During his recent interview with Tobias, Christopher Bloomstran, President and CIO of Semper Augustus Investments Group discussed Why Buffett Was So Somber At This Year’s Meeting. Here’s an excerpt from the interview:
Well, let’s talk about that a little bit and I’m going to tie this into your biggest position which is Berkshire and you’re known as someone who’s has spent a great deal of time researching and writing about it. We’ve just had the general meeting this weekend gone that I think that perhaps shocking might be too strong of a word, but the scary thing for me was really that I had some inkling that this was going to happen before we went in because Munger said beforehand that they hadn’t done a great deal. And we knew that they had sold down Southwest and Delta and it sold down Bank of New York, which has the very unfortunate BK ticker symbol. And then I think it’s the most somber I’ve ever seen a Buffet in a general meeting and perhaps compounded by the fact that he was alone for a lot of it or with only Greg Abel there for part of it in a gigantic auditorium. What were your impressions and how do you feel about Berkshire right now?
Yeah, it’s all very interesting. And I couldn’t agree with your perspective anymore. He was extremely dour and somber and you think about where he is at his station in life, he’s run this operation. He’s had this great American tailwind at his back where he’s seen, GDP per capita on a real basis, compound at multiples over a course of a lifetime. And you really haven’t had that in the last 20 years. And we’ve seen leverage levels build throughout the system, went through the financial crisis and took some opportunities and made some very good investments during that period, wound up buying the railroad, in ’09 but had made the investments in GE and in Goldman Sachs. You think about running the operating businesses that they have and seeing the retail operations in the empire.
They’ve owned Nebraska Furniture Mart for a long time. They’ve owned Borsch arms for a long time. They’ve owned seas, back to the early 1970s. Those are businesses that closed their doors and they furloughed employees. And that’s something Berkshire has never done. They managed through the ’08 crisis seamlessly. And then on the other hand, you’ve got Bill Gates who’s very close to who couldn’t be more of an authority on what’s going on medically today, resigning from not only his board of directors, but the Microsoft board to focus on what I think Bill knew was going to be a very, very profoundly serious thing, and that it would impact the economy for a long time. And so, we presumed correctly when we saw the sales of the Southwest position and the Delta position to take them down to 10% that it wasn’t because he was teeing up the outright acquisition of an airline.
We assume they sold all of them and had probably already sold the other two United continental and American prior to the 10. He rightfully, having grown up in the wake of the great depression and I go back with my own family and both my grandmothers when I was growing up having lived through that period with large families and not a lot of resources and a lot of pain and suffering. On the odd occasion that my grandmothers would be willing to go out to lunch or to dinner because they really just never wanted to spend the money. Both drank hot tea for example with both for their entire adult lives that I knew them. They would wrap up in aluminum foil or a napkin their teabags and take them home from the restaurant. Because why don’t you throw away a perfectly good teabag that you’ve only gotten one use out of. We’ve lost that sense.
But Mr. Buffet grew up in that environment and they have every right to be concerned about what’s going on because nobody can know the duration and the magnitude of where we are. We’re seeing the economy start back up and we’re trying to put industries that have been closed back to work, but within that microcosm of Berkshire, they’ve seen this thing up and close and we see it as investors and we’re talking to CEOs and CFOs and people in the medical world and try to get our minds around it. But he’s running businesses and he’s never seen anything like this. I couldn’t share the sentiment anymore. I think he’s logically concerned about what’s going on.
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