I’m your host, Jason Moser, and on this week’s financials show, we’re digging into five big takeaways from Berkshire Hathaway’s latest shareholder meeting over the weekend, and we’ve also got a few more earnings reviews on tap for you.
It seems like it’s clearing up a little bit, so hopefully it’ll be clearing out for a nice weekend, or a nice week here.
If I recall correctly, correct me if I’m wrong, but you’ve not physically been to that meeting yet, right? You were planning on going, and then all of this COVID stuff happens, so you’ve had to postpone those plans for a little while.
Well, speaking of Charlie and Warren and all of the fun stuff that occurs during a normal year at the Berkshire meeting — clearly, virtual is a bit of a different story, but always insightful, always educational, and we always get some really needed takeaways, and this year was no exception.
We got some clarity a couple of years ago, when they made Greg Abel and Ajit Jain the two co-chairmen or the vice chairmen of the company, to join Charlie Munger as vice chairman.
The 59-year-old is the one who is most likely to stay Berkshire’s CEO for a couple of decades if he gets the job.
Greg Abel, by the way, is currently in charge of all non-insurance operations at Berkshire, so he presided over the railroad business, the utility business, Dairy Queen, Duracell, all the little adjacent businesses.
I think there were enough people out there who thought it could be Jain, given his experience with the business, given his familiarity with the insurance business in particular.
Not just focused on really insurance, and he has even said this, he tends to stay focused on the competitive threats for Berkshire Hathaway writ large, as a conglomerate, as this gathering of so many different businesses.
I mean, Ajit Jain, I would even make the case that aside from his age, he’s the favorite of the two leaders in Buffett’s eyes, just reading the praise he has gotten in annual letters over the years.
They want someone in place who they feel is in line with what matters most to them, and so certainly it’d be tough to come up with a name other than Mr. Abel, perhaps Mr. Jain, but here we are.
Nor do I like shuffling out a few extra billions and billions of dollars to somebody who just invented a new financial product out of thin air.” If that wasn’t enough, he went on to say that it’s disgusting and contrary to the interests of civilization.
But yeah, it does seem like he’s opening the invitation for a lot of blowback there from the younger generations of investors who feel like he’s too old, he just doesn’t get it, Bitcoin is the future, whatever it may be.
I think it’s interesting, too, because you said, and these are his words, but he refers to it as a currency.
You can agree with him or disagree with him, but clearly, there’s more than one opinion on the matter.
I’ve always said, and I stand by this, Bitcoin bulls, to me, they’ve done a phenomenally horrible job at explaining why it matters.
You either love it or you hate it, and I would add maybe a third category, and I think I fall on this third category — you just are apathetic.
Maybe Munger will be proud of me, because I’ve realized what I don’t know, and that’s really one of his more famous quotes.
I’m not throwing out all of these, because there will be some babies that go out with this bathwater, but Buffett’s problems with SPACs — talk a little bit about that.
Frankel: Buffett first started talking about SPACs when asked about how they affect Berkshire’s ability to find acquisitions.
But the cash is just building up, and I think the whole elephant-gun quote was before anyone knew what a SPAC was.
I wouldn’t necessarily get the best deal, but I promise you, I would take that money and buy a business with it.” Munger, being Munger, said it’s not just stupid, it’s shameful talking about the SPAC boom.
I think there are going to be some important companies that have come public via SPAC, and we won’t be sorry that they were able to come public.
I think Opendoor, which went public through SPAC last year, I think it’s a big one that has a ton of market potential.
I think that’s another one that, to me, we talk about where we feel the world is headed, I feel like that’s solving a big problem, and I feel like that is a direction that the world needs to be headed.
Like any class, you’ve got your top 10% that are going to go onto Ivy League schools or whatever.
Maybe that’s how we piggyback off the series of shows that we did earlier in the year on SPACs.
They’ve made their share as well, and Warren talked about one of Berkshire’s bigger mistakes, and that was takeaway No.
He said the airlines have been better off without Berkshire involved as an investor, and basically, his point is that the government wouldn’t have been as willing to bail out the airlines if they had an investor like Berkshire Hathaway backing them up.
As we know, Apple is by far Berkshire’s biggest stock positions, with well over $100 billion at this point.
Moser: Well, I’m going to put you on the spot here, because I feel like this is always something to talk about, and I’ve got an idea of one I would use.
In hindsight, do I wish I did that? Well, probably could have just left that money alone, and it would have done fine, and I reinvested that capital in other investments that are performing well, so I’m not sure.
We got the first case, I think Washington state had a few cases at first, and everyone’s like, it’s going to fizzle out, whatever.
Frankel: It went down a little bit, and I put a bunch of money to work saying that this is a silly overreaction.
It’s just the real key is figuring out the lesson from it so that you can try to avoid repeating that mistake in the future, and it sounds like at least we were recognizing the mistakes and we just got to learn from them.
I would even go so far as to say in 2020, when there were no casinos, there were no sports to bet on.
Frankel: — Or things to that effect? Yeah, the stonks or whatever, and he says that nobody’s going to tell you when the clock is going to strike 12 and it all turns into pumpkins or mice.
He said it’s awful that something like that brought investments from civilized men and decent citizens and brought it into Robinhood’s platform.
Frankel: So, it’s not that Robinhood’s making it into a casino.
There was a blog post this morning from the head of public policy communications of Robinhood to counter Buffett and Munger’s comments, and ultimately, they feel that Buffett and Munger have insulted a new generation through their comments on Robinhood.
But perhaps they need to be a little bit more thoughtful on how they build out this platform if they want to really build the next generation of investors, as opposed to the next generation of traders or gamblers, because clearly, they are two very different things.
I’ve said that there are some cases where it could be a good platform to use, especially for cryptocurrency investors.
Frankel: Whether that’s a good or bad thing, and they’re doing it in the right way or not, it’s up for debate.
Frankel: SoFi is partnering with Coursera to create personal-finance classes that it’s giving to its members.
Thanks for digging into that meeting, and like you said, of course, there are probably countless takeaways, but we’ve got to draw the line somewhere.
Before we wrap up the show today, we have a few earnings reports that we wanted to get to here that came out recently.
Frankel: Well, if you rewind to our bank earnings show last time, every bank beat their earnings, pretty much.
Excluding any reserve activity, including their setting aside last year and their releasing this year, earnings were up 1% year over year.
Capital One’s one of the most efficient banks I’ve heard of, especially out of the brick-and-mortar banks, which, before I had been to D.C.
We mentioned this last week, last time, when we did the bank earnings, consumers have had a lot of cash in the way of stimulus checks, things like that, extra cash being pumped in, and they’ve had less opportunity to spend.
Consumers have just had less opportunity to spend and extra cash coming in.
I like that they have such a strong focus on credit cards and being able to open up that product landscape for consumers with so many different levels.
Revenue was down 12% year over year, which, in a lot of the cases like we mentioned with Capital One, earnings were down year over year, pretty flat, but revenue did OK.
Spending on American Express cards, excluding travel and entertainment, which people aren’t spending money on still for the most part, was up 11% Europe from 2019 levels.
Unfortunately, American Express makes its money by selling cards based on travel and entertainment benefits.
That’s promising, but the fact that they had to back that out, to even compare it with two years ago, is not that impressive.
They did online credit at Best Buy, online credit at Goldbelly — which, if you haven’t used Goldbelly, it’s where you order food from restaurants from all over the country to have it shipped to you.
Moser: Let’s wrap it up, then, with SVB Group, because that’s another one, SVB Financial.
Not terribly surprising, the bank’s earnings exceeded expectations, but what was surprising is that it was the best quarter in the bank’s history.
A bank’s assets might grow 5%-7% in a year, which would be considered a good year for a Bank of America.
I really appreciate you not only taking the time to dig into those takeaways from Berkshire Hathaway’s meeting, but also to dig into those earnings reports.
As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don’t buy or sell stocks based solely on what you hear.