- Warren Buffett’s Berkshire Hathaway spent billions on corporate bailouts during the financial crisis, but it isn’t fielding many calls for help this time around.
- “Everybody’s just frozen,” Charlie Munger, Buffett’s longtime partner, told The Wall Street Journal this week. “The phone is not ringing off the hook.”
- “Take the airlines,” Munger said. “They don’t know what the hell they’re doing. They’re all negotiating with the government, but they’re not calling Warren.”
- Berkshire is more focused on protecting itself than bailing out others, Munger said, adding that a few of its bad businesses won’t reopen once the coronavirus threat recedes.
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Warren Buffett’s Berkshire Hathaway famously bailed out the likes of Goldman Sachs and General Electric during the financial crisis, but company bosses may be too shell-shocked by the novel coronavirus outbreak to tap the famed investor for cash this time around.
“Everybody’s just frozen,” Charlie Munger, Berkshire’s vice chairman and Buffett’s right-hand man, told The Wall Street Journal this week.
“Take the airlines,” he said, referring to the “big four” carriers that already count Berkshire as a shareholder. “They don’t know what the hell [they’re] doing. They’re all negotiating with the government, but they’re not calling Warren.”
“The phone is not ringing off the hook,” Munger added.
Even if executives were dialing Buffett’s number, the investor’s primary focus is protecting Berkshire’s balance sheet.
“We’re like the captain of a ship when the worst typhoon that’s ever happened comes,” Munger told The Journal. “We just want to get through the typhoon, and we’d rather come out of it with a whole lot of liquidity.”
“We’re not playing, ‘Oh goody, goody, everything’s going to hell, let’s plunge 100% of the reserves [into buying businesses],'” he added.
Munger emphasized that Buffett is being prudent with Berkshire’s massive cash pile. The value investor is widely expected to capitalize on the coronavirus-fueled market sell-off and snap up discounted assets, given his past complaints about “sky-high” prices and relentless hunt for an “elephant-sized acquisition.”
“Warren wants to keep Berkshire safe for people who have 90% of their net worth invested in it,” Munger told The Journal. “That doesn’t mean we couldn’t do something pretty aggressive or seize some opportunity.”
Munger cautioned that not all of Berkshire’s businesses will weather the current turmoil.
“This will cause us to shutter some businesses,” he told The Journal. “We have a few bad businesses that … we could be tolerant of as members of the family,” he continued, but they “won’t reopen when this is over.”
Munger also issued a dire economic forecast in the interview.
“Of course we’re having a recession,” he said. “The only question is how big it’s going to be and how long it’s going to last.”
“It’s quite possible that never again — not again in a long time — will we have a level of employment again like we just lost,” he added.