Buffett says debt default would spark turmoil, has confidence in U.S.

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(Recasts first paragraph; adds comments from Buffett, Munger and Abel throughout)

By Jonathan Stempel, Carolina Mandl and John McCrank

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OMAHA/NEW YORK, May 6 (Reuters) –

Warren Buffett on Saturday offered a vote of confidence in the United States, saying he could not imagine the government letting it default on its debt and risk letting the world’s financial system “go into turmoil.”

Speaking at Berkshire Hathaway Inc’s annual meeting in downtown Omaha, Buffett also said it would have been “catastrophic” for regulators not to step in to protect depositors of Silicon Valley Bank, which was seized in March after a bank run.

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But he said Berkshire is well-positioned, as rising interest rates help its insurance units generate more income from investments, even as partnership in Washington deteriorates into a form of “tribalism” where people talk past each other.

“We have to refine, in a certain way, our democracy as we go along,” he said. “But if I still had a choice, I would want to be born in the United States. It is a better world than we’ve ever had.”

The comments came hours after Berkshire posted a big jump in quarterly profit and said it bought back $4.4 billion of its own stock, a sign it considered the shares undervalued. In contrast, it sold $13.3 billion of other companies’ stocks.

Buffett, 92, who is Berkshire’s chairman and chief executive, and Charlie Munger, 99, a vice chairman, are answering five hours of shareholder questions at the meeting.

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Vice Chairman Greg Abel, 60, who would become CEO if Buffett were no longer in charge, and Vice Chairman Ajit Jain, 71, are also taking some questions.

Buffett, the world’s sixth-richest person, has run Berkshire since 1965. The company now owns dozens of businesses including Geico car insurance and the BNSF railroad, and recently owned $328 billion of stocks including Apple Inc.

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Saturday’s meeting is the centerpiece of a weekend Buffett calls “Woodstock for Capitalists” that draws tens of thousands of people to Omaha.

Attendance is up significantly from last year, with Berkshire receiving ticket requests from 45 countries.

Unlike in 2022, the downtown Omaha arena hosting the meeting was filled to capacity.

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Berkshire also issued first-quarter results on Saturday.

Net income increased more than sixfold to $35.5 billion, largely reflecting gains from Berkshire’s stock holdings including Apple Inc, as well as higher income from investments and a performance rebound at the Geico car insurer.

GET USED TO LESS

In discussing Berkshire’s performance, Buffett said perhaps a majority of its operating businesses may fare worse in 2023 than in 2022 as economic activity slows, but this can be offset by rising investment income.

He said it added $7 billion of Treasury bills in April, and recently bought another $3 billion yielding close to 6%.

Munger said Berkshire is unlikely to make a major foray into artificial intelligence, saying “old-fashioned intelligence works pretty well.”

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But he also said value investors such as himself, Buffett and many of their fans “should get used to making less” in part because so many investors are following similar strategies, prompting muffled groans from the audience.

Abel also said BNSF, which he oversees, is taking steps to reassure customers following a recent spate industrywide of train derailments.

WAITING ON LINE

Prior to the meeting, dozens of uniform-clad pilots at Berkshire-owned NetJets demonstrated outside the arena, protesting low pay, long hours and fatigue.

Thousands more lined up outside the arena before its 7 a.m. CDT (1200 GMT) opening, often to get seats close to the stage.

Many recognized it could be one of their last chances to see Buffett and Munger, given their advanced ages.

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Vidhya Vivekananda, an investment associate from Vancouver, said she and her husband showed up 30 minutes earlier for their first meeting.

“It has been on our bucket list for a long time,” she said. “We don’t know how long it will be with Warren and Charlie before they pass it on.”

Yongsheng Zhao, who lives in Shanghai and is a researcher for an asset management firm, said he showed up at midnight to attend his eighth Berkshire meeting. He brought his own chair.

“I am inspired by their passion and normalcy,” he said, referring to Buffett and Munger. “I would hope they can go another five years, or more.”

(Reporting by Jonathan Stempel in Omaha, Nebraska; additional reporting by Carolina Mandl and John McCrank in New York; Editing by Megan Davies, Ira Iosebashvili and Diane Craft)