There’s a well-known Chinese curse: “May you live in interesting times.” These are interesting times. Last weekend I listened in on Warren Buffet’s shareholder meeting. For the first time ever there was no one there. It was a virtual meeting. And he made two very interesting points that I’d like to bring up.
First, he talks about how there are no good deals out there. I think that’s important because there’s a bit of a mania in the markets right now. It’s almost as if people aren’t looking down the street. In fact, just today, someone close to me lost a high paying job. There’s a lot of damage in the economy. There will be good deals. We just need to be very circumspect how we proceed in the next six months.
We also are looking at debt not seen since the end of World War II – and yet we can handle it. The interest rates are phenomenally low, but when this is all over we’ve got to deal with it. And unlike World War II, we’re not going to have a demographic dividend where the birth rate of each generation is less than that which follows. Supporting the elderly was not much of an issue when most people didn’t make it to Social Security age. We have enormous expenses, enormous debt, and no demographic dividends – very small number of children per family going forward.
We’ve also created what is probably best-known as the “government put”. Meaning if there’s a disaster, the government’s made the announcement that they will spend a lot of money. And I’m not saying that’s wrong, but it does change market behavior. It actually makes markets more fragile; more prone to take unnecessary risk. And I think some of those unnecessary risks are going on right now in the S&P 500.
There will be deals. We just have to be careful. When we switch to the long-term he made one comment. He made it many times, and I’d like to add to it. “In the long-term don’t bet against America.” I couldn’t agree more. Now I came over in the Fall of 1979 with $200 and a toothbrush. And the world I left behind is unrecognizable when I go back. Which really gets to my point, and that is don’t bet against the world. Don’t bet against people. And of course, don’t bet against America. This too will pass, but it’s not going to be pleasant in the near future. We wish you the best of success. Thank you.