Warren Buffett: I Didn't Pull The Trigger On Amazon | May 2, 2019

TL;DR

Warren Buffett discusses his decision not to invest in Amazon, despite being a fan of the company and Jeff Bezos. He also touches on Berkshire Hathaway's involvement in Occidental Petroleum's deal and his views on inflation and interest rates. The conversation reveals Buffett's investment philosophy and his opinions on current economic conditions.

Transcript

hi warren how are you what brings you to the wall uh i'm just in town kind of passing through thought i'd stop by the tourists it is are you ready for this weekend i'm ready for this weekend sure is this your favorite weekend of the year yeah i would say so yeah yeah what are you expecting with the crowds here this year uh it should just it should ... Read More

Key Insights

• Warren Buffett acknowledges admiration for Amazon and Jeff Bezos but regrets not investing in the company.
• Berkshire Hathaway committed $10 billion to back Occidental Petroleum's acquisition of Anadarko.
• Buffett emphasizes the importance of oil prices in determining the value of oil-related deals.
• He expresses support for Tim Sloan, former Wells Fargo CEO, despite political pressures leading to Sloan's resignation.
• Buffett highlights the political challenges faced by Wall Street executives in leadership roles at major banks.
• He praises Jay Powell as the best choice to lead the Federal Reserve, acknowledging economic complexities.
• Buffett finds the current economic situation, with low interest rates and a budget deficit, unprecedented and unsustainable long-term.
• He remains optimistic about Apple, holding significant investments without concern for quarterly earnings.

Questions & Answers

Q: Why didn't Warren Buffett invest in Amazon?

Warren Buffett did not invest in Amazon despite being a fan of the company and its CEO, Jeff Bezos. He acknowledges that it was a missed opportunity and refers to himself as an 'idiot' for not pulling the trigger on the investment. The decision was not due to a lack of admiration but rather his investment approach and other priorities at the time.

Q: What is Berkshire Hathaway's involvement in the Occidental Petroleum deal?

Berkshire Hathaway committed $10 billion to back Occidental Petroleum's acquisition of Anadarko Petroleum. The deal was negotiated quickly, with Buffett meeting Occidental's CEO and finalizing the agreement within a day. The investment is contingent on Occidental successfully acquiring Anadarko, highlighting Buffett's strategic approach to significant investment opportunities.

Q: How does Warren Buffett view the role of oil prices in investment decisions?

Warren Buffett considers oil prices to be a critical determinant in the value of oil-related investments. He acknowledges that while he is not an expert on the Permian Basin, oil prices play a significant role in the long-term success of such deals. This perspective influenced Berkshire Hathaway's decision to invest in Occidental Petroleum's acquisition of Anadarko.

Q: What are Warren Buffett's thoughts on Tim Sloan's resignation from Wells Fargo?

Warren Buffett expresses support for Tim Sloan, the former CEO of Wells Fargo, who resigned due to political pressures. Buffett believes Sloan was an excellent banker and regrets his resignation, emphasizing that it was not due to performance issues but rather the challenging political environment. He highlights the difficulties faced by Wall Street figures in leadership roles at major banks.

Q: Why does Warren Buffett prefer not appointing Wall Street figures to major bank leadership roles?

Warren Buffett prefers not appointing Wall Street figures to major bank leadership roles due to the political challenges they face. He believes such appointments would lead to continuous scrutiny and political attacks, especially during election periods. Buffett argues that capable individuals from Wall Street would become 'pinatas' for political purposes, making it difficult to lead effectively.

Q: What is Warren Buffett's opinion on Federal Reserve Chairman Jay Powell?

Warren Buffett praises Federal Reserve Chairman Jay Powell as the best choice to lead the Federal Reserve. He values Powell's experience and leadership in navigating complex economic conditions. Buffett agrees with Powell's assessment that the current lack of inflation is transitory and believes Powell is well-equipped to manage future economic challenges.

Q: What surprises Warren Buffett about the current economic conditions?

Warren Buffett is surprised by the current economic conditions, including low interest rates, a significant budget deficit, and low unemployment. He finds the situation unprecedented and believes it cannot be sustained long-term without leading to economic changes. Buffett notes that no economics textbook predicted such a scenario, and he anticipates future adjustments in the economic landscape.

Q: How does Warren Buffett view Apple's performance and investment strategy?

Warren Buffett remains optimistic about Apple's performance, holding a significant investment in the company without focusing on short-term earnings. He emphasizes that his investment in Apple is based on long-term confidence rather than quarterly results. Buffett appreciates Apple's business model and believes it aligns well with Berkshire Hathaway's investment philosophy, contributing to his continued support for the company.

Summary

In this video, Warren Buffett discusses various topics including his recent deal with Occidental, the importance of oil prices in the deal, the tracking of private planes, his opinion on Tim Sloan and other Wall Street executives, Apple's earnings, his holdings in Berkshire, the Federal Reserve's stance on inflation, and the current economic landscape.

Questions & Answers

Q: How did the deal with Occidental come together?

The deal with Occidental came together when Warren Buffett received a call from Brian Moynihan, the CEO of Bank of America, who informed him about their involvement in financing the Occidental deal. He then scheduled a meeting with Occidental's CEO, Vicki Hollub, and by the end of the meeting, they had a deal in place for $10 billion.

Q: Did Warren Buffett make the deal based on his confidence in the oil industry or the Permian Basin?

Although oil prices are an important factor, Warren Buffett states that he is not particularly familiar with the Permian Basin. The deal was primarily based on the terms of the deal itself and its sensibility for both parties involved.

Q: Can private plane movements be tracked?

Private plane movements can be tracked using certain services, which can be a concern for individuals who want privacy in their business dealings. However, Warren Buffett mentions that if anyone wants to do business with him and maintain privacy, they can use a NetJets plane, which cannot be tracked.

Q: What is Warren Buffett's opinion of Tim Sloan and his resignation from Wells Fargo?

Warren Buffett expresses his support for Tim Sloan and states that he was behind him 100%. He believes Tim Sloan was an excellent banker, and his resignation was due to the circumstances in Washington. Warren Buffett also clarifies that he would have never asked for Sloan's resignation.

Q: Why does Warren Buffett believe a Wall Street executive should not be running Wells Fargo?

Warren Buffett explains that although there are capable individuals on Wall Street who could run Wells Fargo well, the political climate and the need for lawmakers to make statements during hearings would make it challenging for a Wall Street executive to succeed in that role. He believes that Wells Fargo does not need that kind of negativity in Washington.

Q: What is Warren Buffett's view on Apple's earnings?

Warren Buffett states that he does not have high expectations for quarterly earnings, even for a company like Apple. He was pleased with what Apple reported, but he emphasizes that he does not have specific expectations in mind. He reiterates his confidence in Apple, mentioning that Berkshire Hathaway owns over $50 billion in Apple stock.

Q: Has Warren Buffett been buying more Apple stock?

Warren Buffett mentions that he is not aware of any buying or selling done by the other portfolio managers in his office. He states that the 13F filing, which comes out in a couple of weeks, may reveal if there have been any changes in Berkshire Hathaway's holdings.

Q: What does Warren Buffett think about inflation and the Federal Reserve's stance on it?

Warren Buffett agrees with Jay Powell, the Chairman of the Federal Reserve, that inflation is transitory. He believes that low inflation rates cannot exist in the current fiscal, monetary, and political landscape. However, he acknowledges that he has been wrong on this in the past and that he may continue to be wrong in the future.

Q: What surprises Warren Buffett about the current economic situation?

Warren Buffett is surprised that despite a 5% budget deficit, low unemployment rates, low interest rates, and negative interest rates in many countries, the yield on a 10-year note remains at around 2.5%. He states that this situation cannot continue indefinitely and that there will likely be changes in the future.

Takeaways

In this video, Warren Buffett discusses his recent deal with Occidental, his opinion on Tim Sloan and other Wall Street executives, the Wall Street practice of tracking private plane movements, Apple's earnings, his holdings in Berkshire, the Federal Reserve's stance on inflation, and the current economic landscape. He emphasizes the importance of oil prices in his deal with Occidental and expresses his confidence in Apple. Buffett also highlights the challenges of running Wells Fargo in the current political climate. He agrees with the Federal Reserve's view on transitory inflation but expresses surprise at the current economic situation.

Summary & Key Takeaways

• Warren Buffett reflects on his missed opportunity to invest in Amazon, despite his long-standing admiration for the company and its CEO, Jeff Bezos. He clarifies that any Amazon investments by Berkshire Hathaway were made by other managers, not himself. Buffett also discusses his company's recent $10 billion commitment to support Occidental Petroleum's acquisition of Anadarko, emphasizing the significance of oil prices in such deals.

• Buffett comments on the political challenges faced by Wall Street executives, particularly in leadership roles at major banks like Wells Fargo. He supports former CEO Tim Sloan, who resigned due to political pressures, and expresses skepticism about appointing Wall Street figures to such positions in the current political climate. Additionally, Buffett praises Federal Reserve Chairman Jay Powell and discusses the complexities of the current economic landscape.

• Buffett is surprised by the current economic conditions, including low interest rates and a significant budget deficit, which he views as unsustainable in the long term. Despite these concerns, he remains optimistic about Apple's performance, maintaining a significant investment without focusing on short-term earnings. Overall, the conversation reveals Buffett's cautious yet strategic approach to investments and his insights into economic trends.