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Can Berkshire Hathaway thrive without Warren Buffett? · The Financial Exchange Show

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Speaker 1: Zada and Paul Lane.
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Speaker 2: Chuck, Paul and Tucker with you here kicking off another week.
1:14
Speaker 2: Hope you all had a great weekend, maybe enjoyed Kentucky
1:20
Speaker 2: Derby had a mint julip er two. If that's your thing,
1:23
Speaker 2: It's it's not mine personally, not really a big mint
1:27
Speaker 2: jewelib fan, but now they're fine. It's just it wouldn't
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Speaker 2: be the direction I go in. But hey, we are
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Speaker 2: here this week and you know, trying to again continue
1:37
Speaker 2: to get a sense of what the economy looks like
1:41
Speaker 2: in you know, in the face of you know, tariffs
1:44
Speaker 2: that have now been implemented, including over the weekend. We
1:48
Speaker 2: saw on Saturday morning effectively the autoparts tariff go into effect.
1:53
Speaker 2: There were some exceptions that ended up being worked in
1:57
Speaker 2: there as far as how manufacturers would be tariff there.
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Speaker 2: But continuing to see, you know, how the economy reacts
2:04
Speaker 2: to what is going on on the trade front. And
2:08
Speaker 2: we got a piece in the New York Times state
2:10
Speaker 2: it's titled economic concerns are mounting, but the Fed isn't
2:13
Speaker 2: cutting rates proactively, And quite honestly, I think you can
2:17
Speaker 2: say that it's because to this point, Paul, the economic
2:19
Speaker 2: data has not shown any significant deviation from the course
2:24
Speaker 2: that it was on previously. It's still kind of wait
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Speaker 2: and see how this develops in places like the labor market,
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Speaker 2: retail sales, industrial production, all the places you had to
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Speaker 2: look to see if the FED were going to start cutting.
2:37
Speaker 2: We're not really seeing any signs of any meaningful shift
2:40
Speaker 2: there yet.
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Speaker 3: No, and I really thought that last week was going
2:43
Speaker 3: to be the first indications that we get that some
2:45
Speaker 3: of the hard economic data would be pointing to a slowdown,
2:48
Speaker 3: but we really didn't see that. Like you mentioned, it's
2:50
Speaker 3: really been the crux of what we've digested is poor
2:53
Speaker 3: consumer sentiment. Off you know, multiple different reports, whether you
2:57
Speaker 3: look at the University of Michigan Consumer Survey or others
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Speaker 3: out there on small businesses, in manufacturing and other fronts.
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Speaker 3: But what we saw last week on the GDP front,
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Speaker 3: we did see a contraction for the first quarter of
3:09
Speaker 3: twenty twenty five. However, a lot of that was influenced
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Speaker 3: by companies pushing through imports ahead of tariffs, so that
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Speaker 3: skewered that number. Skewed that number a little bit. But
3:19
Speaker 3: then the job support Friday to MEETCHUK was surprising. I
3:23
Speaker 3: didn't anticipate it coming in as strong as it did. Obviously,
3:26
Speaker 3: those numbers can get adjusted and be the next month
3:29
Speaker 3: we could be looking at a different figure from what
3:31
Speaker 3: was initially reported, which was one hundred and seventy seven
3:33
Speaker 3: thousand jobs that were added for the month of April,
3:36
Speaker 3: and an unemployment rate that still sits at four point
3:38
Speaker 3: two percent. So it is hard to point to anything
3:41
Speaker 3: from a hard economic number standpoint to you know, look
3:45
Speaker 3: at the fact that the economy is weakening for right now,
3:48
Speaker 3: it is more of the status quot like you mentioned, yeah.
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Speaker 2: To this point. Basically, what we have been seeing is
3:55
Speaker 2: people indicating significant concern about the tariffs and how they
3:59
Speaker 2: may impact the economy, but we haven't actually seen much
4:03
Speaker 2: that has been disrupting the economic data in a meaningful way.
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Speaker 2: Now you're starting to maybe get some signs that are
4:12
Speaker 2: out there here and there. There was a report this
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Speaker 2: morning from Barclays that in the last week or two
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Speaker 2: they've started to see higher end consumers reducing their spending
4:22
Speaker 2: areas that previously were growing. But again that's one credit
4:26
Speaker 2: card company and one issue we're out there. Whereas everything
4:29
Speaker 2: we've heard from JP Morgan and Bank of America was yeah,
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Speaker 2: like things are fine. It was a couple of weeks ago.
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Speaker 2: We haven't really heard from them since then. But we're
4:37
Speaker 2: just not seeing anything out there right now that is
4:42
Speaker 2: actually indicating the economic data is shifting. It certainly doesn't
4:46
Speaker 2: mean that it's not going to but look, if you're
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Speaker 2: actually trying to assess the state of the US economy
4:54
Speaker 2: right now, it seems to be much more one that is.
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Speaker 2: I know that Mark Fandetti likes to say that one
5:03
Speaker 2: of the best predictors of where the economy is going
5:05
Speaker 2: to be tomorrow is where it was yesterday, because there is,
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Speaker 2: you know, some real momentum that economies build up and
5:11
Speaker 2: they don't simply turn on a dime. So I think
5:14
Speaker 2: to this point the case can be made, Hey, there's
5:17
Speaker 2: there's enough momentum out there in the US economy that
5:21
Speaker 2: to this point it's been able to weather the storm
5:23
Speaker 2: of any concerns about what we're seeing on the tariff side.
5:27
Speaker 2: I think based on the timing and kind of where
5:31
Speaker 2: things the timing and where things are going to show up,
5:36
Speaker 2: if you start to see problems, you're probably in the
5:40
Speaker 2: next two to three weeks going to see some sporadic
5:42
Speaker 2: things popping up, and then it really seems to be
5:44
Speaker 2: June July where you start to have things hitting, you know,
5:48
Speaker 2: full tilt if there are going to be issues with
5:52
Speaker 2: supply chains and stuff like that, and that could obviously
5:55
Speaker 2: then continue into the fall, the back to school season
5:58
Speaker 2: in things along those lines, but it's to this point
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Speaker 2: it's just too soon for it to be broadly felt,
6:05
Speaker 2: so you know, those things would start to pop up
6:07
Speaker 2: in the next couple weeks probably.
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Speaker 3: Yeah, And that leads us to an interesting point that
6:11
Speaker 3: the Federal Reserve finds itself as they get together this
6:14
Speaker 3: week as to what they should do. As you just
6:16
Speaker 3: as we just kind of covered and hashed through, there
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Speaker 3: isn't really any signs economically that you can point to
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Speaker 3: that would justify potentially cutting rates during this the course
6:26
Speaker 3: of the meeting this week, there is currently looking at
6:28
Speaker 3: CMA futures, a ninety seven percent chance that they hold
6:31
Speaker 3: pat and don't make any changes, and even in the
6:34
Speaker 3: subsequent meeting in the middle of June, it still indicates
6:38
Speaker 3: at the moment that the majority probability would be they
6:41
Speaker 3: continue to stay pat at that meeting as well. Obviously,
6:45
Speaker 3: tariffs have an inflationary impact. We haven't really felt the
6:48
Speaker 3: full scope of some of the tariffs in place, because
6:51
Speaker 3: some of them are under the ninety day period of
6:54
Speaker 3: negotiation and others there's been modifications to them. It's all
6:57
Speaker 3: been relatively short span of time I'm here. But the
7:01
Speaker 3: tricky thing that they'll find themselves in trying to make
7:04
Speaker 3: a decision on is whether potential inflationary impacts could arise.
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Speaker 3: We very much they will, but we don't know for
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Speaker 3: how long and how significant it will be. And you
7:15
Speaker 3: also have to weigh in the fact that if the
7:17
Speaker 3: economy is slowing into the impact of higher inflation, just
7:21
Speaker 3: what do you do. And it's a really difficult position
7:23
Speaker 3: that they find themselves in.
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Speaker 2: Yeah, and it's part of the reason why I think
7:26
Speaker 2: that this is actually, from my perspective, going to be
7:29
Speaker 2: one of the least anticipated FED meetings in a while.
7:32
Speaker 2: I don't think we're going to get anything meaningful from them,
7:35
Speaker 2: and I don't think the commentary from Powell's going to
7:38
Speaker 2: have anything unique, because what we are watching is not
7:43
Speaker 2: going to be, you know, what the FED does. The
7:45
Speaker 2: FED is not the key driver of anything that's going
7:49
Speaker 2: on at this point in time, and so I think
7:52
Speaker 2: ultimately it's one where given the fact that they're likely
7:56
Speaker 2: going to be a little bit more passive here, I
7:59
Speaker 2: kind of look at this FED me and I'm like, Eh,
8:02
Speaker 2: not really one of those ones where you you know,
8:04
Speaker 2: ginet up as hey, like this is the most important
8:06
Speaker 2: FED meeting ever. It's much more okay, like we have
8:09
Speaker 2: to pay attention to them because they're the FED and
8:10
Speaker 2: they could always surprise us, but we're not really expecting
8:14
Speaker 2: to see much, or at least I'm not personally expecting
8:16
Speaker 2: to see much.
8:17
Speaker 3: No, there's obviously the backdrop of the drama with President
8:19
Speaker 3: Trump and his calls for lowering interest rates that they
8:23
Speaker 3: may feel. Do they feel any pressure. I don't think
8:26
Speaker 3: it will change what they do from a policy standpoint,
8:30
Speaker 3: but do they shift commentary? Likely not. But that's the
8:33
Speaker 3: only added piece of drama to this. But in terms
8:36
Speaker 3: of actual changes, I would agree with you there's probably
8:39
Speaker 3: not a significant amount that we see this week.
8:41
Speaker 2: The one thing that I think I am looking to
8:43
Speaker 2: see this week, and this is based on, you know,
8:45
Speaker 2: some different hints that you've gotten out of the White House,
8:47
Speaker 2: and also just the fact that hey, we're closing in
8:51
Speaker 2: on we're actually over months since the initial tariff announcements,
8:54
Speaker 2: and we're closing in on four weeks since the April
8:57
Speaker 2: ninth implementation date for the Chinas. Hey, do we start
9:01
Speaker 2: to get, you know, any signs, any tangible progress that
9:05
Speaker 2: is happening there with other countries and potential trade deals there,
9:10
Speaker 2: and or something happening with the rate of tariff supply
9:15
Speaker 2: to China and vice versa. Just because you're getting to
9:18
Speaker 2: the point, and this is from again people that I
9:21
Speaker 2: know that are actually involved in, you know, importing and
9:25
Speaker 2: exporting stuff from China and other countries, You're getting to
9:28
Speaker 2: the point where if there isn't something that starts to
9:30
Speaker 2: show up in the next week or two, they're giving
9:33
Speaker 2: me the signs that hey, it's it's gonna be a
9:35
Speaker 2: real problem the rest of the year because you just
9:37
Speaker 2: can't make up that volume. And this is before you
9:41
Speaker 2: even get into the fact that, hey, if there is
9:43
Speaker 2: a change in the China policy and if it is
9:45
Speaker 2: meaningful enough to you know, get production spooled back up again.
9:50
Speaker 2: I've had one person tell me that they are banking
9:52
Speaker 2: on their shipping costs being twice as high as they
9:54
Speaker 2: used to be and their lead time being twice as
9:58
Speaker 2: high as it used to be because they just they
10:01
Speaker 2: know that everyone is going to be trying to produce stuff.
10:04
Speaker 2: So if that's the.
10:05
Speaker 3: Case, supply chain shock again, it's kind of we battled
10:08
Speaker 3: with in twenty twenty two exactly.
10:09
Speaker 2: So that's good.
10:10
Speaker 3: Imagine right now they're just burning through excess inventory. Is
10:13
Speaker 3: that the feedback that you're getting. It seems like that's
10:14
Speaker 3: what the position companies are taking, Like they had inventory
10:17
Speaker 3: that they kind of stashed away that they're just eating
10:19
Speaker 3: through at the moment.
10:20
Speaker 2: It's so the senses, Yeah, the companies that were able
10:23
Speaker 2: to stock up are doing that. The ones that weren't
10:26
Speaker 2: are kind of like, what do we do. There's certain
10:29
Speaker 2: companies that are saying, okay, like we're gonna ship the
10:32
Speaker 2: stuff to Canada and stored and what's called a bonded
10:34
Speaker 2: warehouse where basically you can avoid paying the tariff until
10:37
Speaker 2: you get it out of the warehouse. And so you've
10:40
Speaker 2: got companies doing that. I know that companies are trying
10:44
Speaker 2: to set up factories in you know, Vietnam or Malaysia
10:48
Speaker 2: and Thailand and trying to figure out how they can
10:51
Speaker 2: do those kinds of things. You obviously have some companies
10:54
Speaker 2: that are trying to skirt the tariffs by saying, okay,
10:57
Speaker 2: can we technically say this is made in a country
10:59
Speaker 2: other than by having it chipped through there, and like
11:02
Speaker 2: some kind of production change happening there. So you got
11:05
Speaker 2: all different things that are happening. And the big thing
11:09
Speaker 2: is all of this ends up adding cost and complication
11:12
Speaker 2: to the process, and so there's no way that you
11:15
Speaker 2: end up coming out in the short term with something
11:16
Speaker 2: that's more efficient, more profitable, and higher supply. And that's
11:21
Speaker 2: why I think, no matter how you look at where
11:23
Speaker 2: we end up in the long run, these things are
11:25
Speaker 2: going to start to show up and probably be present
11:28
Speaker 2: for the next three to six months at a minimum now.
11:30
Speaker 2: And that's if everything you know starts to get resolved
11:34
Speaker 2: this week, which I don't think you're gonna get everything
11:36
Speaker 2: resolved this week. Doesn't seem like it, No, I don't
11:40
Speaker 2: think so. So let's take a quick break here when
11:43
Speaker 2: we come back. Some big news over the weekend coming
11:46
Speaker 2: out of Omaha, Nebraska. It's not a new cut of beef,
11:49
Speaker 2: but we'll fill you in on what's happening out there
11:51
Speaker 2: right after this.
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12:49
Speaker 2: So over the weekend, Berkshire Hathaway had their annual shareholders meeting.
12:54
Speaker 2: It's been described as quote woodstock for capitalists, which again
12:58
Speaker 2: you would assume goes probably a little bit more smoothly
13:01
Speaker 2: than woodstock for hippies, just because that was, you know,
13:05
Speaker 2: kind of a mostly happy mess, but also like it
13:09
Speaker 2: goes so grade for some people. So here's what happened
13:13
Speaker 2: over the weekend is Normally these these coming go and
13:16
Speaker 2: we get, you know, a couple of quotes out of
13:17
Speaker 2: Buffett that are kind of interesting, and we move on
13:20
Speaker 2: with our lives. This time, it seems that it's Warren
13:24
Speaker 2: Buffet who's moving on with his life. As he said
13:27
Speaker 2: during the shareholder meeting, Hey, I'm gonna ask the board too.
13:30
Speaker 2: I'm gonna step down and ask the board to replace
13:33
Speaker 2: me with Greg Abel. And apparently, according to the reporting
13:36
Speaker 2: on this from the Wall Street Journal, greg didn't know
13:39
Speaker 2: before this that he was gonna do that. Now I'm
13:42
Speaker 2: trying to figure out if that's true or if that's
13:45
Speaker 2: just being spun as a tall tale, because the the
13:48
Speaker 2: reason that I wonder that is, Look, here's the thing
13:51
Speaker 2: about Warren Buffett is Warren keeps up this image of
13:56
Speaker 2: you know, it's kind of this folksy guy who still
13:58
Speaker 2: lives in, you know, the same small house that you
14:01
Speaker 2: know he's always lived in, and you know, drives. You know,
14:05
Speaker 2: I don't know exactly what it is, but it's probably
14:07
Speaker 2: like you know, he claims it's like a Honda, a
14:08
Speaker 2: Cord or whatever, keeps up this very folksy atmosphere around him,
14:14
Speaker 2: you know, this this kind of everyman image who just
14:16
Speaker 2: happens to be really good at, you know, picking stocks.
14:19
Speaker 2: I gotta tell you that the real secret about Warren
14:21
Speaker 2: Buffett Okay, the dude is a freaking shark.
14:27
Speaker 3: Oh sure.
14:29
Speaker 2: He is as ruthless in the business world as anyone
14:32
Speaker 2: that you will meet. And when he sees blood in
14:35
Speaker 2: the water, he pounces. I mean, he looked back to
14:37
Speaker 2: the financial crisis just as an example and what he
14:40
Speaker 2: was able to do because he had capital and no
14:43
Speaker 2: one else did at the time. So he plays the
14:45
Speaker 2: game very well. And that's why I kind of look
14:47
Speaker 2: at this and I'm like, is Greg just kind of
14:49
Speaker 2: playing us the same way that Warren tries to play us?
14:52
Speaker 2: A little bit? Like, Oh, I didn't even know I
14:54
Speaker 2: was going to be CEO until he said that, you know,
14:56
Speaker 2: like me, oh, look at me, Like, how can how
15:00
Speaker 2: could that happen? Gosh, that's so nice exactly. So part
15:05
Speaker 2: of me wonders if they're stringing us along on this.
15:07
Speaker 2: But what I can tell you is based for certain
15:10
Speaker 2: everyone else is surprised that this happened, and I it's
15:14
Speaker 2: just it's a pretty monumental thing that's going to represent,
15:20
Speaker 2: you know, a significant transition here.
15:22
Speaker 3: It is, I mean to be clear for listeners out
15:25
Speaker 3: Greg had been the one who has picked since twenty
15:27
Speaker 3: twenty one, so it wasn't a question who is the
15:29
Speaker 3: next person that had been out there for a while,
15:31
Speaker 3: but certainly the timing of it is a bit of
15:33
Speaker 3: a surprise. He'll take over effective January first, twenty twenty six.
15:37
Speaker 3: I believe there was probably a lot of people out
15:39
Speaker 3: there that thought that Warren would just continue to hold
15:41
Speaker 3: the CEO role until he passed away. He's ninety four
15:46
Speaker 3: at this point. He will continue to sit on as
15:49
Speaker 3: a chairman of the board. But it does bring into
15:53
Speaker 3: today just a look back at what was probably i
15:57
Speaker 3: would say the best investing career of all tying in
16:01
Speaker 3: terms of longevity and returns. If you combine those two together,
16:05
Speaker 3: I'm sure people could make a counter argument that there
16:07
Speaker 3: have been others who have more significant returns than Berkshire
16:10
Speaker 3: Halfway has had, but certainly not for the period of
16:13
Speaker 3: time that Buffet has been the helm for there's you know,
16:16
Speaker 3: we do these things on new account applications where it's
16:19
Speaker 3: time horizon like how long have you been investing in
16:21
Speaker 3: the market for? And I was just looking at this today.
16:23
Speaker 3: There's probably no one in the world living who has
16:25
Speaker 3: invested longer than were in Buffett. He brought his first
16:28
Speaker 3: stock in nineteen forty two at eleven years old. I
16:31
Speaker 3: don't think there's many people out there who could beat
16:34
Speaker 3: that in terms of longevity. So just a tremendous career.
16:37
Speaker 3: There's so many stories that we could tell of his success.
16:42
Speaker 3: Just a fascinating run for a really successful businessman.
16:48
Speaker 2: Here and Berkshire Hathaway stock Today, in the first day
16:53
Speaker 2: of trading after this announcement, it's down about six and
16:55
Speaker 2: a quarter percent.
16:56
Speaker 3: And it is that much. It's six two and a
16:58
Speaker 3: half pre market.
16:59
Speaker 2: Yeah, sent is what it's down today. And I think
17:03
Speaker 2: there are a couple of reasons for that. The first is, look, obviously,
17:07
Speaker 2: the concern, hey, if if the next guy isn't gonna
17:11
Speaker 2: be Warren Buffett, which we know with one hundred percent
17:13
Speaker 2: certainty the next guy is not going to be Warren Buffett. Okay,
17:19
Speaker 2: Like obviously you gotta you know kind of factor that
17:21
Speaker 2: in sure. You know Buffett was he's gonna be ninety
17:24
Speaker 2: five this year, so he wasn't gonna stick around forever,
17:26
Speaker 2: but okay, do we have a couple more years now
17:28
Speaker 2: that maybe we need to plan for a non Buffet
17:31
Speaker 2: leadership there. The other thing that you got to remember
17:34
Speaker 2: about Berkshire Hathaway is it's a conglomerate. It's got a
17:38
Speaker 2: bunch of different pieces that don't really fit well together. There.
17:41
Speaker 2: It's literally everything from insurance companies to airplane part manufacturers
17:47
Speaker 2: to Jordan's furniture.
17:49
Speaker 3: Dry Queen Duracel sees candy Fruit of the Lot.
17:53
Speaker 2: There are no synergies between these companies. You don't take
17:55
Speaker 2: the underwear from Fruit of the Loom and be like, hey,
17:58
Speaker 2: put it on, you know, the guy's a dry queen
18:00
Speaker 2: and call it a day. Like that's just not what
18:02
Speaker 2: they do. So conglomerates in the US generally get a
18:06
Speaker 2: pretty hefty discount because the pieces don't fit well together.
18:11
Speaker 2: The interesting thing with Buffett at the Helm is it
18:13
Speaker 2: hasn't received that kind of discount because they look at
18:16
Speaker 2: it and they're like, how are you going to bet
18:18
Speaker 2: against that guy? Like it's it would be kind of
18:20
Speaker 2: dumb to given, you know, the track record that he
18:23
Speaker 2: has had. So I think that ultimately when you look
18:28
Speaker 2: at what's going on there, a little bit of a
18:30
Speaker 2: rerating of the stock and you'll have to see how
18:32
Speaker 2: it goes afterwards. But it's also not something where I
18:37
Speaker 2: think you'll likely see any kind of significant deviation right away,
18:40
Speaker 2: because all these businesses a have a ton of momentum
18:42
Speaker 2: of their own and be Buffet's notoriously hands off, and
18:46
Speaker 2: that he doesn't really get involved in those individual businesses
18:49
Speaker 2: that much.
18:49
Speaker 3: The other great statistics that they pointed out in one
18:51
Speaker 3: of these pieces is that his stock picking are the
18:54
Speaker 3: total assets of Berkshire halfway fifty percent of it between
18:57
Speaker 3: nineteen seventy and two thousand was based on his stockholdings.
19:01
Speaker 3: Now the stockholdings only make up twenty percent of the
19:04
Speaker 3: company's total assets. So the CEO role is much more
19:07
Speaker 3: running all of the businesses and overseeing them, and less
19:10
Speaker 3: so the stock picking side of things, which greg Abel
19:12
Speaker 3: doesn't have a tarrak record or really any tenure at
19:15
Speaker 3: all at doing so it's a different business than what
19:17
Speaker 3: it was previously.
19:19
Speaker 2: I also just love that he basically disclosed this as
19:23
Speaker 2: the last question that he took in his Q and A.
19:26
Speaker 2: They gave us applause. He gave a five minute warning,
19:28
Speaker 2: and yeah, people plotted him for like the entire five minutes.
19:32
Speaker 2: Then he was like, well, there's two ways you could
19:33
Speaker 2: look at this, and I'll take the better option. Quick
19:36
Speaker 2: break here we got Wall Street Watch next.
19:42
Speaker 1: Like us on Facebook and follow us on Twitter at
19:45
Speaker 1: TFE show. Breaking business news is always first right here
19:49
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:55
Speaker 1: Street Watch. A complete look at what's moving market so
19:58
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:02
Speaker 4: Well fed week is upon US, and markets are kicking
20:04
Speaker 4: off the week in negative territory, where a President Trump
20:07
Speaker 4: yesterday suggested to reporters that the US could strike trade
20:11
Speaker 4: deals with some countries as soon as this week. At
20:14
Speaker 4: the moment, the Dow is off by seventy points, SMP
20:17
Speaker 4: five hundreds down by two thirds of a percent, and
20:20
Speaker 4: the Nasdaq is down by nearly nine tenths of a
20:23
Speaker 4: percent or one hundred and fifty eight points. Russell two
20:25
Speaker 4: thousand is off by seven tenths of a percent, ten
20:28
Speaker 4: year Treasure reeled up by three basis points and now
20:32
Speaker 4: is at four point three five percent, and crude oiled
20:35
Speaker 4: down over two and a half percent so far today,
20:38
Speaker 4: trading a fifty six dollars and seventy six cents a barrel.
20:43
Speaker 4: Several media stocks are garnering attention this morning after President
20:47
Speaker 4: Trump announced plans for one hundred percent tariffs on four
20:50
Speaker 4: and made films. Netflix among the biggest losers on that news,
20:53
Speaker 4: down over two percent, Disney down by a third of
20:57
Speaker 4: a percent, while Warner Brothers, Discovery, Paramount, and Amazon are
21:00
Speaker 4: also seeing losses of about one percent. Meanwhile, the big
21:04
Speaker 4: news from over the weekend came from Berkshire Hathaway's annual
21:07
Speaker 4: shareholder meeting, where CEO and famed investor Warren Buffett announced
21:11
Speaker 4: his intention to step down as CEO by the end
21:14
Speaker 4: of the year.
21:14
Speaker 2: It will be succeeded.
21:15
Speaker 4: By Greg Abel on January first. The ninety four year
21:19
Speaker 4: old Buffett will remain as the company's chairman. Berkshire is
21:23
Speaker 4: down by five percent today. Elsewhere, shares in United Airlines
21:27
Speaker 4: up by three percent after the company announced on Friday
21:30
Speaker 4: was cutting some of its flights outside of Newark, New Jersey,
21:33
Speaker 4: citing staffing and technology issues at the airport. Shares in
21:37
Speaker 4: Howard Hughes jumping by three percent after the real estate
21:40
Speaker 4: developer and activist investor Bill Ackman's Perishing Square said the
21:44
Speaker 4: fund will buy nine million newly issued shares of Howard
21:48
Speaker 4: Hughes for one hundred dollars per share, and after today's closing,
21:52
Speaker 4: bell Ford and Pallenteer will report their first quarter results.
21:58
Speaker 4: I'm Tucker Silvan, that's Wall Street Watch, Paul.
22:00
Speaker 2: What else do you got? We were talking about Warren
22:02
Speaker 2: Buffett announcing over the weekend that he's going to be
22:05
Speaker 2: stepping down. What else do you have that you want
22:06
Speaker 2: to touch on that?
22:07
Speaker 3: Just just some numbers to put into context. He's when
22:10
Speaker 3: he took over Berkshire, the failing textile mill back in
22:13
Speaker 3: nineteen sixty five. From that period on through the end
22:16
Speaker 3: of twenty twenty four, Berkshire halfway return nineteen point nine percent.
22:21
Speaker 3: That compares to about ten and a half percent for
22:23
Speaker 3: the S and P five hundreds. So just to sort
22:25
Speaker 3: of illustrate how he was able to significantly outperform the
22:30
Speaker 3: market over that period of time. That's incredible. I mean,
22:33
Speaker 3: there's all the sorts of investmenting wins that he's had
22:37
Speaker 3: over time from investing in Coca Cola back in nineteen
22:40
Speaker 3: eighty eight. That now his holding in Coca Cola now
22:44
Speaker 3: pays seven hundred and seventy million dollars in dividends alone
22:47
Speaker 3: a year. There's American Express. There's just so many companies
22:51
Speaker 3: that he has touched and invested in over time and
22:54
Speaker 3: has been a long time shareholder of. Plus. The other
22:58
Speaker 3: piece year, which is it runs similar to what we
23:01
Speaker 3: try to do as a program, is the education piece
23:04
Speaker 3: that Warren Buffett has really made himself available and done
23:09
Speaker 3: I think a very fantastic job of trying to impart
23:12
Speaker 3: financial wisdom and sound financial wisdom to the next generation,
23:16
Speaker 3: whether it be through his book Snowball was a biography
23:19
Speaker 3: that's done. There's been many different books that have been
23:21
Speaker 3: done about him and Munger and others out there. And
23:23
Speaker 3: his annual shareholder letters are also a great way for
23:26
Speaker 3: people to understand finance, and he does it in a
23:29
Speaker 3: way it's folksy but also that anyone can understand it,
23:33
Speaker 3: So I think that's worth noting as well as he
23:35
Speaker 3: steps down as CEO.
23:38
Speaker 2: I had something interesting that I saw from him over
23:41
Speaker 2: this weekend because there's one thing that I think has
23:44
Speaker 2: always been a core tenet of Warren Buffett's investment philosophy,
23:50
Speaker 2: which is the belief in American business above all else,
23:55
Speaker 2: like Warren Buffett is the original American exceptionalism, Like he
24:02
Speaker 2: just bought it, like both literally and what's the word
24:08
Speaker 2: I'm moving figure, that's the one I was thinking, like spiritually,
24:11
Speaker 2: but it's not quite the right place to be going
24:13
Speaker 2: on this. Yes, like he very much was like I
24:17
Speaker 2: am going to buy American companies because there is no
24:20
Speaker 2: better place in the world to do business than the
24:22
Speaker 2: United States of America. So there is one quote that
24:25
Speaker 2: perked my ears up over the weekend from him. Buffett
24:29
Speaker 2: says there could be things that would happen in the
24:31
Speaker 2: US that would quote make us want to own a
24:33
Speaker 2: lot of other currencies. And that to me, like again,
24:36
Speaker 2: if you know anything about Warren Buffet and how he
24:38
Speaker 2: talks about the United States, this is equivalent to Steve
24:42
Speaker 2: Jobs coming in one morning being like, hey, do you
24:44
Speaker 2: think we should get a couple p season here? You know,
24:48
Speaker 2: like on the surface, kind of inocuous, but then you're like, wait,
24:51
Speaker 2: did he just say what I think he said? And
24:56
Speaker 2: I found that notable just because I don't think I've
25:00
Speaker 2: ever heard anything like that from Buffett in the past.
25:04
Speaker 3: Very very good point, I mean, kind of wild to
25:06
Speaker 3: be honest. Yeah, he is beat the drum on investing
25:09
Speaker 3: in the US and the belief in capitalism in this
25:12
Speaker 3: country for six decades more.
25:14
Speaker 1: You know.
25:15
Speaker 2: I mean this is like, who's like a really fashionable person. Okay,
25:21
Speaker 2: if we don't as with our apparel, Okay, this is
25:27
Speaker 2: like asking. This is like if Tom Brady came in
25:30
Speaker 2: one day and you know, just said, hey, let's just
25:34
Speaker 2: toss it around for fun, Like Tom Brady likes to
25:38
Speaker 2: win it everything. And if he comes in one day
25:40
Speaker 2: and is like, yeah, like let's not keep score, Let's
25:43
Speaker 2: just see how it goes. That's kind of what this
25:45
Speaker 2: feels like. It's just like the message in the person combined.
25:48
Speaker 2: It's it's a little bit wild there. So I found
25:50
Speaker 2: that to be kind of notable. Other than you know,
25:54
Speaker 2: what what Buffett said about him him stepping down. Anything
25:58
Speaker 2: else we.
25:58
Speaker 3: Want to add on Buffett, No, I think we've covered
26:01
Speaker 3: a tremendous run and that change will happen. On January
26:05
Speaker 3: first of twenty six.
26:06
Speaker 2: All right, to talk about this piece from the Wall
26:08
Speaker 2: Street Journal. It's titled Corporate America is leaving more jobs unfilled,
26:12
Speaker 2: and this continues to be the story, which is companies
26:15
Speaker 2: are not really laying people off at any higher numbers
26:18
Speaker 2: right now, but job postings continue to decline, and by
26:22
Speaker 2: all accounts, right now, if you are trying to get
26:25
Speaker 2: a job right now, which look, we don't have data
26:27
Speaker 2: for the month of May yet or even the latter
26:30
Speaker 2: part of April, by all accounts, it is a much more,
26:34
Speaker 2: much lengthier, and much slower process just because companies are
26:39
Speaker 2: kind of pausing that you know, job searches in a
26:41
Speaker 2: lot of cases, even if they have the positions open,
26:43
Speaker 2: they might just be saying, yeah, let's wait and see
26:46
Speaker 2: before we actually bring someone on for that. In this
26:48
Speaker 2: I think continues to be a story that we're getting here.
26:51
Speaker 3: No between the federal government freezing a lot of funding
26:55
Speaker 3: in different areas for hiring. They're on a freeze through
26:58
Speaker 3: mid July. Then you have numerous other companies following suit
27:01
Speaker 3: there pausing on hiring. You have dozens of universities that
27:05
Speaker 3: are sort of held in limbo on the funding side
27:07
Speaker 3: of things, so they too have pumped the brakes a bit.
27:10
Speaker 3: So as much as I said earlier in the program
27:12
Speaker 3: that the job support that we got last Friday was
27:15
Speaker 3: relatively strong compared to expectations. Four four point two percent
27:19
Speaker 3: unemployment and one hundred and seventy seven thousand jobs at it.
27:23
Speaker 3: I would imagine that if listeners out there have kids,
27:25
Speaker 3: you know, coming out of college looking for a job,
27:28
Speaker 3: or people who are looking to either get back in
27:30
Speaker 3: the hot the work market, it's really challenging. It seems
27:34
Speaker 3: like there is not a lot of appetite to hire,
27:37
Speaker 3: just because everyone is in sort of a wait and
27:40
Speaker 3: see mode. And you do have some anecdotes in here
27:42
Speaker 3: from recruiters just saying that they're seeing a steep decline
27:45
Speaker 3: in their revenue of placing executives in certain places.
27:49
Speaker 2: And I think the group that I've actually been hearing
27:52
Speaker 2: a lot about this from is you know, expected, like
27:55
Speaker 2: people expecting to graduate from college in the next month
27:58
Speaker 2: or two, and it's just those offers are not coming through.
28:02
Speaker 2: And I don't know if it's there are a couple
28:05
Speaker 2: of potential things here, by the way. Some of it
28:07
Speaker 2: could be companies saying, Okay, we're not sure if we
28:09
Speaker 2: need to bring on this many, you know, entry level
28:11
Speaker 2: people this year because of, you know, what the business
28:13
Speaker 2: environment looks like. I do wonder if on the edges
28:17
Speaker 2: companies might be starting to play around with trying to
28:19
Speaker 2: use AI to bring on fewer people, and hey, we
28:22
Speaker 2: can have you know, three people that do the work
28:24
Speaker 2: of four because of AI, like those types of things.
28:27
Speaker 2: Maybe I don't know that that's the case. I would
28:30
Speaker 2: be completely speculating on that front. But you hear from Satniyaadella,
28:35
Speaker 2: who the CEO of Microsoft I think it was either
28:37
Speaker 2: last week or the week before, was like, yeah, like
28:39
Speaker 2: thirty percent of the code that's being written in our
28:41
Speaker 2: company right now is being done by AI. So okay,
28:45
Speaker 2: maybe you don't need as many people. Instead, it's you know,
28:49
Speaker 2: you have coders overseeing how AI does more of the work,
28:52
Speaker 2: and that continues to grow, which then gets you to,
28:55
Speaker 2: you know, a really interesting question, which is, well, if
28:59
Speaker 2: I'm some with like that background, what do I do
29:04
Speaker 2: you know? The entire twenty tens were hey, learn how
29:06
Speaker 2: to code, and now if those jobs are going to
29:09
Speaker 2: be you know, potentially not there in the numbers that
29:13
Speaker 2: they were before because you're not doing the coding for
29:17
Speaker 2: the most part, you're kind of overseeing it and correcting
29:19
Speaker 2: it when it needs assistance. Okay, what happens to the
29:23
Speaker 2: availability of those jobs as you go forward? I don't
29:27
Speaker 2: know the answer on this, but just things that are
29:29
Speaker 2: kind of interesting to that might fit into this story.
29:32
Speaker 2: Beyond just hey, this is you know, tariffs and trade
29:36
Speaker 2: in that kind of uncertainty, there could be a few
29:38
Speaker 2: things going on here. To take a quick break when
29:41
Speaker 2: we come back, talk about what's going on in the
29:44
Speaker 2: Boston property market and why unfortunately decent chance that you
29:49
Speaker 2: might see property tax bills moving in the wrong direction
29:54
Speaker 2: in the coming years. Quick break. Then we'll talk that
29:56
Speaker 2: after this.
29:58
Speaker 1: Market volatility is at its highest point since the pandemic.
30:01
Speaker 1: Keep it here for the most comprehensive coverage of the
30:04
Speaker 1: global trade war. This is the Financial Exchange Radio Network.
30:08
Speaker 1: Get up to the minute market updates with Wall Street
30:11
Speaker 1: Watch Weight days at ten thirty only here on the
30:14
Speaker 1: Financial Exchange Radio Network.
30:32
Speaker 2: Piece in the Wall Street Journal about Boston real estate,
30:35
Speaker 2: which if the Wall Street Journal is talking about Boston
30:37
Speaker 2: real estate, it makes my years perk up a little bit.
30:39
Speaker 3: Because I didn't realize. I thought this was a globe
30:41
Speaker 3: piece of four Yeah right, totally.
30:42
Speaker 2: I mean, like normally the Wall Street Journal, you guys
30:44
Speaker 2: watch mad Men. Yes, sure, dude gets in the elevator
30:47
Speaker 2: with John Ham and gives like the whole speech about
30:50
Speaker 2: like whatever, and John Ham just goes, I don't think
30:52
Speaker 2: about you at all. That's what the Wall Street Journal
30:54
Speaker 2: normally is to Boston, like they do not think about
30:56
Speaker 2: Boston at all. So when you get a piece titled
30:59
Speaker 2: a billion dollar tax bills looming over Boston homeowners, I go, oh,
31:03
Speaker 2: tell me more. And this gets it something we've been
31:05
Speaker 2: talking about for the last you know, six to eight months.
31:08
Speaker 2: So it is nice to note that they've been going
31:09
Speaker 2: through the archive of our show and picking up some
31:12
Speaker 2: you know, ideas for pieces on it. Boston gets a
31:16
Speaker 2: ton of its tax revenue from commercial property taxes, and
31:21
Speaker 2: given what has been happening in the office market in
31:24
Speaker 2: the Boston area, we've seen a number of towers being
31:26
Speaker 2: sold for a fraction of what they were sold for previously.
31:30
Speaker 2: And you better believe that those new owners are gonna say,
31:32
Speaker 2: excuse me, City Hall, please, you know, reduce our property
31:35
Speaker 2: tax by the appropriate amount. Hey, you still have policemen
31:39
Speaker 2: to pay, firemen to pay teachers to pay, snowplows to
31:43
Speaker 2: pay like all of your municipal services. You have to continue.
31:47
Speaker 2: And so you're faced with this problem here where it's
31:51
Speaker 2: something bad has to happen it's either you cut headcount
31:53
Speaker 2: dramatically at the City of Boston and you don't do
31:57
Speaker 2: you don't provide the same level of services that you used,
32:00
Speaker 2: or you've got to raise property taxes on the group
32:03
Speaker 2: that hasn't you know, skipped town literally and figuratively, which
32:07
Speaker 2: is Boston residents and residential tax rates just.
32:11
Speaker 3: A really difficult spot for those who are residential Boston homeowners.
32:14
Speaker 3: You've not only had your home increase in value over
32:17
Speaker 3: this period of time, but now on top of it,
32:20
Speaker 3: you have to pick up a heavier burden from the
32:23
Speaker 3: commercial property tax side of things. Like you said, a
32:26
Speaker 3: third of boston SAX residue comes from commercial property. And
32:30
Speaker 3: the reason that this is covered in the journal is
32:32
Speaker 3: that this is the highest level among all major US
32:36
Speaker 3: cities around the country. We are extremely around the Boston
32:38
Speaker 3: are reliant upon that office space in the commercial property market.
32:42
Speaker 3: The vacancy rates on office have increased to fourteen percent
32:46
Speaker 3: according to co Star Group that level that percentage was
32:49
Speaker 3: at six point seven percent and twenty eighteen, so almost
32:52
Speaker 3: more than a doubling of vacancy rates in the office
32:55
Speaker 3: space market. And if you look at the taxable value
32:58
Speaker 3: of commercial property that has decreased over the last fiscal year,
33:02
Speaker 3: so there really is no perfect solution to this chuck.
33:06
Speaker 3: You're either talking about cutting budget or increasing taxes off
33:10
Speaker 3: of a residential base that it does seem unfair for
33:14
Speaker 3: them to have to pick up this burden because there's
33:17
Speaker 3: not going to be an immediate rise that's going to
33:19
Speaker 3: have the office space rally in this area just yet,
33:22
Speaker 3: It's going to take years for that to come back.
33:25
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33:31
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34:25
Speaker 2: I want to talk a little bit about student loans.
34:26
Speaker 2: Peace in the Wall Street Journal headline is collections coming
34:29
Speaker 2: from millions of student loan borrowers. And basically what you
34:34
Speaker 2: have happening as of today is that the Trump administration
34:39
Speaker 2: is going to resume the collections process and penalties process
34:43
Speaker 2: for student loan borrowers who are behind on their payments.
34:48
Speaker 2: There are approximately five million barrowers whose loans are in default
34:52
Speaker 2: right now and have not been making regular payments over
34:55
Speaker 2: the last five years. Millions more that are kind of
34:58
Speaker 2: on the verge of being in that status. But this
35:01
Speaker 2: is another thing that has the potential to impact consumer
35:03
Speaker 2: spending and the economy and create a little bit more
35:06
Speaker 2: drag in another area. Not saying that this isn't something
35:09
Speaker 2: that should be happening again, I don't think this is uh,
35:13
Speaker 2: this is not something that is purely you know that
35:14
Speaker 2: the Trump administration doing this this place, this plan was
35:17
Speaker 2: put in place by the previous administration anyways in order
35:21
Speaker 2: for this to begin happening here. But ultimately it is
35:25
Speaker 2: going to be something that is going to create some drag,
35:27
Speaker 2: even if you do need to have some accountability at
35:30
Speaker 2: some point for student loan borrowers who you know, have
35:33
Speaker 2: not had any penalties or forced collections over the last
35:37
Speaker 2: five years.
35:38
Speaker 3: I try to stay relatively measured on most subjects, but
35:41
Speaker 3: when something like this comes across, it's just I have
35:44
Speaker 3: trouble mounting any sort of sympathy here. We're talking about
35:47
Speaker 3: years and years of forgivement and correct and the savings
35:50
Speaker 3: right in this country serves to a tremendous level. In COVID,
35:52
Speaker 3: there is literally nothing else that you could do during
35:55
Speaker 3: that period of time. So I just don't buy that
35:58
Speaker 3: there isn't there's an excuse in place to just think
36:01
Speaker 3: that your debt. Now it's probably the prior administration for
36:03
Speaker 3: giving credence the idea that might get wiped out, that
36:05
Speaker 3: people leaned on that. But as all of us know
36:08
Speaker 3: who carry debt in some way, shape or form they
36:11
Speaker 3: need to collect you know, the collector needs to come
36:14
Speaker 3: and you need to pay off your debts. There are
36:15
Speaker 3: very rare instances where it just gets It shouldn't happen,
36:18
Speaker 3: you know, that's just not how debt works. It doesn't
36:20
Speaker 3: get wiped off like this. So I just can't mount
36:22
Speaker 3: a ton of sympathy Therefore it I get the economic
36:24
Speaker 3: stance there that it could you know, hinder some the
36:27
Speaker 3: consumer spending front, but I just can't mount any sympathy here.
36:30
Speaker 2: No. Well, and look, here's the thing. We've talked about
36:33
Speaker 2: this a lot. If you want to, you know, reform
36:35
Speaker 2: the entire financial aid system in order to not end
36:39
Speaker 2: up back in this place, you know, five ten years
36:42
Speaker 2: from now or whatever, great, let's have realistic conversations about that.
36:46
Speaker 2: But if all we're going to do is forgive some
36:49
Speaker 2: debt and say, well, like now we can move on, well, no,
36:51
Speaker 2: you're just gonna be back here with that next group
36:53
Speaker 2: of borrowers ten years from now. So I don't think
36:57
Speaker 2: we're doing ourselves any favors if we just say, hey,
37:00
Speaker 2: forgive the debt and call it a day, Because you
37:03
Speaker 2: haven't reformed the system that's gotten you to this point
37:06
Speaker 2: and ultimately you would need to do that. What kinds
37:09
Speaker 2: of things do you consider, Okay, allowing this debt to
37:12
Speaker 2: be discharged, maybe having the schools have some kind of
37:15
Speaker 2: skin in the game where they have to take on
37:17
Speaker 2: a portion of the debt as an issuer, so that
37:21
Speaker 2: ge like, how do you actually price this in terms of,
37:23
Speaker 2: you know, from an interest rate perspective, and oh, I
37:26
Speaker 2: don't know, maybe making it so that maybe making it
37:31
Speaker 2: so that in terms of if you want to maintain
37:34
Speaker 2: your tax exempt status, you have to actually provide those
37:37
Speaker 2: educational benefits to a bunch of people who wouldn't be
37:39
Speaker 2: able to afford them otherwise. Because here's the other thing
37:44
Speaker 2: that I will say. If you want to say we'll
37:45
Speaker 2: get rid of this and just you know, make it
37:47
Speaker 2: so that the people who can pay can go, great,
37:49
Speaker 2: you're just gonna have like a bunch of really wealthy
37:52
Speaker 2: families continuing to propagate you know, Harvard and Princeton and
37:56
Speaker 2: this and that, and now you're kind of institutionalizing those
37:58
Speaker 2: families at the top end of the food chain when
38:00
Speaker 2: it comes to allowing for any upward mobility.
38:04
Speaker 3: Only worse than the problem.
38:05
Speaker 2: Yeah, let's take a quick break but we still got
38:07
Speaker 2: a lot to come in our two, including we're gonna
38:11
Speaker 2: be joined by Craig Fuller, he's the CEO of Freight Waves,
38:14
Speaker 2: a major logistics data company, will be joined by him
38:17
Speaker 2: for a bit, and we got a whole lot more
38:19
Speaker 2: coming up an hour two as well,