American Consequences - August 2020

By Bill McGilton

Warren Buffett finally got “sober” again...

over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in. You’ve got huge fixed costs, you’ve got strong labor unions, and you’ve got commodity pricing. That is not a great recipe for success. I have an 800 number now that I call if I get the urge to buy an airline stock. I call at two in the morning and I say: “My name is Warren, and I’m an aeroholic.” And then they talk me down. “I have an 800 number now that I call if I get the urge to buy an airline stock. I call at two in the morning and I say: 'My name is Warren, and I’m an aeroholic.' And then they talk me down.” At the time of the interview, Buffett was referring to Berkshire Hathaway’s 1989 $358 million investment in convertible preferred stock of USAir – later renamed US Airways and now a part of American Airlines. (Convertible preferred stock are shares that can be converted into common stock under certain conditions.) Buffett wrote in a 2007 letter that US Airways tanked and stopped paying the preferred dividend soon after Berkshire’s investment.

Buffett is currently seventh on the Bloomberg Billionaires Index – a daily ranking of the world’s richest people. The index lists his net worth at roughly $73 billion... and he earned it all through investing. The “Oracle of Omaha” invests through his conglomerate holding company Berkshire Hathaway (BRK-B), which he took over in 1965. Since then, Buffett has generated a compound annual return of around 20% per year on average while managing Berkshire’s investments. Every $10,000 investment in Berkshire Hathaway at the start of 1965 was worth $274 million at the end of 2019. While he’s widely recognized as one of the greatest investors of all time, not every investment turns out well for Buffett. When the COVID-19 pandemic cropped up earlier this year, it crushed one of his biggest investment ideas. You see, Buffett has a problem... He’s a self- admitted “aeroholic.” As he told British newspaper The Telegraph in a September 2002 interview... If a capitalist had been present at Kittyhawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money. But seriously, the airline business has been extraordinary. It has eaten up capital

 CLICK HERE TO READ THE WEB VERSION

American Consequences

37

Made with FlippingBook Ebook Creator