Warren Buffett tells shareholders about spending $51 billion

Billionaire Warren Buffett reveals he’s plugged £26 billion into oil giant Chevron as part of his £50B spend as he tells Berkshire Hathaway shareholders that Wall St is ‘run like a gambling parlor’

  • Warren Buffett called Wall Street a ‘gambling parlor’ at Berkshire Hathaway’s annual shareholder’s meeting on Saturday, saying it encourages risky behavior
  • ‘It’s much better to have somebody that’s going to trade 20 times a day and get all excited about it – just like pulling the handle on the slot machine,’ he said
  • ‘Wall Street makes a lot more money when people are gambling than when they’re investing,’ he said
  • He said that large American companies have become ‘poker chips,’ citing an increase in call options
  • But amid that environment, he said, his company Berkshire Hathaway seized an opportunity, spending more than £50 billion on stocks in the first quarter
  • Berkshire revealed in its earnings report Saturday morning that its cash shrank to £106 billion in the first quarter from £147 billion at the beginning of the year

By Associated Press and Christina Coulter For Dailymail.Com

Published: 14:27, 30 April 2022 | Updated: 01:48, 1 May 2022

Warren Buffett lambasted Wall Street at Berkshire Hathaway’s annual meeting on Saturday, telling investors that the market encourages risky behavior in the stock market that turns it into a ‘gambling parlor.’ 

Buffett, 91, criticized investment banks and brokerages to a crowd of tens of thousands of investors at his annual shareholder meeting at Omaha Arena, saying that Wall Street makes ‘a lot more money when people are gambling than when they’re investing.’

‘It’s much better to have somebody that’s going to trade 20 times a day and get all excited about it – just like pulling the handle on the slot machine,’ he said. 

‘You may not say you’d want that person… but that’s where you make the money. The degree to which the market got dominated by that is showing.’

‘Wall Street makes money, one way or another, catching the crumbs that fall off the table of capitalism,’ he said. ‘They don’t make money unless people do things, and they get a piece of them.’

Large American companies have become ‘poker chips’ for market speculation, he said, citing an increase in call options and said brokers make more money off bets than simple investments. 

But amid that environment, he said, his company Berkshire Hathaway seized an opportunity, spending more than £50 billion on stocks in the first quarter of 2022. 

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Warren Buffett, 91 (pictured) criticized investment banks and brokerages to a crowd of tens of thousands of investors at his annual shareholder meeting at Omaha Arena, saying that Wall Street makes ‘a lot more money when people are gambling than when they’re investing’

Warren Buffett tells shareholders about spending $51 billion

Charlie Munger, 98, Berkshire’s vice chairman and Buffett’s longtime partner, called the current market a ‘mania of speculation’

Warren Buffett tells shareholders about spending $51 billion

Two men take a break on a bench during the Berkshire Hathaway 2022 Annual Shareholders Meeting weekend at the CHI Health Center in Omaha

Warren Buffett tells shareholders about spending $51 billion

People line up for the Berkshire Hathaway 2022 Annual Shareholders Meeting weekend outside the CHI Health Center in Omaha

‘That’s why markets do crazy things, and occasionally Berkshire gets a chance to do something,’ he said. 

‘Occasionally, Berkshire gets a chance to do something, and it’s not because we’re smart. It’s because we’re sane.’

Berkshire revealed in its earnings report Saturday morning that its mountain of cash shrank to £106 billion in the first quarter from £147 billion at the beginning of the year as Buffett invested £51 billion in stocks and repurchased £3.2 billion of its own shares.   

But after Buffett told shareholders in his annual letter on February 26 that he was having trouble finding anything to buy at attractive prices, he said, deals began revealing themselves over the next three weeks. 

Buffett revealed Saturday that he has made a big bet on Microsoft’s planned acquisition of Activision Blizzard. 

He said a couple months after one of Berkshire’s other investment managers bought roughly 15 million Activision shares, he increased that stake to roughly 9.5% of the company – or about 74 million shares – after Microsoft announced the deal in January because Activision stock was selling for less than the £95 per share deal price. 

Warren Buffett tells shareholders about spending $51 billion

A Warren Buffett rubber duck is available during the Berkshire Hathaway 2022 Annual Shareholders Meeting weekend at the CHI Health Center in Omaha

Warren Buffett tells shareholders about spending $51 billion

Special See’s Candies boxes are available during the Berkshire Hathaway 2022 Annual Shareholders Meeting weekend at the CHI Health Center in Omaha

The business magnate also allocated £7 billion toward shares of Occidental Petroleum in the first half of march, grabbing 14 percent of the oil producer’s total shares.  

He also revealed that he boosted Berkshire’s stake in oil giant Chevron to £26 billion, up from £4.5 billion at the beginning of the year, making it one of the conglomerate’s largest four investments.

Edward Jones analyst Jim Shanahan said that with the Chevron and Occidental investments combined Berkshire now has more than £40 billion invested in the oil sector. 

Even before Saturday, it was clear Buffett was on the hunt because he agreed to buy the Alleghany insurance conglomerate for £11.6 billion and made another multibillion-dollar investment in HP Inc.

Buffett said Saturday that he also bought three German stocks but didn’t name them. 

Charlie Munger, 98, Berkshire’s vice chairman and Buffett’s longtime partner, called it a ‘mania of speculation.’ 

‘We have people who know nothing about stocks being advised by stock brokers who know even less,’ Munger said. ‘It’s an incredible, crazy situation. I don’t think any wise country would want this outcome. Why would you want you country’s stock to trade on a casino?’ 

Both Buffett and Munger reiterated their past criticisms of cryptocurrencies like bitcoin because they don’t produce anything. 

Munger said cryptocurrencies are ‘stupid because they’re likely to go to zero’ and ‘evil because they undermine the Federal Reserve.’ Plus he said they make American leaders seem foolish for not banning them like China did. 

Share prices were boosted to record highs during the pandemic as retailers flooded into the stock market last year.

Meme stocks on Reddit forums fueled the calamity further. 

But the market has flipped on its head this year, putting many at-home traders at a loss. The NASDAQ composite is down more than 23 percent from last year’s high after a downturn in April.  

Warren Buffett has long been critical of investment bankers and firms, calling them ‘money shufflers’ and saying that they encourage mergers and spinoffs to make a profit rather than improving companies. 

Warren Buffett tells shareholders about spending $51 billion

A truck with rotating images protesting over the ongoing contract negotiations for BNSF Railway union workers drives past people lining up for the Berkshire Hathaway 2022 Annual Shareholders Meeting outside the CHI Health Center in Omaha on Saturday

Warren Buffett tells shareholders about spending $51 billion

People line up for the Berkshire Hathaway 2022 Annual Shareholders Meeting weekend outside the CHI Health Center in Omaha on Saturday

Warren Buffett tells shareholders about spending $51 billion

People protest outside the Berkshire Hathaway 2022 Annual Shareholders Meeting over the ongoing contract negotiations for BNSF Railway union workers outside the CHI Health Center

Warren Buffett tells shareholders about spending $51 billion

Garrett Northwall, 11, of Nashville, Tennessee, watches a model train and trolley during the Berkshire Hathaway 2022 Annual Shareholders Meeting weekend

He also said during the shareholder’s meeting that the company would always be cash-rich. In times of need, he said, it would be ‘better than the banks’ at giving companies loans and credit lines. 

‘Was that a banker screaming?’ Buffett joked as an audience member made an inaudible comment. 

Buffett also assured his investors that the Berkshire Hathaway would endure long after he was gone.  

‘Berkshire is built to forever.

There is no finish point,’ Buffett said. ‘The new management – and the management after them and after them – are just custodians of a culture that’s embedded.’  

Investor Harris Kupperman, who leads the Praetorian Capital hedge fund, said he’s not especially worried about the Berkshire’s future because the eclectic conglomerate has a solid foundation.

‘He built it as well as he could build it. Nobody is ever going to be him. That’s obvious,’ Kupperman said.

He said perhaps Buffett’s eventual successor will be able to reevaluate some long-term Berkshire investments that Buffett has held for decades and decide whether it still makes sense to hang onto things like the company’s huge Coca-Cola stake.

Even though Berkshire is led by aging Buffett and Munger, investors didn’t ask much about succession planning perhaps because Buffett said a year ago that Vice Chairman Greg Abel, who oversees all of the company’s non-insurance businesses now, will eventually replace him as CEO. 

Berkshire also has two other investment managers who will take over the company’s portfolio. 

Warren Buffett tells shareholders about spending $51 billion

People line up to get inside the Berkshire Hathaway 2022 Annual Shareholders Meeting weekend at the CHI Health Center in Omaha

Warren Buffett tells shareholders about spending $51 billion

Nestor Riano, of Roseville, Minn., gets his photo taken near a welcome sign during the Berkshire Hathaway 2022 Annual Shareholders Meeting weekend

But Buffett’s and Munger’s ages are always in the back of Berkshire investors’ minds because there may not be too many more meetings with both of them.

Munger sat in a wheelchair during Saturday’s meeting.

‘Actuarially, I don’t know how much longer they’ll be able to do this,’ said Josu Elejabarrieta, 43, of Miami, who was attending his first meeting.  

Earlier Saturday, Berkshire said its first quarter earnings fell more than 53% on a large swing in the paper value of its investments. 

Berkshire said it earned £5.46 billion, or £3.702 per Class A share, during the quarter.

That’s down from £11.7 billion, or £7.638 per Class A share, a year ago.

Buffett says that Berkshire’s operating earnings are a better measure of the company’s performance because they exclude investment gains and losses.

By that measure, Berkshire’s earnings remained steady at £7.04 billion, or £4,773.84 per Class A share, up from £7.018 billion, or £4,577.10 per Class A share, a year ago.

The four analysts surveyed by FactSet expected Berkshire to report operating earnings of £4,277.66 per Class A share.

In addition to investments, Berkshire Hathaway owns more than 90 business outright, including BNSF railroad, several major utilities, Geico insurance and an assortment of manufacturing and retail companies.