Buffett Talks Succession At Berkshire Annual Meeting | Business Matters Full Broadcast (May 6)

Is Warren Buffett worried about a potential crisis event? Is companies sitting on record levels of cash? We have an analysis for you coming up on Business Matters. Good afternoon and thank you so much for joining me here today. I'm your host, Don Ma. To start off, as always, let's go to Wall Street. U.S. stock indexes ended higher today. And by the way, this is the third straight session of advances. And you know, many investors here, they're gaining hope here that a greater chance of the Federal Reserve interest rate cuts are coming this year. And this is on the heels of data on Friday. If you remember that, it showed that U.S. job growth slowed more than expected in April. Now, to be completely honest with you, a lot of the market's movements have been on trying to figure out and fine-tune the different perspectives on inflation and rates. The majority of S&P 500 sectors ended in positive territory today. And the energy index was among the leading gainers, rising in part due to U.S. natural gas futures hitting their highest level in 14 weeks. And we have a bit of breaking news for you right now. The FAA has launched another investigation into Boeing. And investigators are probing whether Boeing employees failed to perform some quality inspections on its 787 jets. Now, the investigation is to determine whether the inspections were conducted and whether company employees may have falsified aircraft records. This is according to the FAA. And legendary investor Warren Buffett is assuring investors that the culture of Berkshire Hathaway will be preserved with his successor, Greg Abel. The two took the stage for Berkshire Hathaway's annual meeting in Omaha, Nebraska, which attracts tens of thousands of shareholders from all around the world. Happened over the weekend. According to the succession plan, Abel will replace Buffett in making all major investment and capital allocation decisions. And Vice Chairman Ajit Jain will oversee insurance operations. Buffett said the two have proven to be the right people to lead Berkshire when he departs. There is no slowing down for Berkshire Hathaway, it looks like. Now, in a surprise move, actually, Berkshire reported selling about 13 percent of its Apple shares. And this was the main reason Berkshire's cash hoard soared for the first quarter. Buffett said cash might grow to 200 billion dollars this quarter, reflecting the risks potentially he sees from high stock market valuations and geopolitical conflicts. And earlier today, I spoke to a real expert on everything Warren Buffett related, Lawrence Cunningham. He wrote the bestseller book called The Essays of Warren Buffett. It was actually in collaboration with Warren Buffett himself. Lawrence has been going to the shareholder meetings for many, many years. He was actually there on Saturday as well. And here's what he told me. Take a look. Lawrence, thank you so much for your time today, this afternoon. So the shareholder meeting at Berkshire Hathaway over the weekend, all eyes on that. And you told me you were actually there at the event. You know, a lot happened there from Warren Buffett talking about his own mortality, actually, his successor, taxes, deficits. I mean, what did you find the most interesting? What was the atmosphere like? Well, the atmosphere had a sense of loss because Charlie Munger was not there the first time he hasn't been there in the history of the program. So that was a conspicuous absence because Charlie always had a quick or a witty way of adding a little bit to Warren's lengthy answers. So that was the atmosphere. On the other side, you mentioned Warren acknowledging his own mortality. This was a big subtext of the meeting was Warren letting go. Warren saying that I'm not going to be around for that much longer. I read the actuarial tables. I wouldn't take a four year job right now. I'm making a joke about the presidential candidates and really emphasizing that he will and is already delegating almost everything to Greg Abel. So it's as if he's just taking layers of burden off. And who knows? I may be part of his catharsis with Charlie's departure. I mean, speaking of Greg Abel, I mean, how do you feel about him as a successor to the company? Totally confident. I've known Greg for 15 or so years. Talked to him at the annual meeting every year and sometimes between meetings, called him for business advice on a variety of matters. He's always astute, focused, discerning. With me personally, he's demonstrated his capital allocation prowess through his CEO ship at the energy business. He's demonstrated his leadership skills and in his new role as vice chair, where he is available and consults with the CEOs of all Berkshire's operating companies. He's a really nice guy. Everyone could see that during the meeting yesterday. So while no one can replace Warren Buffett or replicate him, I can't think of a better choice than Greg. Are you able to comment on if there's going to be any differences, similarities, of course, but are there any going to be any differences between and what are they between the two leaders? There may be a slight difference. And Warren and Greg alluded to it during the meeting yesterday. The question from an audience member from a shareholder was how much has changed since promoting Greg and Ajit Jain to the vice chair roles? What has changed at Berkshire? And Warren said one thing that has changed is that the CEOs of all the operating companies don't call Warren anymore when they have a question or a challenge or an opportunity. They don't call Warren anymore. They call Greg. And that was really interesting. That's a really big shift. And then what they talk about or how they engage differs. Warren said that he almost never advised any CEO on any operational or business matter. And he indicated that Greg is far more willing to do so. Indeed, he indicated that given Warren's very deferential or hands off approach, he had a lot of managers who were not even pulling their weight and he just let him go. And Warren indicated that Greg isn't like that. And so if he has laggard managers, it seems as if Greg will at least be in touch with them and maybe coach them and urge them to improve their game. All right. And another thing I found interesting here was that Berkshire Hathaway sitting on mountains of cash approaching $200 billion, apparently. So Buffett says that he only swings at the pitches that he likes. Does that mean not too much on the horizon that he likes? Does he see something that we don't? Potential problems? That's a great question. In his letter this year, which is always a prelude to the meeting and sort of preparation for it, he said, look, we do have a ton of money. But the thing is, we don't have a ton of opportunities. We would like to deploy an enormous amount of capital. And by enormous, you know, it's 30, 40, 50 plus billion. And there just aren't that many companies in the world who would be available for sale. So his opportunity set is very, very small. He did allude to potential calamitous crises, situations where credit is contracted, markets are berserk and willing buyers are scarce, where Berkshire would be able to seize opportunities. And he referenced Berkshire having done exactly that in 2008, 2009 during the credit freeze. Company that the credit default swap debacles when they bought large chunks of big banks, Bank of America, Goldman Sachs, and as well as operating companies like Harley-Davidson and Tiffany. So he alluded to that. And I wouldn't say that he knows something we don't or anything, because he was very careful to say, I don't know what it will be or when it will be, but it'll happen. He said it won't be a set. You know, it's maybe it may be tomorrow. It'll probably be within a decade. So Warren will probably not be here. But Greg will. And Warren joked that Greg will probably have more fun taking advantage of those opportunities than Warren had fun taking advantage of it in 08. All right, we're a little bit short on time right now. So many more questions I could ask you. Let me just pick one more here. Maybe what Elon Musk said. He said Warren Buffett should buy Tesla stock. He says it's an obvious move. What do you think? Well, I don't know enough about the economics of Tesla. Warren is very picky, and he has a couple of things that Tesla may or may not have. One is a clear moat and a compelling economic franchise. Tesla may or may not get into that position. I'm not sure if it's in there now. Warren is also extremely focused on the personality and mindsets of the managers. And I'm not sure that Elon, as wonderful as he is, has the kinds of traits that Warren finds attractive in the manager. All right. Well, thank you very much. Very great insight here today, Lawrence. Thank you for your time. My pleasure. And Robinhood in the news today says that it has been put on notice by the U.S. Securities and Exchange Commission, and the agency has warned that the stock trading firm that it faces enforcement action over its crypto business. So Robinhood's CFO said that in a statement that the company was disappointed by the move and that the company firmly believes the assets listed on its platform are not securities. Now, in the past, the SEC has argued most tokens are subject to SEC rules, and it has brought cases against other crypto brokerages. The company will have a chance to respond to allegations before regulators take any action. And grounded planes and slow domestic demand for Spirit Airlines as well. And it's forecasting week second quarter revenue. Spirit is one of the most heavily impacted by the issues with RTX's Pat Whitney-geared turbofan engines, and the carrier estimates that it will average about 25 grounded aircrafts throughout the year. And this is on top of domestic demand improving slower than the company had expected. To cut costs here, Spirit has postponed Airbus deliveries and plans to furlough about 260 pilots, and the airline forecasts second quarter revenue between $1.32 and $1.34 billion. Boeing's spaceflight program is set to reach a significant milestone as it attempts to carry two NASA astronauts to orbit. The crew flight test could blast off as soon as 10.34 p.m. Eastern time tonight. Launch of the Starliner spacecraft is a decade in the making. Now NASA and Boeing have finally deemed the spacecraft ready for its ultimate test. This comes as Boeing has been in the hot seat due to issues with its commercial airplane division. Boeing officials have stressed that the Starliner operates separately from its commercial sector. And Tyson Foods ate up second quarter estimates but warned the third quarter might not be as filling. The company surpassed Wall Street expectations for profit through its cost-cutting measures. It closed chicken plants last year, laid off corporate employees, and announced plans to close a pork plant. That helped it post adjusted earnings of $0.62 per share for the second quarter compared to an estimated $0.39. Tyson is anticipating a weaker third quarter though. The company noted that consumers are under pressure from persistent inflation and from stores and restaurants. Vaccine maker BioNTech is anticipating the majority of its annual profit to come at the end of the year. The German company's vaccine, in partnership with Pfizer, was widely used during the pandemic. Its first quarter profits plunged compared to the year before. But BioNTech is still targeting about $2.7 billion in revenue this year. In a statement, the company noted that approximately 90% of its full-year revenue are expected in the last months of 2024. For now, increasing business activity for companies in the Eurozone. And it's giving banking policy makers confidence to cut rates. A survey reveals that the Purchasing Managers Index bounced up in April to the highest in almost a year. It's also the second month, the PMI, which was above 50. And that separates growth from contraction. Three European central bank policy makers said separately that the latest inflation and growth data cemented their beliefs that inflation will return to the 2% target by the middle of the year. Now, last month, Eurozone inflation stood at 2.4%. Okay, taking a short break now. But when we come back, we're going to have an analysis for you on China's Xi Jinping visiting Europe for the first time in five years and why his goodwill tour may see some uphill struggle. And as well, this year, an abundance of spring rains across the Midwest are raising concerns for farmers. And if the bad weather continues, it could eventually mean higher produce costs for consumers. That and more when we come back after the break. And welcome back. Thank you very much for sticking around. Let me go through with you some real quick headlines here of the day. Members of the United Auto Workers have ratified a new labor contract with Daimler Truck, avoiding a strike here. Now, the focus is on voting next week at a Mercedes assembly plant in Alabama. And Trump Media and Technology Group has fired accounting firm BF Borgers. U.S. regulators have accused the accounting company of massive fraud. The SEC did not accuse Trump Media of any wrongdoing, nor did it mention the company in its charges. And Hospital Network Steward Health filed for Chapter 11 bankruptcy in Texas today. It is aiming to secure a new loan from its landlord Medical Properties Trust. It operates 31 hospitals in eight U.S. states and is the largest private physician-owned for-profit health care network in the U.S. All right, some China's related stories to go through today. Another blow to China's declining property market. A private survey revealed a slump in home sales during the major May Day public holiday. Now, according to China Index Academy, average daily home sales slid 47% from a year earlier. Sales are down about 30% from pre-pandemic levels. Researchers found sales fell in 19 out of 22 surveyed cities. It was a big drop for big cities like Guangzhou and Shanghai, for example. Down more than 60%. And Chinese authorities have tried to prop up the troubled sector with various measures. But analysts, you know, they're saying that many of the policies are piecemeal or have limited impact so far. Meanwhile, a shift in gears in electric cars in China and the U.S. Markets could crash margins for refineries. So consulting firm Wood Mackenzie says global petrol demand growth could be cut in half this year at just 340,000 barrels per day, down from last year's 700,000. This would squeeze refinery margins for the second half. And this is being driven by a shift to electric vehicles in China and the U.S. The International Energy Agency says that China is expected to account for more than half of all global EV sales this year. Chinese regime leader Xi Jinping is in Europe for the first time in five years, and he met with the European Union's top official and the French president in Paris Monday. In French, Xi Jinping praised China's ties with the country as he arrived in Paris. For a pretty rare visit here, French President Emmanuel Macron is set to urge Xi to reduce trade imbalances with China. But we have to keep in mind that Xi's visit to France and other European countries later on, this comes amid an environment that is very different from the last time he visited. So for starters here, France is backing a European Union probe into Chinese electric vehicle exports. And in January, Beijing opened an investigation into mostly French-made imports of brandy. So a bit of conflict there. And on top of that, in the past weeks alone, the European Union has launched trade probes into China's wind turbines and procurement of medical equipment, and as well raided offices of Chinese nationals. So major breakthroughs with China's toughest critics will not be without challenges. For a deeper analysis on Xi Jinping's visit to Europe, I spoke to Daniel Lacalle. He's the professor of global economy at the Madrid IE Business School. Here he is. Daniel, thank you very much for coming back on this Monday afternoon. OK, so the biggest news, one of them at least, China's Xi Jinping in Europe today, in Paris. So let's talk about that. It seems like he's trying to win back the favor of some policymakers, to say the least here. So what are your thoughts on this? What do each side want from each other? Well, I think that what Xi Jinping wants is a higher level of confidence from the European Union countries, particularly France and Germany, in terms of international trade. It's been very evident that President Macron has been voicing concerns about the subsidies that China gives to electric vehicle manufacturers, that China gives to different industries, and that have been diminishing the competitiveness of the French industry in its exports, and certainly also of the German industry. So I think that Xi Jinping wants to achieve a better understanding or at least some form of agreement that avoids protectionist measures or at least tariffs from the European Union on China. And I think that what Macron in particular wants is a higher level of transparency from China in terms of how industries are competing and exporting. Today, apparently manufacturing is expanding. What are your thoughts? How are we doing in terms of the European economy? Well, the European economy data is improving basically because it cannot go any lower. So what we're seeing basically is a bounce. After 30 months of declining figures, it is normal to see a bounce. However, even in the latest estimates from investment banks such as Morgan Stanley, JP Morgan, etc., the European Union and the euro area in particular level of growth is going to be very, very poor in the next couple of years. And this is self-inflicted. The euro area weakness has absolutely nothing to do with external factors and has everything to do with a misguided energy policy, with a misguided industrial and agricultural sector policy that have basically made it very difficult for industries and for businesses to thrive in the euro area. So the old saying that the United States innovates and the European Union regulates has become unfortunately a reality, is that the European Union has lost the battle of technology, is not growing as it could and certainly as it should, considering that it is in the middle of one of the largest stimulus packages in its history. We must remember that these figures are only a bounce, but they're happening in the middle of the largest stimulus package in the recent history. The next generation EU funds. So very disappointing and it's obviously self-inflicted. So a lot of talk about rate cuts from the ECB coming for the euro area. Would that help at all with the economy? I don't think so. I think that there is this narrative here in the European Union that blames the weakness of the euro area on the ECB policy, which makes absolutely no sense because the euro area was already weak with low productivity growth, low GDP growth and high unemployment before when the ECB implemented negative rates. So the problems of the euro area are not happening because of the ECB, but problems of the euro area are happening despite the accommodative policy of the ECB, because we have to remember that the ECB continues to purchase sovereign bonds, that the ECB continues to be hugely accommodative in terms of liquidity, and a rate cut is not going to make German manufacturers or French manufacturers or Spanish businesses take more credit because the problem is not availability or the cost of credit, but opportunities to invest. All right, Daniel, thank you very much for the update today. Until next time. Thank you very much. And finally, for farmers, watching and waiting is a spring planting ritual. So this year, an abundance of spring rains across the Midwest are raising concerns for farmers. NTD's Shah Marshall takes a look at what is making them anxious. The increase in spring rains across the Midwest can mean more anxiety for farmers eager to carry out their traditional spring planting. Long planting days can become endurance tests that stretch into the night when farmers have to wait for fields to dry up. This year, with the way the weather's been, it's been, it's slowed progress, obviously. We are, I wouldn't say we're behind, but a few more rains and we're going to be. If bad conditions persist, retailers could end up paying higher prices for produce and those higher prices could get passed to consumers. Kitty Rogers already ran into a $2,800 revenue loss this year because the fields weren't workable during the couple of weeks needed to plant them. I have the ability to pivot. So we had talked about, I might have to scrap all the spring Brussels sprouts because we got set back, but that's one thing. I have 41 other and as the season goes on, I'm going to have to scrap a few things. We're going to have to take things out, but that diversity gives us resiliency. Because of her operation's smaller size, Rogers can plant by hand when wet fields won't allow her tractor. But it's extremely draining work, she said. Farms of all sizes are feeling the pressure to work as much as possible when field conditions allow. Sean Marshall, NTD News. All right. That's all the stories we have for you today. Thank you very much for watching. And if you have any feedback for the show, feel free to let me know. You can email us at business at ntd.com or leave a comment online. I do read them all. And speaking of reading them all, Bill, if you're watching, I did read your email to me. Thank you for the thoughts. And one final thing before we leave. Don't forget, business matters. Goodbye.