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Trade war

Warren Buffett says U.S. and China will avoid 'foolish' trade war

Asian investors make annual pilgrimage to Berkshire's hometown

Warren Buffett, CEO of Berkshire Hathaway, talks to a reporter in the exhibit hall at the company's annual meeting in Omaha, Nebraska on May 5.   © Reuters

OMAHA, Nebraska -- The U.S. and China will be "extremely foolish" if they engage in a serious trade war, billionaire investor Warren Buffett told shareholders of his investment empire Berkshire Hathaway on Saturday, assuring them that such a scenario would most probably not happen.

"It's just too big and too obvious," he said about U.S.-China trade. "The benefits are huge and the world is dependent on it in a major way for its progress, that two intelligent countries will do something extremely foolish," he said.

More than 40,000 shareholders, including hundreds from China, South Korea and India, made their pilgrimage here to attend a three-day event that centers on Berkshire Hathaway's annual shareholders meeting.

Omaha, Nebraska is where Buffett lives his famously modest life and where Berkshire's headquarters are located. In the shopping stalls that popped up at the venue, languages such as Mandarin and Korean could be heard throughout the day, as Asian investors shopped for Buffett goods produced by the companies he has invested in.

The otherwise quiet city saw hotel prices shoot up this weekend as booking a room became extremely difficult.

Many Asian shareholders of Berkshire Hathaway attended the company's annual meeting.   © Reuters

Asian participants were not shy to express their admiration of the legendary investor.

"Buffett may be more popular in India than he is in the U.S.," said Sunita Agrawal, an Indian fund manager who has attended the Omaha event for the past 20 years. This year he brought along 85 colleagues from brokerages that he works with. "It is an opportunity to meet various investors from around the world," he said.

Jon Dong, a first-time participant from southern China's Guangdong province, said, "I like the way he invests in companies that offer products and services that make regular people happy, and not the companies that benefit only the rich."

The 87-year-old Buffett and his 94-year-old Vice Chairman, Charlie Munger, answered questions from shareholders, journalists and analysts for more than five hours. Many Chinese shareholders took the microphone to ask questions, and the "Oracle of Omaha" did not disappoint. "In August, I will be 88, in a year that ends in an 8. Eight is a lucky number in China," he said.

Several of his Chinese fans have spent millions of dollars to win the right to have an exclusive lunch with Buffett at the Smith & Wollensky Steakhouse in New York, which Buffett does for charity.

Talking about U.S.-China trade tensions, Buffett said, "The United States and China are going to be the two superpowers of the world, economically and in other ways for a long, long, long time. We have a lot of common interests and like any two big economic entities there are times when there will be tensions. But it is a win-win situation when the world trades in China."

Buffett touched on several Asian companies that he has invested in. One of the successful cases has been the Chinese electric vehicle maker BYD, in which Berkshire invested in 2008 and has made capital gains as of 2017. The company's share prices have been rising, on the coattails of the Chinese government's policies to promote electric cars.

Yet, Buffett has not made major investments in emerging markets lately. He explained that scale was an issue, meaning that each investment figure would be too small for Berkshire's portfolio. He signaled that his investment focus will continue to be on American stocks.

Amazon founder and CEO Jeff Bezos. Buffett regrets not betting on Amazon's "miracle" growth.   © Reuters

Buffett is known for his bullish views on the U.S. economy and U.S. stocks. At this year's meeting, he continued to express confidence in his home market.

Some analysts, however, have noted that the investor may have lost his magic in recent years. Berkshire's stock prices over the five years leading up to 2017 have risen 2.21 times, according to its annual report. That figure under-performs the 2.48-fold rise in the S&P 500 Property & Casualty Insurance Index.

As he did last year, Buffett expressed his regret for not investing in Amazon stocks. While saying that he has been studying Amazon stocks from early on, he admitted that he could not bring himself to invest in the company.

"I've watched Amazon from the start. I think what Jeff Bezos has done is something close to a miracle," he said of Amazon's CEO. "The problem is when I think something will be a miracle, I tend not to bet on it. It would have been far better obviously if I had some insights into certain businesses."

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