For the first time ever, Berkshire Hathaway held a virtual annual meeting from an empty conference hall with not a single shareholder in sight and without the wise and witty Charlie Munger. However, Warren Buffett did not disappoint. He shared some wisdom that I believe we can all learn from.

It was very clear that Warren missed Charlie dearly as he started the meeting describing their partnership and friendship for the past 60 years. He went on to clarify that it was safer for him to stay home but at the young age of 96, he was in great shape mentally and vocally and would be back next year. Warren shared that Charlie had taken on a new life as a ZOOM expert and had passed him in technological expertise but that was like “stepping over a peanut” for Charlie.

The meeting was broken into 4 parts:

1. Monologue with slides and a history lesson on the United States.

2. Brief recap of the 1st Quarter results

3. Business formal meeting

4. Q&A period narrated by Becky Quick

I would like to focus on the first part of the meeting as I thought it was of greatest importance. We owe Warren Buffett a debt of gratitude who in his 90th year, has reminded us just how lucky we are. It is really easy to be pessimistic at a time like this, however if we take a look at history and in this case the history of the United States and see what has been endured and what has been accomplished, you will understand this pandemic won’t be the only challenge that we face but rather the tailwind for growth and prosperity is still at our back.

I won’t do Warren justice so I do apologize in advance but I will try and get his message across as I heard it and if you did not watch the first hour and a half of the meeting, please take the time to do so. You will not be disappointed.

Warren weaved a wonderful summary of the United States from the organization of the country in 1789 to present time, 231 years later. In 1790, the population was 3.9 million people and 700,000 of those people were slaves. If you had asked anyone living at that time what the United States would look like in 2020, no one would have imagined our current freedoms. Nor would one imagine that there would be 280 million cars on the road, flying airplanes at 40,000 feet with the ability to travel from coast to coast in several hours, students attending some of the best universities in the world, and opportunities to watch some of the best entertainment.

In 1803, the Louisiana Purchase was an example of the wealth to come in America. The purchase from France included 827,000 square miles of land west of the Mississippi for what seemed at the time a costly $15,000,000. This cost pales as Warren goes on to describe the wealth earned in millions of barrels of oil and gold that were retrieved from this land.

He then went on to say that if you think the last 231 years were without a bump in the road you are wrong as it wasn’t all steady progress.

The Spanish flu in 1918 killed 974 people in Omaha alone between October 5-December 31st which was half of one percent of the population at the time and the numbers were similar for the rest of the United States. In today’s numbers that would be approximately 1,700,000 people in the United States that would have passed from the Spanish Flu.

The Civil War 1861-1865 would have killed 4 million males between the ages of 18-60 in today’s numbers.

The President of the United States said aloud at Gettysburg 1863 when the United States was just 74 years of age: “Testing whether that nation, or any nation so conceived and so dedicated, can long endure”. Although this pandemic will test us, we will be able to persevere through it.

The Great Depression as Warren described, lasted a long time but the effects lasted even longer on the minds of Americans. On September 3, 1929, the Dow Jones was 381.17 and the United States was at the time, 143 years of age. On November 13, 1929, the Dow Jones was 198.69, a decline of 48%. In the fall of 1930, people were not aware they were going into a depression and the Dow recovered 20% from the low to close at 240.42 on August 29, 1930. The Dow went from 240.42 to its low point, 41.22, on July 8, 1932. $1,000.00 had become $170.00 in less than two years which was an 83% drop.

One of the positives that came out of the Depression in January 1934, was the Federal Deposit Insurance Corporation (FDIC) which insures deposits in the U.S. If the FDIC had been established 10 years earlier, we might have seen a different outcome.

Warren went on to tell the story of his father who was working as a Stock Broker for a small regional bank at the time. In light of the depression, the bank closed and therefore he lost his job. This same thing happened to many Americans who had also saved and were left in the dust as there were over 4000 banks that closed their doors, affecting neighbors and relatives in small towns across the country.

1929 was a painstakingly memorable year. Fast forward to January 4, 1951, the Dow Jones was now 240.85 and people who were born in the depression had just finished college including Warren.

“After more than 20 years, a buyer on my day of birth finally gets even (though dividends had been received).”

Fast forward even further to the start of 1954 when the Dow Jones was 280. Warren remembers this year fondly as he says it was the best year he has had as an investor. The Dow Jones went a little over 400 and crossed the old high of 381.17. People timidly started to wonder if 1929 was going to repeat itself even though companies were doing much better. In response, 20 of the best minds were assembled for a Stock Market Study in March of 1955. One of them being, Benjamin Graham, who Warren was working for at the time. His quote from testifying was:

“The stock market looks high, it is high, but it’s not as high as it looks.”

Can you imagine 26 years later after 1929 a committee had to be formed to analyze whether a depression might happen again?

The American tailwind is still in full force and the Dow is now over 24,000 and you would now have $100.00 for every $1.00 invested when Warren finished College.

In 2020, the United States is now a better and much wealthier country than it was in 1789. Warren weaves further by quoting in 1776, “We held these truths to be self-evident that all men are created equal… yet in the first census of 1790 more than 15% of the population were held as slaves. They wrestled with that as a nation and any fool could recognize that.” He goes on to say it was 131 years before women could vote for their country’s leaders and it took another 61 years until a woman could join 8 males on the Supreme Court during which 33 men had been appointed.

In summary of the history lesson, Warren goes on to say we are a better society than existed in 1789, however we still have a long way to go in creating an even wealthier and more equitable society. The document written in 1776 was an aspirational document, not a fact, as you can see from history.

Now, this brings us to today. How should we approach our future, both in life and in the stock market? We simply cannot predict the stock market or the future. We don’t know what it is going to look like in a day, in a month, or even in a year. We do know that by investing in good quality dividend paying companies, that provide services and products we use every day, we will continue to let the power of dividends work its magic. No matter what the future holds, we are not going to stop drinking coke, buying toothpaste and deodorant, using electricity etc. As Warren reminds us, we should not be in the market if we aren’t in it for the long run. Alongside aligning our life goals with our investment goals, we as a society will get through this tough time and will come out the other side, stronger and wiser.

 

"How will you replace your current income in retirement?" - Jim Seyers