Warren Buffett Preaches Confidence in America in Berkshire Annual Report, Warns Deficits Have Consequences

In his annual letter (pdf) to Berkshire Hathaway shareholders, Warren Buffett He expressed his confidence in the U.S. economic recovery, while also warning about potential problems. “runaway inflation” From the effects of fiscal deficits during the past decade.

Buffett, who was 92 years old, encouraged investors not to be distracted by volatile short-term conditions. He claimed that betting against America has never paid off in the nearly six decades he spent running Omaha, Nebraska’s multi-national conglomerate.

Buffett stated that after 80 years of investing, he has yet to lose his faith in the world’s biggest economy.

“We count on the American Tailwind and, though it has been becalmed from time to time, its propelling force has always returned,” He wrote.

“I have been investing for 80 years—more than one-third of our country’s lifetime. Despite our citizens’ penchant—almost enthusiasm—for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future.”

Buffett, echoing Charlie Munger’s sentiments, claimed that the company was in the best position to make a profit. “patient investor” The will always outperform the “foolish gamblers.”

Charlie Munger, Vice Chairman, attends Omaha’s 2019 Annual Shareholder Meeting, May 3, 2019, in Omaha (Neb.). (Johannes Eisele/AFP via Getty Images)

He took a moment for a comment on “disgusting” Money managers call out specific activities to identify their behavior “disgusting.”

“Finally, an important warning: Even the operating earnings figure that we favor can easily be manipulated by managers who wish to do so. Such tampering is often thought of as sophisticated by CEOs, directors, and their advisors. Reporters and analysts embrace its existence as well,” He said.

“That activity is disgusting. It requires no talent to manipulate numbers: Only a deep desire to deceive is required.”

The company also included his famed annual letter. “good” Year-end results showed a record $30.8 million operating profit and $22.8 billion in annual losses.

Berkshire had close to $130 Billion in cash reserves at the end 2022.

Buybacks and deficits

Warren Buffett lamented federal government in his letter. He defended corporate buybacks, and warned of the consequences for federal deficits.

President Joe Biden delivered the State of the Union Address. Proposed The tax on stock buybacks by corporations was quadrupled to 4 percent. Inflation Reduction Act was the first to introduce this tax. This policy has been supported by many Democrats, who argue that revenue-raising taxes would reduce tax avoidance for corporations as well as wealthy shareholders. Critics claim that corporations should spend the money to increase employee benefits or capital expenditures. However, buybacks can increase earnings per share (EPS), according to supporters.

Buffett stated that buybacks benefit shareholders by increasing the intrinsic value of each share.

“The math isn’t complicated: When the share count goes down, your interest in our many businesses goes up. Every small bit helps if repurchases are made at value-accretive prices,” Buffett said. “Gains from value-accretive repurchases, it should be emphasized, benefit all owners—in every respect.”

If the public believes that buybacks are bad for shareholders and investors, but good for CEOs, then it is. “listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive),” He wrote.

Buffett was a strong advocate for tax and deficit reform. Berkshire officials are the Oracle of Omaha according to Buffett. “hope and expect to pay much more in taxes during the next decade.”

“We owe the country no less,” He said.

Buffett expressed his support for higher taxes, but he also mentioned the poor fiscal management in Washington. He noted that the U.S. government paid $32.3 trillion in taxes over the decade ending 2021, while spending $43.9 trillion.

“Huge and entrenched fiscal deficits have consequences,” He wrote that Berkshire offers many benefits. “modest protection from runaway inflation.”

Buffett noted that 1,000 taxpayers could match Berkshire’s $32 Billion tax payments over the past decade. “no other business nor any of the country’s 131 million households would have needed to pay any taxes to the federal government. Not a dime.”

Buffett, Munger and others will be attending the annual shareholder weekend at the company in early May.

Year-to-date, Berkshire Hathaway Inc class B shares have fallen by about 2 percent and are now around $304.

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