Billionaire investor Warren Buffett is famed for his seeming sixth-sense when it comes to the stock market. But business has been flat lately. And he’s becoming increasingly concerned a looming catastrophe that could shake civilisation itself.
Buffett released his annual letter to Berkshire Hathaway Inc. shareholders at the weekend.
Buffett’s letter is always well-read in the business world because of his remarkable track record, his habit of dissecting the economy or other topics and his talent for explaining complicated subjects in plain language.
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Which is why so many have sat up and paid attention to his warning of a pending ‘megacatastrophe’.
Not only will it shake global markets to the core, he believes it will stress society to the breaking point.
“A major catastrophe that will dwarf hurricanes Katrina and Michael will occur — perhaps tomorrow, perhaps many decades from now,” the CEO wrote. “The Big One may come from a traditional source, such as a hurricane or earthquake, or it may be a total surprise involving, say, a cyber attack having disastrous consequences beyond anything insurers now contemplate.”
THE BIG ONE
While others may see little but catastrophe in his words, Buffett sees opportunity:
“When such a mega-catastrophe strikes, we will get our share of the losses and they will be big — very big,” he wrote of his Berkshire Hathaway firm’s prospects. “Unlike many other insurers, however, we will be looking to add business the next day.”
Buffet was less than specific in specifying the threat.
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Apart from his mention of a catastrophic hurricane, he did not refer to the Earth’s rapidly ballooning carbon dioxide levels which, experts believe, will reach a tipping point within just 12 years — triggering a thousand-year hothouse and the melting of the world’s glaciers and ice sheets.
He pointed to earthquake. And while there is constant nervousness about the fate of risky locations such as Calafornia’s San Andreas Fault line, the world appears no more at risk of a major even now than at any other time. What has changed, however, is the extent of residential and commercial development within such zones.
He pointed to ‘surprising’ events — such as cyber attack. And a slew or recent US intelligence and defence department reports have highlighted their devastating potential. Power grids can be taken down. Communications and transport systems stalled. So great is the potential impact of an internet-crippling attack that cyber attack has been classified as a potential weapon of mass destruction (WMD).
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And then there’s the recent abandonment of nuclear non-proliferation treaties and the advancements in new space-based and hypersonic delivery vehicles.
It’s all produced a growing cloud of gloom across society, commentators say, which is being expressed through the popularity of zombie shows and apocalyptic scenarios — such as Game of Thrones.
ROOM FOR OPTIMISM
Buffett isn’t all doom and gloom.
He writes that investors should continue betting on the US economy because Berkshire has prospered by doing so. But he warns that they shouldn’t forget about the rest of the world.
“There are also many other countries around the world that have bright futures. About that, we should rejoice: Americans will be both more prosperous and safer if all nations thrive,” Buffett wrote. “At Berkshire, we hope to invest significant sums across borders.”
Berkshire continues to hold roughly $US130 billion in cash and short-term investments because Buffett says hasn’t found any reasonably-priced acquisitions in recent years, so he’ll likely continue investing more in stocks.
“Prices are sky-high for businesses possessing decent long-term prospects,” he wrote.
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But not all market commentators are impressed with Buffett’s vision, however.
“To me, it’s (the letter) becoming less of an event,” Edward Jones analyst Jim Shanahan.
He argues it has become watered down in recent years. Instead, Buffett’s been saving his sage advice for the secrecy of the boardroom.
Buffett promoted two potential successors last year to oversee most day-to-day operations. But the88-year-old tycoon made no mention of retiring.
Berkshire Hathaway Inc. owns more than 90 companies, including the railroadand clothing, furniture and jewellery businesses. Its insurance and utility businesses typically account for more than halfof the company’s net income. The company also has major investments in such companies as Apple, American Express, Coca- Colaand Wells Fargo & Co.