SAT, MAY 06, 2023
WARREN BUFFETT WATCH
Shareholder Meeting Special Edition
Buffett: We're not going to buy control of Occidental
Warren Buffett is dashing the hopes of anyone betting that Berkshire Hathaway's ongoing purchases of Occidental Petroleum stock would lead to an acquisition of the entire company.
During a discussion at today's Berkshire Hathaway annual shareholders meeting in Omaha about the many challenges facing oil companies, Buffett was straightforward. "There's speculation about us buying control. We're not going to buy control. We wouldn't know what to do with it."
That doesn't necessarily mean Berkshire won't be adding to its 211.7 million share stake. which is almost 24% of OXY outstanding shares and was valued at more than $12.8 billion at Friday's close. (We could be seeing more purchases soon, now that the stock has dropped back to around $60, the area in which many previous buys have been made.)
"We love the shares we have. We may or may not own more in the future."
Buffett also said he's "glad" that as part of its 2019 deal to help finance Occidental's purchase of Anadarko, Berkshire received warrants to buy 84 million OXY shares at $59.62 each.
Buffett: We like Occidental’s position in the Permian Basin
Activision arbitrage bet isn't looking good
At last year's annual meeting, Buffett revealed that he had bought more than $4 billion worth of Activision Blizzard shares for Berkshire's portfolio after the January announcement that Microsoft planned to buy the video game maker for $95 per share.
The stock was trading around $80, so it was a bet the deal would win regulatory approval and be finalized at the $95 price.
At that meeting, he said, "If the deal goes through, we make some money, and if the deal doesn't go through, who knows what happens."
Last week, British antitrust regulators announced they will block the acquisition, a move that Microsoft plans to appeal.
In the U.S., the Federal Trade Commission filed its own antitrust case last December.
Buffett on Microsoft-Activision deal: Microsoft has met the opposition more than halfway
Today, Buffett would not say whether Berkshire has sold any of that stock, which closed Friday at $76 per share.
He did say he thinks Microsoft has "met the opposition, it seems to me, more than halfway, but that doesn't mean that it gets done."
"Not everything that should happen, does happen..."
He added, "I think the British government is making a mistake in this case, but that's life in the big city, as Charlie would say."
"What we do will depend on a lot of things."
American public is "as confused about banking as ever"
Buffett is blaming politicians, regulators, and the media for failing to assure Americans that their all of their bank deposits are safe, arguing Washington would do whatever is needed to protect them, regardless of their size.
"Although there's a $250,000 limit on FDIC [insurance], the FDIC and the U.S. government and the American public have no interest in having a bank fail and have deposits actually lost by people," citing the move by regulators to backstop all deposits at the failed Silicon Valley Bank.
Failing to do that, Buffett said, would have been "catastrophic."
Buffett said he has his own personal money in a local bank, and even though he has deposited more than the $250,000 that is explicitly guaranteed by the FDIC, "I don't worry about it in the least."
SVB failure would have been ‘catastrophic’ without government backstop
While he thinks bank customers don't have to worry, Berkshire is being very "cautious" about owning bank stocks because the industry has been changing rapidly.
"We don't know where the shareholders of the big banks ... or the regional banks, or any bank, are heading."
He did reaffirm his support for Berkshire's $28.6 billion dollar stake in Bank of America, saying, "I like the management."
And while Berkshire has reduced other bank holdings over the past six months, Buffett remains loyal to BofA, citing his initiation of the 2011 deal in which Berkshire invested $5 billion in the bank when it was struggling.
"I proposed the deal to them, so I'm -- I stick with it."
U.S. and China need to step back from 'stupid' economic confrontation
Comparing the current tensions between the United States and China to the Cold War with the Soviet Union, Warren Buffett called on both sides to avoid an escalation that could lead to "mutually assured destruction."
"It is imperative that China and the United States both understand what the game is, and understand that you can't push too hard."
Buffett thinks both sides can "prosper" even if they are competitive. "We won't give away the store, but we won't try to take the whole store, either."
Munger on U.S-China tensions: Both sides are equally ‘guilty of being stupid’
Munger blamed both Washington and Beijing for being too antagonistic in their economic relationship.
"That tension has been wrongly created on both sides. I think we're equally guilty of being stupid...
"Everything that increases the tension between the two [countries] is stupid, stupid, stupid... Each side ought to respond to the other side's stupidity with reciprocal kindness."
Munger defends 'old-fashioned' intelligence
Charlie Munger thinks artificial intelligence isn't necessarily the next big thing.
"I am personally skeptical of some of the hype that has gone into artificial intelligence. I think old-fashioned intelligence works pretty well."
Buffett said that while it can do "amazing things," he is absolutely certain artificial intelligence won't be able to, for example, "replace" what Ajit Jain does to manage the company's insurance operations.
Buffett and Munger on A.I. revolution: Old-fashioned intelligence works pretty well
He is, however, "a little bit worried" about something that can do "all kinds of things" because "I know we won't be able to uninvent it," comparing AI's potential destructive power to the atomic bomb.
Paraphrasing Albert Einstein, he said, "It can change everything in the world except how men think and behave. That's a big step to take"
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Also, Buffett's annual letters to shareholders are highly-recommended reading. There are collected here on Berkshire's website.
-- Alex Crippen, Editor, Warren Buffett Watch
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