Good news and bad news from Warren Buffett

The world’s most famous investor Warren Buffett spoke at length at the weekend. Now aged 89, Buffett was addressing an online version of the annual meeting of his firm, Berkshire Hathaway. He talked about stocks, the economy and of course the coronavirus crisis.

Some commentators have suggested that Buffett was more downbeat than he has been in the past. He certainly had bad news as well as good. But, as Andrew Ross Sorkin commented in the New York Times, it’s more accurate to say he was neither pessimistic nor optimistic but realistic.

Particularly noticeable was how often Buffett repeated the words, “I don’t know”. That’s right, Warren Buffett, the most successful investor of the modern era, doesn’t know how this crisis will unfold. Yet there are plenty of experts in the media offering their opinions.

Ultimately, as Buffett’s friend, the late Jack Bogle, liked to say, “nobody knows nothing”. If there was ever a time for investors to stay humble, surely this is it.

Bad news

The current situation is unprecedented

“In 2008 and 2009 our economic train went off the tracks. This time we just pulled the train of the tracks and put it on a siding. And I don’t really know of any parallel — in terms of the most important country in the world, most productive, huge population — in effect sidelining its economy and its workforce.”

Nobody knows how the crisis will play out

“We’re not getting a best case and we know we’re not getting a worst case. The range of possibilities is still extraordinarily wide. We do not know what exactly happens when you shut down a substantial portion of your society.”

Anything can happen in the markets

“Perhaps with a bias, I don’t believe anyone knows what the market is going to do tomorrow, next week, next month, next year. I know America’s going to move forward over time, but I don’t know for sure. Anything can happen in terms of markets. You’re going to have to be careful about how you bet.”

… good news

Nothing can stop America

“I remain convinced… I was convinced of this in World War II, I was convinced of it during the Cuban Missile Crisis, 9/11, the financial crisis — that nothing can basically stop America.”

Patient indexers have been richly rewarded

“All you had to do was believe in America. You just had to believe that the American miracle that was intact. You didn’t have to read the Wall Street Journal. You didn’t have to look at the price of your stock. You didn’t have to pay a lot of money in fees to anybody. In the end the answer is never bet against America.”

The S&P 500 may well beat Berkshire again over the next ten years

“I recommend the S&P 500 to people. Berkshire is about as sound as any single investment can be in terms of earning reasonable returns over time, but I would not want to bet my life on whether we beat the S&P 500 over the next ten years.”

… and some advice

Stock pickers will always pick duds and miss the winners

“We don’t think that if you own a great many businesses that every one is destined for success. That’s why I suggest to people, buy an index fund. I would not want to put all my money in any one company. You get surprises in this world, and there will be businesses that we think are very good that’ll turn out not to be not so good and there’ll be other businesses that turn out better than we think.”

Own an index fund for decades

“In my view, for most people, the best thing to do is owning the S&P 500 index fund. There are huge amounts of money people pay for advice they really don’t need. If you bet on America and sustain that position for decades, you’d do far better than following people who tell you (what to do).”

Don’t borrow money to invest

“When something like the current pandemic happens, it’s hard to factor that in. That’s why you never want to use borrowed money (to invest). There’s no reason to use borrowed money to participate in the great American tailwind.”