“A friend of mine from Dublin who goes to Berkshire Hathaway's AGM every year in Omaha has written an account of his experience again this year, which I've attached. His final paragraph resonates with me:
“........Buffett and Munger's response to this would be to say that what happens in the short term is not that important and if you invest in good businesses, the short term share price shouldn't matter to you. This, I think is the hardest lesson to learn. Most of us are much younger than Buffett and Munger but we would still be devastated if the market were to fall by 30% or more.”
Eoin Treacy's view Thank you for this account of Berkshire Hathaway's annual general meeting contributed in the spirit of Empowerment Through Knowledge. Following my piece on the cost of US healthcare in Friday's Comment of the Day, I thought it was interesting to hear Warren Buffett's opinion on the subject. However, here is a section on the eventual removal of quantitative easing which may be of interest to subscribers:
A shareholder from Kansas wanted to know whether the Federal Reserve was doing too much in the way of quantitative easing and "how do we stop". Initially Buffett suggested he pass the question to Munger as he had answered the same question on CNBC. Munger replied that he had no idea how the US would reverse the process but it was going to be difficult. Buffett then said that it was always easier to buy than to sell. Quantitative easing had the potential to be inflationary but currently the money was sitting in banks rather than "hitting the market". He would guess that at least some Fed members would like to see more inflation. He added that when the market gets a signal that buying ends and selling starts that could be a shot that would be heard around the world and cause anyone holding securities to "re-evaluate their hand".
“Monetary Policy beats most other factors most of the time” has been a maxim at Fullermoney for decades. Therefore a major event such as the eventual removal of quantitative easing is likely to have a disruptive effect.However, considering the intent of the Fed and other central banks to court inflation, we can reasonably expect that they will not begin tightening until they achieve their objective.
Berkshire Hathaway, with its exposure to both the insurance and industrial sectors is benefitting from strength in both. The share has rallied particularly impressively since November and is becoming increasingly overextended relative to the 200-day MA. A sustained move below $160,000 would represent a larger reaction and would break the progression of higher reaction lows, suggesting mean reversion is underway.