we were in 1789 … We got a long ways to go but we moved in the right direction,” he said, referencing the abolition of slavery and women’s suffrage.
Warren Buffett has traded his old flip phone for Apple’s iPhone
“Never bet against America.”
Buffett is considered one of the savviest investors anywhere. His fortune of US$72 billion is the fourth-largest in the world, according to Forbes, and in normal years, the company’s annual gathering in Omaha is a high-point of the calendar for investors, a “Woodstock for capitalists”.
But the devastating economic impact of the pandemic has hit hard at Berkshire Hathaway’s wide range of investments, and the need for social distancing forced it to hold the annual meeting online.
Buffett addressed his shareholders in a live-stream flanked only by Gregory Abel, who is in charge of Berkshire’s non-insurance operations.
His business partner for six decades, 96-year-old Charlie Munger, did not appear.
The annual meeting often has an almost carnival atmosphere, as thousands of fans and investors flock to Nebraska to hear from the celebrated “Oracle of Omaha”. Buffett, famous for his relatively modest lifestyle, turns 90 on August 30.
In documents filed Saturday, Berkshire noted that until mid-March many of its companies were posting “comparative revenue and earnings increases” over the same 2019 period.
Many of its companies – including in rail transport, energy production and some manufacturing and service businesses – are deemed essential and are able to continue working amid the far-reaching confinement orders.
But their turnover slowed considerably in April, the company statement said.
Moves taken by those companies such as employee furloughs, salary cuts and reductions, and capital spending reductions are “necessary actions” and “temporary,” it said.
Source: SCMP
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