Warren Buffett made mistakes in handling bank failures, US, cheers over Berkshire

OMAHA, Nebraska, May 6 (Reuters) – Warren Buffett on Saturday criticized his handling of recent turmoil in the banking sector and said the debt ceiling conflict could bring “turmoil” to the financial system. America and its conglomerate Berkshire Hathaway Inc (BRKa.N).

Speaking at Berkshire’s annual shareholder meeting, Buffett criticized how politicians, regulators and the press handled the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank.

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

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

“As we go, in a certain way, we have to refine our democracy. But if I had another choice, I’d like to be born in America. It’s a better world than we had.”

Buffett spoke hours after Berkshire posted a quarterly profit of $35.5 billion and said it had bought back $4.4 billion in its own shares.

By contrast, other companies sold $13.3 billion in stocks during the quarter, as the S&P 500 index (.SPX) rose 7%.

The world’s sixth-richest man, Buffett has run Berkshire since 1965, whose dozens of businesses include Geico auto insurance, BNSF railroad and consumer names such as Dairy Queen and Fruit of the Loom.

Berkshire owns $328 billion in shares, close to half of Apple Inc ( AAPL.O ).

At the meeting, Buffett, 92, Berkshire’s chairman and chief executive, and Vice Chairman Charlie Munger, 99, answered questions from shareholders for five hours. Vice Presidents Greg Abel, 60, and Ajit Jain, 71, joined in the morning.

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Buffett reiterated on Saturday that Abel would succeed him as CEO, while saying he had no plans if Abel could not.

Easy competition

Buffett said regulators were right to guarantee Silicon Valley bank depositors, saying it would have been “catastrophic” if they hadn’t done so.

He also said that bank shareholders and executives should bear the risks of mismanagement, and Munger criticized executives who cared more about getting rich than customers.

“A lighted match can turn into a collision or explode,” Buffett said. “You must punish those who do wrong.”

Buffett also said he couldn’t imagine politicians or regulators willing to “disrupt the world’s financial system” if Washington failed to break its deadlock on raising the debt ceiling, or how much the government could borrow.

Anticipating banking-related questions, Buffett drew laughter by putting the words “available for sale” in front of him and “maturity to maturity” in front of Munger.

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

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

Saturday’s meeting is the centerpiece of what Buffett calls a “Woodstock for capitalists” weekend, drawing tens of thousands to his hometown of Omaha, Nebraska.

Attendance increased from 2022 onwards. Unlike last year, the downtown arena hosting the meeting was packed.

Buffett: “Apple is a great business”

Discussing Berkshire’s performance, Buffett said most of its operating businesses will fare worse in 2023 than in 2022 as economic activity slows.

But Berkshire said it could offset this with higher returns on investments, including the $7 billion in Treasury bills it bought in April.

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Buffett defended the size of Berkshire’s $151 billion investment in Apple, saying that consumers are less likely to give up $1,500 iPhones than $35,000 second cars, for example.

“Apple is different than any other business we’ve owned,” Buffett said. “It’s going to be a great business.”

Berkshire recently held a 5.6% stake in Apple, and Buffett said it may buy it.

“Portfolio management practices would suggest that there is definitely concentration risk from having too much Apple in that portfolio,” said Cathy Seifert, CFRA’s vice president of research.

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

Munger, a longtime China bull who led Berkshire’s investment in electric car maker BYD Co, called for less tensions between the country and the United States and increased trade.

Buffett cited those tensions as the more convenient location of capital in Japan than in Taiwan.

Waiting in line

Ahead of the meeting, dozens of uniformed pilots at Berkshire-owned NetJets demonstrated outside the arena, protesting low wages and long hours.

Meanwhile, thousands of shareholders lined up outside the arena ahead of the opening at 7 a.m. CDT (1200 GMT). Many recognized that this might be one of their last chances to see Buffett and Munger.

Vidya Vivekananda, an investment partner from Vancouver, Canada, said she and her husband arrived 30 minutes early for their first meeting.

“It’s been on our bucket list for a long time,” he said. “We don’t know how long Warren and Charlie will last before they send it.”

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Yongsheng Zhao, who lives in Shanghai and is a researcher at an asset management firm, said he arrived in the middle of the night with a chair to see Buffett and Munger for the eighth time.

“I was impressed by their passion and naturalness,” he said. “I believe they can go another five years or so.”

Reporting by Jonathan Stempel in Omaha, Nebraska; Additional reporting by Carolina Mandel and John McCrank in New York; Editing by Megan Davies, Ira Iospashvili and Diane Croft

Our Standards: Thomson Reuters Trust Principles.

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