Warren Buffett is now 'as bearish as he ever gets,' says Bill Smead

I want to begin by asking you, how did Mr. Buffett strike you? It was a weekend of some sentimentality, maybe some melancholy as Charlie Munger, his long time compatriot was remembered. How did Mr. Buffett strike you? Well, he has been such a generous and brilliant and wise man in my life that that there’s hardly anything he can do that that, that that disappoints me. He’s 93 years old. He just had his closest friend and his closest business confidante pass, and he’s feeling the effects of that. And Charlie, they, they started the meeting out with a bunch of Charlie Witticisms of the past years and you couldn’t help but be emotional about it. It it’s really the end of an era. It was, it was clear in some of the sort of subtext that Greg Abel is assuming a more important role internally. He’s the, the designated successor. Did you feel that way? Oh yeah. He, he will be the CEO of Berkshire Hathaway, the primary asset allocator among buying whole companies versus putting more toward stocks etcetera, which was kind of a surprise to us. We, we, we thought the last ten years or so would be a process of turning more of the reins in company selection to Todd Combs and Ted Weschler and that explains why they haven’t been given a more prominent position at the annual meeting. We wondered about that the last three or four years and we got that question answered for us. But but it will be a different company. It’s a wonderful large conglomerate that is closely tied to the United States economy. And if you want a wonderful company closely tied to the United States economy, it would be a a good investment for you. Yeah, the next 10 years. And of course we we should not if you even suggests that Mister Buffett is anywhere close to finished yet. He is an amazing leader, amazing stamina and and of course is still fully in charge. So let’s talk about their big cash pile, 180 some billion dollars heading to $200 billion. What should they do with it? There is some discussion. Would you as a shareholder like to see them pay a dividend or would you like to see them make a big acquisition or would you like to see them buy back shares? We have no interest in the dividend. It’s fine to have them buy back shares. But you, you always have to think about Berkshire Hathaway. Do as I do, not as I say, because Warren Buffett is a super nice guy and he has absolutely no interest in offending people. But if you look at what he’s doing, he is as bearish as he ever gets. I read right between the lines right from the beginning. At the meeting on Saturday, I was there sitting in the audience and I thought, OK, huge cash position, trimmed his apple position. It it isn’t is he’s He’s nibbling on something below the surface they haven’t announced yet. But basically he is waiting until the next 40% decline in the stock market to apply massive amounts of capital at bargain prices in things that are large enough to be meaningful to this company at the size it is now. So. So you just use the phrase this is as bearish, I believe you said as I have ever seen him should. Is, is that really the right characterization or is it rather that he thinks the market is too highly priced for him to go in in a big way and put fresh capital to work? In other words, is it so much a bearish call as it is a a rejection of the idea that this is an opportunistic time to invest? Tyler, you have asked a great question. So I’m going to answer this in kind of an odd way. In 1969, he pivoted from being primarily A quantitative Ben Graham value guy to being more of a Charlie Munger qualitative guy, right? Get a reasonable price on a great company and he said back in 676869 that the the quantitative ideas that he used to like to buy were combed and re combed that was his letter to partners and and this year this last year he he he said that that the kind of things that we would like to do have been endlessly picked over so that that is code for we think the markets expensive. We’re not in any hurry we’re going to wait and and remember he’s talked constantly for 10 to 15 years that the bigger Berkshire gets the more it limits their opportunities right. So really to have very large opportunities for large deployments of that $200 billion, you’ve got to have the entire market get into very difficult circumstances.