Warren Buffett Warns Washington: Budgetary Excesses Threaten the American Economy

At 94 years old, the legendary investor uses his annual letter to shareholders to deliver a straightforward message to Washington: budgetary excesses and monetary instability threaten the American economy.

At 94 years old, Warren Buffett used his annual letter to shareholders to deliver a straightforward message to Washington: budgetary excesses and monetary instability threaten the American economy. This warning comes as Berkshire Hathaway reports spectacular financial performance, with a record profit and a historic cash reserve.

Thus, in a market where investment opportunities are becoming scarce, Buffett favors caution and prepares to hand over the reins to his designated successor, Greg Abel.

Buffett Warns Against Washington’s Budgetary Insanity

In his letter to shareholders, Buffett delivers an unequivocal message to Washington. He criticizes the growing budget deficits in the United States, which could worsen with the possible extension of tax cuts initiated under the Trump administration. “Fiscal craziness can destroy the value of paper money,” he warns, emphasizing the importance of prudent management of public finances. He reminds that the prosperity of the United States relies on a stable dollar and that monetary errors can have irreversible consequences.

As budget deficits explode and the debate on extending the Trump-era tax cuts rages, Buffett fears a weakening of the dollar. He urges Washington to maintain a stable economic framework and to ensure support for the most vulnerable populations: “take care of those who, through no fault of their own, draw the short straw in life. They deserve better.”

Berkshire Hathaway Reports Spectacular Financial Performance, Set to Pass on the Reins to Greg Abel

Berkshire Hathaway continues to assert its dominance in the markets. The year 2024 ends with a net profit of $89 billion, driven by strategic investments in Apple and American Express. Operating profit jumps by 27%, reaching $47.44 billion, a new peak for Buffett’s empire. In a context of high stock valuations, the company accumulates a record cash reserve of $334.2 billion, an unprecedented level. This accumulation reflects a cautious approach in a market deemed too expensive, where attractive investment opportunities are scarce.

Despite these spectacular results, Buffett remains cautious about investment prospects. He observes a shortage of attractive opportunities and notes that “often, nothing seems convincing,” and that the moments when he can massively deploy capital are becoming increasingly rare. This caution has translated into a partial sale of his stake in Apple, although the tech giant remains Berkshire Hathaway's largest investment. Such a strategy illustrates the methodical management of the conglomerate, which prefers to wait rather than overpay for inflated assets.

As he mentions his advanced age, Buffett is preparing to pass on Berkshire Hathaway to Greg Abel, his designated successor. He assures shareholders that Abel has “demonstrated his ability to allocate capital wisely,” thus ensuring a smooth transition. Furthermore, Buffett confirms his intention to increase Berkshire's investments in Japan, particularly in conglomerates like Mitsubishi and Itochu, as he believes these companies offer more attractive valuations than American stocks.

Takeaways From Buffett's Annual Letter to Shareholders

1. Public Debt and Monetary Stability: Buffett's warning about the public debt of the United States and the stability of the dollar could very well come to fruition if American budgetary excesses continue.

2. Berkshire Hathaway's Shift Towards Japan: As Buffett prepares for his succession and plans to allocate more capital in promising markets, his strategy will undoubtedly influence Berkshire Hathaway's future investment decisions.

3. Preparing for the Future: With an advanced age and the intention to pass on Berkshire Hathaway, Buffett's choices and commentary on his successor and the company's future direction hold great significance.