Last weekend saw “Woodstock for Capitalists” – the annual general meeting of Berkshire Hathaway, Warren Buffett’s investment company. Both Buffett and his business partner, Charlie Munger, were upbeat on the US market, arguing that high corporate profits – rather than something to fret about – were a sign that American firms had done “wonderfully well”.
Even today’s relatively expensive stock valuations are justified, says Buffett. Indeed, “if we continue with these interest rates, stocks will look very cheap”. The pair aren’t even phased by the prospect of political change: “if either Donald Trump or Hillary Clinton becomes president”, Berkshire “will continue to do fine”.
However, the duo are a lot less positive about the rest of the world. Buffett concedes that the current Chinese market may be driven by speculation. He and Munger also argued that the euro has many flaws – the most obvious one being the vast array of different types of country that were allowed to join the single currency – “you can’t form a business partnership with your frivolous, drunken brother-in-law”. While the single currency will probably survive, “it’s not going to work” well.
As for their own investment technique, Munger stated that, “I don’t think value investing will ever go out of style”. However, he was a lot less positive about activist investors (those who try to push management teams to change direction), noting that, “it’s hard to think of many activists I want to marry into my family”.