Warren Buffett came under fire for not getting out his elephant gun to make a big purchase during the market lows during the first half of 2020. Here’s how he explained it at the Berkshire Annual Meeting.

Risk Management

Buffett manages risk at Berkshire. He pointed out that the U.S. response to the pandemic was managed very well. Importantly though, it didn’t have to be. He saw a critical point as the intervention of the Fed on March 23rd 2020. Before that, companies were starting to pick up the phone and call Berkshire for help, after the Fed’s actions, help wasn’t needed. Then the fiscal reaction with the CARES Act was favorable too.

Buffett didn’t view this outcome as a certainty and viewed worse outcomes as possible. As much as he enjoys making money, he views it as more important that he doesn’t lose it and the range of potential outcomes early in COVID-19 was one reason he was cautious.

Airline Risk

The other thing that Buffett was concerned about was backstopping certain investments, specifically airlines. One major move that Berkshire made during 2020 was selling down airline stakes. Buffett explained that if Berkshire remained a major investor, then the airlines may have been less likely to get government support because the airlines could have looked to Berkshire for findings.


Berkshire also noted that the rise in SPAC activity is making it harder to source deals, for now. This is a trend that Buffett has seen in the past, but now is particularly pronounced given the number of SPACs seeking deals on a time-limited basis. Buffett’s partner, Charlie Munger, called this “fee driven money” because the deals may be done for fees rather than because they are good deals. Buffett shared that he still had funds in the tens of billions in Treasury bills that he’d like to put to work under better conditions.

Still, it appears implicitly that Buffett does not view the COVID-19 pandemic as Berkshire’s finest hour. He points out that Berkshire did repurchase substantial shares over 2020. It also seems that there were structural reasons from the actions of the Fed in providing massive funding, and the growth of SPACs, in chasing deals, that have cut deal flow to Berkshire over recent months.