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Buffett: 'The airline business’s done better because we sold'

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At the annual Berkshire Hathaway shareholders meeting live streamed on Yahoo Finance, Warren Buffett explains his investment decisions.

Video Transcript

BECKY QUICK: Hello to everybody. This first question that came in, came in from Andy Sees, he says he's the owner of not nearly enough B shares. He says, "Mr. Buffett, you're well known for saying to be fearful when others are greedy and be greedy when others are fearful.

But by all appearances, Berkshire was fearful when others were most fearful in the early months of COVID, dumping airline stocks at or near the low, not taking advantage of the fear gripping the market to buy shares of public companies at exceptional discounts, and being hesitant to buy back significant amounts of Berkshire stock at very attractive prices. I'd appreciate hearing your thoughts surrounding this time, and how Berkshire approached its decision making, specifically after it was assured through the CARES act that the government would provide a robust backstop to the financial markets."

WARREN BUFFETT: Well, of course until they-- until both monetary and fiscal policy kicked in, well, you knew we had an incredible problem. And our-- I am, just as Charlie is the Chief Culture Officer, I'm the Chief-- Chief Risk Officer of Berkshire. That's-- that's my job, that we hope we do well, well, we want to be sure we don't do terribly. But we didn't sell a substantial amount.

I mean we're a company with 600-- probably $700 billion worth of business, and some we own in their entirety, some we own a piece of. And I don't know whether we were sellers, maybe 1% of the value of all the businesses we had at that period. But the airline-- it's just kind of interesting with the airline business, in particular. And I'll get to what was done in fiscal monetary policy.

But we had a few people, various subsidiaries of Berkshire, that wanted to go in for help from the government. And in some cases, they had minority shareholders, only a few percent. They said, well listen, you know. We're going to get killed by what's happening when-- with the regulations that are being put out and stopping the economy.

And-- and they said, everybody's going in form, and why don't we go in? And I said, you know, Berkshire can handle it. This is for people that can't handle what's happening. And we-- so we're not applying. But the airlines were the most prominent beneficiaries of-- of-- of what took place, immediately they got $25 billion initially, most of which went to the big four airlines. And some of which went into grants, not-- not loans.

And you know, I think that was a fine public policy. I think it-- I wish that it could go to every restaurant, and dry cleaner, and every small business that really was out of business and had no one. I mean they were made toast of, you know, basically. But the airlines, clearly what happened was not their fault in any way, shape or form. It wasn't like 2008 when people blamed the banks and hated to see them [INAUDIBLE].

So it was-- now airlines operate in bankruptcy. So it isn't like that-- that three of the four big ones went through a bankruptcy within the previous [INAUDIBLE]. Airlines were kind of used to operating in bankruptcy. They would have kept operating, but it was perfectly proper for the airlines to be helped.

The entire airline business-- you know, you look at these figures of $2 trillion for Apple, and so on. The entire big four airlines-- they were they sold for about $100 billion, almost. I mean it's so very, very small. And combined they wouldn't come close to making the cut. I mean, they wouldn't be in the top 50.

So anyway, they went into the government. They needed government help, or they needed-- or they would go bankrupt, some of them. And-- and really the Congress, but Steve Mnuchin too, they decided they deserved the help, which I do not quarrel with at all. But imagine if Berkshire was the 10% holder, which they had been, of every one of the airlines.

They would have-- said, [INAUDIBLE] Berkshire? I mean, it's-- it would be like one of our-- they would have had-- they might have very well had a very, very, very different result if they'd had a very, very, very rich shareholder that owned 8% or 9%. And they didn't have that, you know, when they went it. So are-- you might not have gotten the same result. In fact, I would think you probably wouldn't.

I mean, I can just see the headlines now. I mean, they, you know, because you've seen the headlines on some companies that took $100 million or 2, you know, and really didn't need it. And some of them gave it back, and most of them gave it back. But you're looking-- you're actually looking at a-- probably at a different result than if we'd kept our stock.

But in any event, an industry that was really selling for less than $100 billion lost a significant amount of money. They lost perspective earning power. I mean, right now, you know, international travel is not coming back. But I would say overall to the-- the economic recovery has gone far better than you could say with any assurance.

So we-- we didn't like having as much money as we had in banks at that time. So I cut back some of the bank investment. But basically, our net sales were about 1%, or 1.5%. And looking back, you know, it'd have been better to be buying, but-- but I do not consider it-- I do not consider it a great moment in Berkshire's history, but also we've got more net worth than any-- any company in the United States under accounting principles.

And we've got we've got 600 or $700 billion of generally good businesses. And-- and I think-- as I think the airline business has done better because we've sold. And I wish them well. But I still-- I still wouldn't want to buy the airline business international.

People really want to-- they want to travel for personal reasons. And-- and business travel is another thing. And we've got a big exposure to business travel, of course, through the fact that we own 19% of American Express. And we own Precision Castparts, which services the-- the air business very [INAUDIBLE]. So we still got a big investment in air travel, a big commitment to it. But-- but we wish the big four the best, and and I think their managements have done a very good job during this period.