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In today’s episode, Dave and Stu Kedwell, Co-Head, North American Equities, RBC Global Asset Management, reflect on takeaways shared by Warren Buffett during Berkshire Hathaway’s annual stakeholder meeting. They discuss Buffett’s optimism towards economic prosperity, and what we can learn from the master investor’s more cautious approach to buying this time around.


Hello and welcome to the Download. I’m your host, Dave Richardson, and I am back with Stu’s days today, with Stu Kedwell, the co head of North American Equities at RBC Global Asset Management. And Stu: something that’s been in the news the last couple of days is Warren Buffett’s annual meeting for Berkshire Hathaway. And I know you are someone who appreciates what Mr. Buffett has done over the years. Obviously you are a significant investment manager yourself, but you’re always interested in what arguably one of the greatest investors of our lifetime has to say. Was there anything that you took out of Mr. Buffett’s comments, things that you found particularly interesting this year?

Thanks, Dave. As always, it was quite a history lesson. When Warren Buffett wants to speak for five hours, even when I have something to do, I normally listen, — let alone these days. So it was a great way to spend a Saturday evening. He really detailed the long-term economic prosperity of the United States and hammered again and again about wanting to bet on America, over time. And I think that was a wonderful lesson. He detailed how the economy had grown and how the economy per capita was fantastic. But then he also talked about the current environment, and how, in the middle of March, the liquidity really dried up. And, — maybe because he owns a railway ! —he talked about how the rail went from going full speed to going onto the side of the tracks, immediately. It wasn’t rolling off the tracks, it wasn’t a crash, because it was all planned. But, you know, when you have rail lines, you have these kind of sidings where you can put the train and just let it sit there, and that’s where you put the economy. And he really complimented Jay Powell and the Federal Reserve for the job they’d done in providing liquidity but also acknowledged that some of that liquidity that came in really quickly prevented him from getting some fantastic deals on things. And I thought the tension of his discussion was: on the long term, he was quite optimistic, as usual, particularly relative to fixed income on an after-tax basis, but also acknowledging that asset prices had really stormed back in response to all the liquidity that the central banks had provided. And for us, we own assets, we all have our units and our funds and we’re asset owners, and the provision of liquidity really helped those assets remain closer to fair value. But if you wanted to put money to work, it was a relatively brief period of time before that liquidity arrived. And I thought he did a really nice job of laying that out. You know, we’ve talked a lot about dollar cost averaging, and that notion of being bullish on the long term without being entirely sure about the short term; that certainly resonated the dollar cost averaging as a wonderful tool for that as well. So those are some things I took away from Saturday night.

What’s interesting is that, in the global financial crisis, 2008-2009, of course, famously, Buffett with the op ed suggested it was time to «buy America». And a lot of investors have been sitting and waiting for him to ring that bell again. And even in his comments on Saturday, there was an expectation that he might do that. It didn’t come. But it’s almost a case of, this time, the Fed and government action was so fast, the market moved, and there almost wasn’t enough time for him to ring that bell.

Yeah, that’s a great point. The Fed maybe moved a little bit more aggressively than he envisioned. You know, the other thing that comes to mind when you say that: we talk a lot about «time in the market» and «timing the market». And, Buffett is remembered for the Goldman Sachs investment and other kind of famous investments in the financial crisis. And, of course, writing the editorial you point out. But the entirety of Berkshire has compounded at a pretty healthy level. And you think about Warren Buffett in 88, he’s added how many billions? Even from 81. And those assets were already in there. Those weren’t new purchases.

Yeah. And just like for Mr. Buffett, and for investors everywhere, that bell never does ring. You’ve got to be there for when the bounce occurs. And that’s why timing the market is so difficult, right?

That’s right. A hundred percent.

Excellent. Well, Stu, a very interesting review of your thoughts on Warren Buffett and as always, some great lessons for investors everywhere. Thanks for joining us on Stu’s days. And we’ll hope to see you back next week.

Great. Thanks, Dave.


Recorded May 5, 2020

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