Warren Buffett on 50% Return, Higher Taxes, Dollar Threat, Secret Gift

• Warren Buffett’s Q&A at Berkshire’s annual meeting was full of interesting nuggets and tidbits.
• He teased a possible Canadian bet, and said he could make a 50% annual return on $1 million.
• Buffett predicted higher taxes and revealed a $500 million donation of Berkshire stock.

Warren Buffett let slip a slew of intriguing facts and anecdotes during Berkshire Hathaway’s annual shareholder meeting on Saturday.

The headlines from the event included Buffett confirming he’d sold 13% of his gargantuan Apple stake, admitting responsibility for a losing bet on Paramount, and raising the alarm on AI-powered fraud.

But the Berkshire CEO also warned of higher taxes, teased a potential Canadian investment, and revealed a $500 million gift of Berkshire stock.

Moreover, Buffett declared that he could earn a 50% annual return on $1 million, predicted Berkshire’s cash pile would balloon to more than $200 billion this quarter, and recalled the time a Russian chess grandmaster visited Omaha.

Here are 14 interesting nuggets from the Berkshire meeting:

1. Raking it in

Buffett pointed out that Berkshire generated some $37 billion in operating profits last year, meaning that on an average day, he received a fresh $100 million to deploy. The investor was underscoring the difficulty of shrewdly investing such a large and relentless inflow of cash.

2. Cash hoard

Berkshire’s mountain of cash and Treasury hit a record $189 billion last quarter, and it’s likely to swell to more than $200 billion this quarter, Buffett said.

“I don’t mind at all, under current conditions, building the cash position. When I look at the alternative of what’s available, in the equity markets, and I look at the composition of what’s going on in the world, we find it quite attractive.”

3. Taxing times

The government will probably raise taxes in the coming years in a bid to balance its budget, Buffett said.

“I would say with the present fiscal policies that something has to give. I think that higher taxes are quite likely. The government may decide that someday they don’t want the fiscal deficit to be this large, and they may not want to decrease spending a lot, and they may decide they’ll take a larger percentage of what we earn.”

4. Charlie and Costco

Buffett bemoaned that he should have listened to his late business partner, Charlie Munger, and been “more aggressive” with his investment in Costco.

Berkshire increased its stake in the retailer from $32 million in 1999 to $1.3 billion in June 2020, then exited the following quarter. Costco stock surged more than 500% during that period.

“Charlie twice pounded the table with me and just said, ‘Buy, buy, buy.’ BYD was one of them and Costco was the other,” Buffett said.

5. Canada intrigue

Buffett revealed he is exploring a potential investment in Canada.

“We do not feel uncomfortable in any way, shape, or form putting our money into Canada. In fact, we’re actually looking at one thing now.”

6. New regime

Buffett appeared to change his mind about who would run Berkshire’s stock portfolio once he’s gone. Instead of his investment managers, Todd Combs and Ted Weschler, he suggested his successor as CEO, Greg Abel, would oversee it.

“I think the responsibility ought to be entirely with Greg,” Buffett said. “He understands businesses extremely well and if you understand businesses, you understand common stocks.”

7. Cracking down

Buffett admitted that he and Munger were lenient with underperforming managers, but declared that would change once Abel takes over.

“If you have 20 children and you’re very rich, you’ll have some that will be go-getters anyway, and you’ll have some that won’t. We are a very, very rich company and we haven’t had a history of being very tough on people that coasted. Greg will do something about it.”

8. Bashing banks

Buffett took aim at Wall Street while underscoring that Berkshire’s rock-solid financials allow it to lend and invest money during dark periods when nobody else will.

“At those times, we want to be sure that the US government thinks we’re an asset to the situation and not a liability or a supplicant, as the banks were in 2008 and 2009. They were all tarred with the same brush. But we want to be sure that the brush that determines our future is not tarred.”

9. Paying fees

Buffett may be a bargain hunter with little respect for middlemen, but he happily paid the standard broker fee on his last home sale.

“I did sell a house for $7 million. I did not negotiate the 6% down, and I feel I got my money’s worth and then some. And I’m cheap by nature, so it isn’t I’m careless about it . I got my money’s worth.”

10. Mystery poison

Ruth Gottesman, the widow of the late Berkshire director Sandy Gottesman, recently donated $1 billion of Berkshire stock to the Albert Einstein College of Medicine to cover students’ tuition in perpetuity.

Buffett revealed that at the same time that Berkshire was repurchasing those shares from the college in exchange for cash, it was also buying back $500 million of stock from another charitable donor in a different state.

He shared that fact to make the case that Berkshire shareholders are unrivaled in their generosity.

11. Pocket change

Buffett claimed that if he had only $1 million to invest instead of nearly $200 billion, he could earn a 50% annual return. “I would try and know everything about everything small, and I would find something.”

12. Dollar champion

Buffett shrugged off fears of “de-dollarization” or dwindling dollar dominance worldwide: “There really isn’t any alternative to the dollar as a reserve currency.”

13. Debt and deficit

The investor raised the alarm on the US government running a large budget deficit and racking up unprecedented amounts of debt.

“I don’t sit and work myself into a stew about it in the least,” Buffett said about the government spending more than it brings in each year. “But I can’t help thinking about it.”

“It won’t be the quantity, it will be whether in any way inflation would get let loose in a way that really threatened the whole world economic situation,” he said about the national debt.

14. Chess royalty

Buffett recalled that Russian chess icon Garry Kasparov once visited his home town and met the legendary founder of Berkshire-owned Nebraska Furniture Mart.

“I know great bridge players, I know great chess players. Actually, Kasparov came to Omaha, met Mrs B.”