Legendary investor Warren Buffet, CEO of Berkshire Hathaway, noted in his annual report to shareholders that “fiscal deficits have consequences.”
He noted his company had a good year despite inflation, hiring shortages and supply chain disruptions. Berkshire Hathaway reported a record $30.8 billion operating profit but posted a $22.8 billion net loss. The “Oracle of Omaha” has repeatedly said he is unconcerned about net losses or gains because they reflect changes in investments the company has not yet sold.
For example, the bulk of the net loss results from a significant decline in the stock price of Apple, which Berkshire Hathaway owns a chunk of. The stock market has tanked in recent months as the Federal Reserve aggressively raised interest rates to return inflation to a two percent level.
“Huge and entrenched fiscal deficits have consequences,” Buffett, 92, declared before deflecting blame from Berkshire Hathaway. He catalogued the hefty tax payments made by his company over time.
“During the decade ending in 2021, the United States Treasury received about $32.3 trillion in taxes while it spent $43.9 trillion,” Buffett wrote in his annual letter. He added that Berkshire paid $32 billion in U.S. corporate income taxes during that time period.
“And that means – brace yourself – had there been roughly 1,000 taxpayers in the U.S. matching Berkshire’s payments, no other businesses nor any of the country’s 131 million households would have needed to pay any taxes to the federal government,” Buffett said. “Not a dime.”
His sage advice remains constant when he advocates having patience and investing with a long-term view. He surprised many professionals on Wall Street earlier this year when he sold large portions of his company’s recently acquired stake in Taiwan Semiconductor Manufacturing Company. He usually takes positions in companies that he holds for years, if not decades.
Buffett was credited with inspiring confidence in stocks during the Great Recession. The large stockpile of cash at Berkshire Hathaway’s disposal allowed him to buy large portions of banks and railroads at steep discounts. He saved some iconic American companies while making his shareholders a bundle of money when the economy recovered. He said he believed in America then and apparently still does.
“I have been investing for 80 years – more than one-third of our country’s lifetime. Despite our citizens’ penchant – almost enthusiasm – for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America,” Buffett said. “And I doubt very much that any reader of this letter will have a different experience in the future.”
He did warn against the ability of money to engage in “disgusting” behavior to the detriment of retail customers.
“Finally, an important warning: Even the operating earnings figure that we favor can easily be manipulated by managers who wish to do so,” Buffett added. “Such tampering is often thought of as sophisticated by CEOs, directors and their advisors. Reporters and analysts embrace its existence as well.”
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