Warren Buffett says pandemic’s impact still hard to predict

OMAHA, Neb. — Billionaire Warren Buffett says the one constant throughout the coronavirus pandemic has been that it has been difficult to predict how it would affect the economy, but clearly it has devastated many small businesses and individuals while most big companies have fared OK.

“The economic impact has been this extremely uneven thing where I don’t know how many but many hundreds of thousands or millions of small businesses have been hurt in a terrible way, but most of the big, big companies have overwhelmingly  … done fine, unless they happen to be in cruise lines or, you know, or hotels or something,” Buffett said in an interview that aired on CNBC Tuesday night.

Buffett and Berkshire Hathaway Vice Chairman Charlie Munger touched on a variety of topics during the interview. Munger said China had the right approach to the pandemic by essentially shutting down the country for six weeks.

“That turned out to be exactly the right thing to do,” Munger said. “And they didn’t allow any contact. You picked up your groceries in a box in the apartment and that’s all the contact you had with anybody for six weeks. And, when it was all over, they kind of went back to work. It happened they did it exactly right.”

Munger also praised the financial regulations that Chinese regulators have put in place. For instance, he said China was right to clamp down on Ant Group, which is affiliated with billionaire Jack Ma’s Alibaba Group, when it forced the giant online payments firm to become a financial holding company that will be regulated more like a bank.

“I don’t want … all of the Chinese system, but I certainly would like to have the financial part of it in my own country,” Munger said.

Buffett and Munger both said U.S. regulators should do more to restrict the amount of gambling in financial markets by limiting how much investors and banks can borrow on margin. They said that over the years Wall Street has found ways around the limits established after the Great Depression that the Federal Reserve put on how much people could borrow against stocks.

Having tougher rules on the amount of leverage investors can use would help avoid problems like the $5 billion charge Credit Suisse took this spring when American hedge fund Archegos Capital defaulted on margin calls, which are triggered when investors borrow using their stock portfolio as collateral and have to make up the balance required by banks when the share prices fall and the collateral is worth less.

“We learned a long time ago … that you can’t make a good deal with a bad person. Just forget it,” Buffett said. “Now, if you think you can draw up a contract that, that is going to work against a bad person, they’re gonna win.”

from Boston Herald https://ift.tt/2UPwhjj