How Buffett Navigates Turmoil

Episode Transcript

Speaker 1 (00:00):
It's a big week on Wall Street. We have earnings
reports from thirty six percent of the Standard and Poors
five hundred index of the top of publicly traded companies
in the country. And while the suits on Wall Street
will spend the week clutching their beads, the old man
in the midtown Omaha office building will surely sit back, relax,

(00:21):
and enjoy the ride again. The oracle may be in
his nineties, but he is still speaking loudly Omaha's Venerable
Warren Buffett and his investment behemoth Berkshire Hathaway. While the
rest of Wall Street gets soaked in this market thunderstorm
is warm and dry. This April tariff tantrum is hidden

(00:42):
most of us pretty hard, not him, not Berkshire. From
the start of the year, it's pretty dramatic. The S
and P since January one is down ten point four percent.
Berkshire Hathaway is up fourteen percent. Now, how is that?
Why is that? And why aren't the rest of us

(01:02):
doing it? Those answers are both simple and complicated. Start
with the easy part. Berkshire is a wash in cash.
They are drowning in it. One of Buffett's bedrock principles
is to only buy stocks first, and then companies with
low priced two book ratios. For those of us who
didn't attend Wharton, that means he bargain shops and then

(01:25):
allows inflation to bring them up slowly but surely. In
the last five years, the S and P has posted
back to back twenty percent plus returns. That means no bargains,
so his savings account has ballooned to three hundred and
thirty four billion dollars in cash. Remember when money markets
were doing five percent. That's fifteen billion a year to

(01:48):
Berkshire's bottom line just for waking up in the morning. Sure,
it's a drag when the market is zooming, but when
it sells off, which is pretty much what it's done
all year, nothing is safer than cash, and investors are
flocking to his That three hundred and thirty billion also
allows Buffett and his scouts the chance to visit devastated

(02:08):
areas of the market and get very good buys on
companies that were over leveraged and had to sell fast.
Investors know the market will bounce back, so they buy Berkshire,
knowing opportunism will push the share price up. What else
they have an investment portfolio of two hundred and sixty billion.
Half of it is invested in three stocks Apple, American

(02:31):
Express and Coca Cola. Throw in Chevron and Craft, Hindes
and Burlington, Northern Santa Fe Geico. But they also own
stuff like the Nebraska Furniture Mart and Borsheim Seize Candy.
They're all good companies which insulate Berkshire from the big swings.
And then there is the old man himself. The investor

(02:53):
class has raved about him for fifty years, but they
refuse to act like him. The panic and down market
then become professionally aroused when it rises. For most of
the last five, ten, fifteen, twenty years, it has dramatically
outperformed the S and P go back further, and the
Berkshire gap is wider. Investors may not put history into

(03:16):
action very often, but they read about it all the time,
and if they would just remember some of Buffett's basic principles,
they'd be relaxed this week too, Like this one. Don't
lose money. Don't buy companies that lose money or can't
keep quality management. Look for value. Price is what you pay,

(03:37):
Value is what you get. Buffett believes in index funds
save ten percent, invest ninety percent in index funds, which,
again for those of us without an MBA, is a
low cost fund of passive stocks that mirror the broader market,
meaning when the market goes up, they do, when it
goes down, they do. But over the long haul, Rock

(03:58):
Solid of Boyd Debt Berkshire wrote the book on how
to make interest work for them. Instead of working to
pay interest, when your company makes money, save it so
you can pay cash for the next one. But topping
all of Buffett's beliefs is this investing is a life
long pursuit. Those who seek to get rich quick usually fail, or,

(04:23):
as the old man loves to say, only when the
tide goes out, which it does every day, like market
fluctuations every day. Do you know who went skinny dipping?