Warren Buffett's mistakes in dealing with bank failures, optimistic about the United States, Berkshire

OMAHA, Nebraska (Reuters) – Warren Buffett on Saturday criticized his handling of the recent turmoil in the banking sector and said a stalemate over the debt ceiling could lead to “turmoil” in the financial system, even though he cast his vote of confidence in the United States. Berkshire Hathaway.Inc (BRKa.N) conglomerate.

Speaking at Berkshire’s annual shareholder meeting, Buffett blasted the way politicians, regulators and the press have handled the recent bankruptcies of Silicon Valley Bank, Signature Bank and First Republic Bank, saying their “very bad” letters needlessly scared depositors.

“Fear is contagious,” he said, adding that “you can’t run an economy” when people are worried about whether their money is safe in banks.

Buffett also warned of growing “tribalism” in Washington, where partisanship pushes people to talk to each other.

“We have to improve our democracy in certain ways as we move forward. But if I still have a choice, I want to be born in the United States. It’s a better world than ever before.”

Buffett spoke hours after Berkshire announced quarterly earnings of $35.5 billion and said it had bought back $4.4 billion of its stock, indicating that he considers the stock to be undervalued.

On the contrary, it sold $13.3 billion in shares of other companies, in a quarter when the S&P 500 Index (.SPX) rose 7%.

The sixth richest person in the world, Buffett has run Berkshire since 1965, whose dozens of businesses include auto insurance company Geico, railroad BNSF, and consumer names like Dairy Queen and Fruit of the Loom.

Berkshire also owns $328 billion in stock, about half of which is in Apple Inc (AAPL.O).

The meeting saw Buffett, 92, chairman and CEO of Berkshire, and Vice Chairman Charlie Munger, 99, answer five hours of shareholder questions. Vice-Presidents Greg Appel, 60, and Ajit Jain, 71, were joined this morning.

Buffett reiterated on Saturday that Abel would succeed him as CEO, adding that he had no plans if Abel couldn’t.

lit match

Buffett said regulators were right to insure depositors at Silicon Valley banks, saying that not doing so “would have been disastrous.”

He also said that bank shareholders and executives should risk mismanagement, with Munger criticizing executives who care more about the rich than customers.

“A lit match can turn into a conflagration or it can explode,” Buffett said. “You have to punish the people who do the wrong thing.”

Buffett also said he can’t imagine politicians or regulators willing to “disrupt the global financial system,” including if Washington fails to break the deadlock over raising the debt ceiling or how much the government can borrow.

Anticipating questions about banking, Buffett elicited laughter by placing a sign that said “Available For Sale” in front of him and another that said “Continue Breastfeeding” in front of Munger.

These refer to how lenders account for their securities, a central issue in the recent banking crisis.

Buffett said Berkshire has been wary of banks and has sold some bank stocks in the past six months.

Saturday’s meeting is the focus of a weekend that Buffett calls “Woodstock for the Capitalists” that draws tens of thousands of people to his hometown of Omaha, Nebraska.

Attendance is up compared to 2022. Unlike last year, the downtown square that hosted the meeting was fully booked.

BUFFETT: “Apples work best”

Discussing Berkshire’s performance, Buffett said most of its operating businesses are likely to perform worse in 2023 than they did in 2022 as economic activity slows.

But he said Berkshire could offset that by increasing investment income, including the $7 billion in Treasury notes it bought in April.

Buffett has defended the size of Berkshire’s $151 billion investment in Apple, saying that consumers are less likely to get rid of their $1,500 iPhone than, say, their $35,000 second car.

“Apple is different from the other companies we own,” Buffett said. “It works better.”

Berkshire recently acquired a 5.6% stake in Apple, and Buffett said he could buy more.

“Portfolio management practices suggest there is certainly concentration risk with a lot of Apple in that portfolio,” said Cathy Seifert, vice president of CFRA Research.

He also said that while Berkshire owns about a quarter of Occidental Petroleum (OXY.N), it has no plans to take control of the company.

Munger, a former Chinese bull who led Berkshire’s investment in electric car company BYD, has called for an easing of tensions and an increase in trade between that country and the United States.

Buffett cited these tensions, saying he feels more comfortable deploying capital in Japan than in Taiwan.