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Dutchy
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Warren Buffet out of aviation

Sun May 03, 2020 2:12 pm

Warren Buffett dumps US airline stocks, saying 'world has changed' after Covid-19

The legendary investor indicates that financial markets could still have further to fall as worldwide cases edge towards 3.5m.

Warren Buffett, the legendary American investor, has sold his firm’s entire holdings in the four major US airlines, warning that the “world has changed” for the aviation industry because of the coronavirus crisis.

In comments that will send shockwaves through financial markets already pulverised by the economic shock of the outbreak, Buffett said the outbreak could have an “extraordinarily wide” range of possible outcomes.

Shares around the world are poised for another torrid week as worldwide cases of the virus creep towards 3.5 million and deaths near 250,000. Despite massive central bank and government intervention, stock markets have been rocked by the continued spread of Covid-19, the plunge in oil prices and Donald Trump’s threats to reignite his trade war with China.

Buffett, 89, who has become known as the Sage of Omaha for his investment skill over the decades, indicated that he believed stock markets had not reached the bottom of the current dip.


Link to the article

That is a clear sign that the aviation world is in for a rough few years given Warren Buffett's track record. So will the aviation world in the west be back to pre-Corona numbers before 2025? Or will this be the start of a real change?
Many happy landings, greetings from The Netherlands!
 
alasizon
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Re: Warren Buffet out of aviation

Sun May 03, 2020 2:24 pm

Nobody, even Warren Buffett knows where we will be at next month or next year, much less three years from now. At this point it is all speculation and it won't be until we have the benefit of hindsight that we could look back and see who was right and who was wrong. A track record is quite literally built on hindsight and being able to evaluate.
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Toinou
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Re: Warren Buffet out of aviation

Sun May 03, 2020 2:28 pm

Even though I mostly agree with him, I wouldn't say that it's an indication of anything. The fact that his investment history is globally positive doesn't mean he's always right. He probably made thousands of mistakes but managed to keep the balance largely positive. The fact that he's often right means almost nothing on one precise decision. People tend to have this kind of misconception people have about statistics.

On the short term, he may quite probably be right for a reason: he did this and communicated about it. So people who are listening to the "sage" will follow. It's the textbook example of a self-fulfilling prophecy. (He may even end up buying back some shares if the market goes low enough to make that move a limited risk bet. It would be a form of market manipulation but I could work.)
 
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Dutchy
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Re: Warren Buffet out of aviation

Sun May 03, 2020 2:36 pm

Toinou wrote:
Even though I mostly agree with him, I wouldn't say that it's an indication of anything. The fact that his investment history is globally positive doesn't mean he's always right. He probably made thousands of mistakes but managed to keep the balance largely positive. The fact that he's often right means almost nothing on one precise decision. People tend to have this kind of misconception people have about statistics.

On the short term, he may quite probably be right for a reason: he did this and communicated about it. So people who are listening to the "sage" will follow. It's the textbook example of a self-fulfilling prophecy. (He may even end up buying back some shares if the market goes low enough to make that move a limited risk bet. It would be a form of market manipulation but I could work.)


Oh yes, but I think he is right in this case.
Many happy landings, greetings from The Netherlands!
 
Toinou
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Re: Warren Buffet out of aviation

Sun May 03, 2020 2:46 pm

Me too, I was only referring to your comment of this being a "clear indication" of what the future will look like in commercial aviation.
 
Cedar
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Re: Warren Buffet out of aviation

Sun May 03, 2020 3:00 pm

Warren Buffet knows his stuff yes, is a great investor & has a great track record. But let's be real - he is in it for the money. He's been back & forth on the airline industry so much in past years and changes his mind based on what he knows and sees. He's been quoted on saying he will never invest in airlines until he saw he could make some great ROI - and invested in the 4 major airlines.

This is not a clear indication of anything.

He is unsure of how it will play out, so to be safe and protect his exposure - he has pulled his money out of airlines. The only indication this provides is that he is unsure. If he can't see that he will make an ROI, he is not going to take the chance.

Give it time & he will be an investor again.

Cedar
 
Jetty
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Re: Warren Buffet out of aviation

Sun May 03, 2020 3:06 pm

Buffet is not trying to become a millionaire very quick anymore. Seems like a wise business decision.
 
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NameOmitted
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Re: Warren Buffet out of aviation

Sun May 03, 2020 3:12 pm

At one point, Buffet is said to have joked that capitalists should have shot the Wright Flyer out of the sky. It's safe to say he's never been particularly bullish on the industry overall.
 
MIflyer12
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Re: Warren Buffet out of aviation

Sun May 03, 2020 3:48 pm

Cedar wrote:
Warren Buffet knows his stuff yes, is a great investor & has a great track record. But let's be real - he is in it for the money. He's been back & forth on the airline industry so much in past years and changes his mind based on what he knows and sees. He's been quoted on saying he will never invest in airlines until he saw he could make some great ROI - and invested in the 4 major airlines.

This is not a clear indication of anything.

He is unsure of how it will play out, so to be safe and protect his exposure - he has pulled his money out of airlines. The only indication this provides is that he is unsure. If he can't see that he will make an ROI, he is not going to take the chance.

Give it time & he will be an investor again.

Cedar


Give it time?!? Do you have any idea of the time horizon from his US Air investment --- 1989 --- to today? Do you think a 90-year-old guy has 30 years to try this again?!?

The significance of this cycle is that he bought into four U.S. carriers. It wasn't a 'United will out-perform AA' strategy... it was confidence in 2016 that a broad mix of U.S. carriers would out-perform other sectors. And now he's given up on that entirely. He'd rather have cash. Do you know the returns on cash today? Check bond yields in the U.S./Canada/UK/Japan/Germany. That is a very clear indication.
 
jetwet1
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Re: Warren Buffet out of aviation

Sun May 03, 2020 3:50 pm

MIflyer12 wrote:

Give it time?!? Do you have any idea of the time horizon from his US Air investment --- 1989 --- to today? Do you think a 90-year-old guy has 30 years to try this again?!?

The significance of this cycle is that he bought into four U.S. carriers. It wasn't a 'United will out-perform AA' strategy... it was confidence in 2016 that a broad mix of U.S. carriers would out-perform other sectors. And now he's given up on that entirely. He'd rather have cash. Do you know the returns on cash today? Check bond yields in the U.S./Canada/UK/Japan/Germany. That is a very clear indication.


I actually agree with you, i've never bought airline stock, but, for Buffet to get out and sell his stock holdings of airlines, there has to be a buyer, so someone thinks they can make money on the stocks from that price point.
 
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enzo011
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Re: Warren Buffet out of aviation

Sun May 03, 2020 4:10 pm

NameOmitted wrote:
At one point, Buffet is said to have joked that capitalists should have shot the Wright Flyer out of the sky. It's safe to say he's never been particularly bullish on the industry overall.



His fund held around 10% stake in each of DL, UA, AA and WN. That is a substantial stake in airlines before this crises. He also dumped the stock at a loss so it seems he is very downbeat about the prospects of the industry.

“We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss,” Buffett said. “We will not fund a company … where we think that it is going to chew up money in the future.”
 
Vicenza
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Re: Warren Buffet out of aviation

Sun May 03, 2020 4:16 pm

Toinou wrote:
On the short term, he may quite probably be right for a reason: he did this and communicated about it. So people who are listening to the "sage" will follow. It's the textbook example of a self-fulfilling prophecy. (He may even end up buying back some shares if the market goes low enough to make that move a limited risk bet. It would be a form of market manipulation but I could work.)


He clearly stated he would not invest in aviation again, yet you are presuming something else.
 
CaptainObvious1
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Re: Warren Buffet out of aviation

Sun May 03, 2020 4:20 pm

Just for clarification. Berkshire Hathaway sold all of its ownership of DL, AA, UA and WN. Delta was one of their top ten investments at the end of 2019 and they owned 11% of the outstanding shares.

Berkshire Hathaway still fully owns NetJets (1998) and FlightSafety (1996). These are subsidiaries of Berkshire and these businesses also have other companies under them also related to aviation.
 
Aither
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Re: Warren Buffet out of aviation

Sun May 03, 2020 4:47 pm

So he invested in airlines all operating from the same country... ?
And people think he is a sage...
Never trust the obvious
 
Toinou
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Re: Warren Buffet out of aviation

Sun May 03, 2020 4:51 pm

Vicenza wrote:
Toinou wrote:
On the short term, he may quite probably be right for a reason: he did this and communicated about it. So people who are listening to the "sage" will follow. It's the textbook example of a self-fulfilling prophecy. (He may even end up buying back some shares if the market goes low enough to make that move a limited risk bet. It would be a form of market manipulation but I could work.)


He clearly stated he would not invest in aviation again, yet you are presuming something else.

Until he signs a legally binding contract stating that he's will never invest in aviation, what he's saying has only the value you want to put in his words.
Besides, I'm absolutely not saying he will invest again. I'm just saying that:
1) with the weight he's opinion has, he can have a real influence on the market so maybe he's right and maybe because he said that, it will happen;
2) because of 1), he could make a profit out of this situation.

If you want to enter current financial system presuming that everything people are saying is the truth and that they won't change their mind, I truly which you good luck!
 
sixtyseven
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Re: Warren Buffet out of aviation

Sun May 03, 2020 5:08 pm

Aither wrote:
So he invested in airlines all operating from the same country... ?
And people think he is a sage...


Well I’d say he’s done ok. But go ahead give us all a lesson on what an idiot he is we’re all ears.
Stand-by for new ATIS message......
 
flyby519
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Re: Warren Buffet out of aviation

Sun May 03, 2020 5:10 pm

Vicenza wrote:
Toinou wrote:
On the short term, he may quite probably be right for a reason: he did this and communicated about it. So people who are listening to the "sage" will follow. It's the textbook example of a self-fulfilling prophecy. (He may even end up buying back some shares if the market goes low enough to make that move a limited risk bet. It would be a form of market manipulation but I could work.)


He clearly stated he would not invest in aviation again, yet you are presuming something else.


How many times has he already said he’d never buy airline stocks again? And then he went out and bought a bunch.
 
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cv990Coronado
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Re: Warren Buffet out of aviation

Sun May 03, 2020 5:16 pm

I wonder if he holds or did hold Boeing stock? It would be interesting to see what he does with that if he does have it.
The fact that he has sold the airline stocks at a loss says a great deal. Yes, I am sure he has made mistakes, most probably he would admit to his error to buy the airline stocks in the first place.
However, most of us would probably dream of having his investment record, therefore, I am inclined to go with his wisdom especially after reading what happened with a small bear recovery after 1929. Perhaps this is why he says stocks still have further to fall but hasn't mentioned his other sales if any.
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Waterbomber2
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Re: Warren Buffet out of aviation

Sun May 03, 2020 5:19 pm

CaptainObvious1 wrote:
Just for clarification. Berkshire Hathaway sold all of its ownership of DL, AA, UA and WN. Delta was one of their top ten investments at the end of 2019 and they owned 11% of the outstanding shares.

Berkshire Hathaway still fully owns NetJets (1998) and FlightSafety (1996). These are subsidiaries of Berkshire and these businesses also have other companies under them also related to aviation.


Yes clickbait title is incorrect so should be changed.
 
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lightsaber
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Re: Warren Buffet out of aviation

Sun May 03, 2020 5:23 pm

Thread is already being discussed in non-aviation as topics quickly went off aviation:

viewtopic.php?f=11&t=1445629
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