Raphael Stevens

Warren Buffett walks the floor and meets with Berkshire Hathaway shareholders ahead of their annual meeting in Omaha, Nebraska on May 3rd, 2024. 
David A. Grogan

When Warren Buffett kicks off Berkshire Hathaway’s annual shareholder meeting on Saturday, the absence of Charlie Munger will be on everyone’s mind.
Some 30,000 rapt shareholders are descending on Omaha for what’s been called “Woodstock for Capitalists.” Pandemic lockdown apart, it will be the first without Munger, Buffett’s longtime partner who passed away in November about a month shy of his 100th birthday.

“The meeting will only have one comedian up there” this year, said David Kass, a finance professor at the University of Maryland and a Berkshire shareholder, who has attended more than 20 annual meetings. “There’ll be, let’s say, a more serious, less humorous background.”
The annual meeting will be exclusively broadcast on CNBC and livestreamed on CNBC.com. Our special coverage will begin Saturday at 9:30 a.m. ET. For the first time, Berkshire will broadcast its annual meeting movie that had previously always been reserved only for those in attendance in Omaha. Many speculate this year’s will be a tear-jerker tribute to Munger.
Vice Chairman of Non-Insurance Operations Greg Abel, Buffett’s designated successor, will fill Munger’s seat in the afternoon session, helping answer shareholder questions. Vice Chairman of Insurance Operations Ajit Jain will join Buffett, the CEO, and Abel in the morning session. Buffett has said they expect to field about 40 to 60 questions Saturday.
“The tone of the meeting is certainly going to be a lot different without Charlie,” said Steve Check, CEO of Check Capital Management and a longtime Berkshire shareholder. “He was the one that really made it funny. It’s getting closer and closer to the transition, so it’s good to see Ajit and Greg on the stage.”

Warren Buffett and Charlie Munger at a press conference during the Berkshire Hathaway Shareholders Meeting, April 30, 2022.

Munger’s investment philosophy rubbed off on Buffett early on, giving rise to the sprawling conglomerate worth $860 billion that Berkshire is today. Generations of investors also appreciated Munger’s trademark bluntness and humor, rare to come by on Wall Street.

If anything, the sea of Buffett admirers will cherish his folksy wisdom even more as the “Oracle of Omaha” turns 94 in less than four months.
Here are some of the big topics shareholders want Buffett to discuss:

Inflation: Price pressures have proved sticky lately. What impact is inflation having on Berkshire’s businesses? Which businesses are being hurt (and helped) the most?
Apple: Why did Berkshire trim its Apple stake in the fourth quarter? Investors will look for Buffett’s outlook on the tech stock given its challenges in China and recent news of a giant, $110-billion stock buyback.
Secret stock pick: Berkshire has been buying a financial stock for two quarters straight. What is it?
Record cash: Does Buffett plan to put his record level of cash to work?
A slowdown in buybacks: With Berkshire shares outperforming this year, will Buffett continue to slow down his own buyback program?
Life after Buffett: More details on Berkshire’s succession plan.

Macro commentary
The annual meeting comes at a tricky time for markets as a pickup in inflation puts the brakes on the Federal Reserve’s plan to cut interest rates this year. While the Berkshire CEO doesn’t make investment decisions based on daily headlines, investors still are eager to hear any market commentary and guidance from the protege of the father of value investing, Ben Graham.
“They don’t time their investments,” Kass said of Berkshire. “The economy goes through cycles. They totally ignore cycles. They invest for a long run, and they really ignore what pretty much what the Federal Reserve is doing. I believe that will be his answer.”
Apple
Shareholders may seek an explanation as to why Berkshire sold about 10 million Apple shares (1% of its massive stake) in the fourth quarter. At the end of 2023, Berkshire owned 905,560,000 shares of the iPhone maker, worth more than $174 billion and taking up more than 40% of the portfolio.
The move came as a surprise to many because Apple has been Buffett’s favorite stock for years, and he even called the tech giant his second-most important business after Berkshire’s cluster of insurers. What’s more, the last time Buffett trimmed this bet, he admitted it was “probably a mistake.’

Arrows pointing outwards

Shares of the iPhone maker got a big boost Friday after the firm announced that its board had authorized $110 billion in share repurchases, the largest in company history. However, Apple posted a decline in overall sales and in iPhone sales.
Secret holding
There’s a small chance that Buffett will reveal the identity of the mystery bank stock that Berkshire has been buying for two quarters straight.
In the third and fourth quarters of 2023, Berkshire requested that the Securities and Exchange Commission keep the details of one or more of its stock holdings confidential. Many speculated that the secret purchase could be a bank stock as the conglomerate’s cost basis for “banks, insurance, and finance” equity holdings jumped by around $2.37 billion.
“He will comment as late as possible…. Charlie would be the only one that would let it slip once in a while. It’s not going to happen with Warren,” Check said.
Succession
Berkshire’s succession could be front and center at this meeting after Munger’s passing. Abel, became known as Buffett’s heir apparent in 2021 after Munger inadvertently made the revelation.
Abel has been overseeing a major portion of Berkshire’s sprawling empire, including energy, railroad and retail. Buffett revealed previously that Abel’s taken on most of the responsibilities at Berkshire.
Still, some questions remain as to who will be helping allocate capital at Berkshire, and the roles of Buffett’s investing managers Ted Weschler and Todd Combs, who is also the CEO of Geico. More

Berkshire Hathaway, led by legendary investor Warren Buffett, has been making a confidential wager on the financial industry since the third quarter of last year.
The identify of the stock — or stocks — that Berkshire has been snapping up could be revealed Saturday at the company’s annual shareholder meeting in Omaha, Nebraska.
In a time when Buffett has been a net seller of stocks and lamented a dearth of opportunities capable of “truly moving the needle at Berkshire,” he has apparently found something he likes — and in the financial realm no less.

Warren Buffett tours the grounds at the Berkshire Hathaway Annual Shareholders Meeting in Omaha Nebraska.
David A. Grogan | CNBC

Berkshire Hathaway, led by legendary investor Warren Buffett, has been making a confidential wager on the financial industry since the third quarter of last year.
The identity of the stock — or stocks — that Berkshire has been snapping up could be revealed Saturday at the company’s annual shareholder meeting in Omaha, Nebraska.

That’s because unless Berkshire has been granted confidential treatment on the investment for a third quarter in a row, the stake will be disclosed in filings later this month. So the 93-year-old Berkshire CEO may decide to explain his rationale to the thousands of investors flocking to the gathering.
The bet, shrouded in mystery, has captivated Berkshire investors since it first appeared in disclosures late last year. At a time when Buffett has been a net seller of stocks and lamented a dearth of opportunities capable of “truly moving the needle at Berkshire,” he has apparently found something he likes — and in the financial realm no less.
That’s an area he has dialed back on in recent years over concerns about rising loan defaults. High interest rates have taken a toll on some financial players like regional U.S. banks, while making the yield on Berkshire’s cash pile in instruments like T-bills suddenly attractive.
“When you are the GOAT of investing, people are interested in what you think is good,” said Glenview Trust Co. Chief Investment Officer Bill Stone, using an acronym for greatest of all time. “What makes it even more exciting is that banks are in his circle of competence.”
Under Buffett, Berkshire has trounced the S&P 500 over nearly six decades with a 19.8% compounded annual gain, compared with the 10.2% yearly rise of the index.

Coverage note: The annual meeting will be exclusively broadcast on CNBC and livestreamed on CNBC.com. Our special coverage will begin Saturday at 9:30 a.m. ET.

Veiled bets

Berkshire requested anonymity for the trades because if the stock was known before the conglomerate finished building its position, others would plow into the stock as well, driving up the price, according to David Kass, a finance professor at the University of Maryland.
Buffett is said to control roughly 90% of Berkshire’s massive stock portfolio, leaving his deputies Todd Combs and Ted Weschler the rest, Kass said.
While investment disclosures give no clue as to what the stock could be, Stone, Kass and other Buffett watchers believe it is a multibillion-dollar wager on a financial name.
That’s because the cost basis of banks, insurers and finance stocks owned by the company jumped by $3.59 billion in the second half of last year, the only category to increase, according to separate Berkshire filings.
At the same time, Berkshire exited financial names by dumping insurers Markel and Globe Life, leading investors to estimate that the wager could be as large as $4 billion or $5 billion through the end of 2023. It’s unknown whether that bet was on one company or spread over multiple firms in an industry.

Schwab or Morgan Stanley?

If it were a classic Buffett bet — a big stake in a single company —  that stock would have to be a large one, with perhaps a $100 billion market capitalization. Holdings of at least 5% in publicly traded American companies trigger disclosure requirements.
Investors have been speculating for months about what the stock could be. Finance covers all manner of companies, from retail lenders to Wall Street brokers, payments companies and various sectors of insurance.
Charles Schwab or Morgan Stanley could fit the bill, according to James Shanahan, an Edward Jones analyst who covers banks and Berkshire Hathaway.
“Schwab was beaten down during the regional banking crisis last year, they had an issue where retail investors were trading out of cash into higher-yielding investments,” Shanahan said. “Nobody wanted to own that name last year, so Buffett could’ve bought as much as he wanted.”
Other names that have been circulated — JPMorgan Chase or BlackRock, for example, are possible, but may make less sense given valuations or business mix. Truist and other higher-quality regional banks might also fit Buffett’s parameters, as well as insurer AIG, Shanahan said, though their market capitalizations are smaller.

Buffett & banks

Berkshire has owned financial names for decades, and Buffett has stepped in to inject capital — and confidence — into the industry on multiple occasions.
Buffett served as CEO of a scandal-stricken Salomon Brothers in the early 1990s to help turn the company around. He pumped $5 billion into Goldman Sachs in 2008 and another $5 billion into Bank of America in 2011, ultimately becoming the latter’s largest shareholder.
But after loading up on lenders in 2018, from universal banks like JPMorgan to regional lenders like PNC Financial and U.S. Bank, he deeply pared his exposure to the sector in 2020 on concerns that the coronavirus pandemic would punish the industry.
Since then, he and his deputies have mostly avoided adding to his finance stakes, besides modest positions in Citigroup and Capital One.

‘Fear is contagious’

Last May, Buffett told shareholders to expect more turbulence in banking. He said Berkshire could deploy more capital in the industry, if needed.
“The situation in banking is very similar to what it’s always been in banking, which is that fear is contagious,” Buffett said. “Historically, sometimes the fear was justified, sometimes it wasn’t.”
Wherever he placed his bet, the move will be seen as a boost to the company, perhaps even the sector, given Buffett’s track record of identifying value.
It’s unclear how long regulators will allow Berkshire to shield its moves.
“I’m hopeful he’ll reveal the name and talk about the strategy behind it,” Shanahan said. “The SEC’s patience can wear out, at some point it’ll look like Berkshire’s getting favorable treatment.”
— CNBC’s Yun Li contributed to this report.

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Wealthy families are spending an average of $3 million to operate their private investing wings, known as family offices, according to a J.P. Morgan Private Bank report.
The biggest cost is staffing, which has become more expensive as family offices have tripled in number over the past five years.
That’s leading to competition for talent with banks, private equity firms and hedge funds.

Sdi Productions | E+ | Getty Images

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
The typical family office costs more than $3 million a year to operate, as competition for talent drives up staffing expenses, according to a new study.

Wealthy families are spending anywhere from $1 million to more than $10 million a year to operate their family offices, with the average now at around $3.2 million, according to the J.P. Morgan Private Bank Global Family Office Report released this week. While the costs vary widely depending on assets, experts say expenses are growing across the board as family offices explode in size and number and compete more directly with private equity, hedge funds and venture capital.
“There’s a real war for talent within family offices,” said William Sinclair, U.S. head of J.P. Morgan Private Bank’s Family Office Practice. “They’re competing for talent against private equity and hedge funds and banks.”
Smaller family offices spend less, of course. According to the report, which surveyed 190 family offices with average assets of $1.4 billion, family offices that manage less than $500 million spend an average of $1.5 million a year for operating costs. Family offices between $500 million and $1 billion spend an average of $2.7 million, and those above $1 billion average $6.1 million. Fifteen percent of family offices spend more than $7 million, while 8% spend more than $10 million.
The biggest cost is staffing, which has become more expensive as family offices have tripled in number over the past five years. Family offices are increasingly competing with one another for senior talent, according to recruiters.
More importantly, family offices are shifting more of their investments into alternatives, which include private equity, venture capital, real estate and hedge funds. According to the J.P. Morgan survey, U.S. family offices have more than 45% of their portfolios in alternatives, compared with 26% for stocks.

As they expand their reach into alternatives, they’re increasingly in direct competition with big private equity firms, venture capital firms and deal advisors to bring in top talent.
“We’ve seen over the last decade, the professionalization and institutionalization of the family office space,” said Trish Botoff, founder and managing principal of Botoff Consulting, which advises family offices on recruiting and staffing. “They’re building out their investments teams, hiring staff from other investment firms and private equity firms, so that has a huge impact on compensation.”
According to a family office survey conducted by Botoff Consulting, 57% of family offices plan to hire more staff in 2024 and nearly half are planning on extending raises of 5% or more to their existing staff. Experts say overall pay at family offices is up between 10% and 20% since 2019 due to frenzied demand for talent in 2021 and 2022.
The average compensation for a chief investment officer for a family office with less than $1 billion in assets is about $1 million, according to Botoff. The average comp for a CIO overseeing more than $10 billion is just under $2 million, she said. Botoff said more family offices are adding long-term incentive plans, such as deferred compensation, on top of their base salary and bonus, to sweeten the packages.
Competition is even driving up salaries for lower-level staff. Botoff said one family office she worked with was hiring a junior analyst who asked for $300,000 a year.
“The family office decided to wait a year,” she said.
Competition with private equity firms is getting especially costly. As more single-family offices do direct deals, buying stakes in private companies directly, they’re trying to lure talent from the big private equity firms such as KKR, Blackstone and Carlyle.
“It’s the biggest quandary,” said Paul Westall, co-founder of Agreus, the family office advisory and recruiting firm. “Family offices just can’t compete at a senior level with the big PE firms.”
Instead, Westall said, family offices are recruiting midlevel managers at PE firms and giving them more authority, better access to deals and higher pay. Family offices are now sometimes giving PE recruits a “carry” — meaning a share of the profit when a private company is sold — similar to PE firms.
He said better pay, access to billionaires and their networks, and the benefit of “not feeling like just a cog in a big wheel” are making family offices more attractive places to work.
“If you look back 15 years ago, family offices were where people went to retire and have work-life balance,” he said. “That’s all changed. Now they’re bringing in top talent and paying their people, and that’s pushed them into competition with the big firms and the banks.”
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A former Societe Generale trader who was fired for unauthorized risky bets has lambasted the French bank for making him a “scapegoat” and failing to take its share of responsibility.
Kavish Kataria, who was dismissed from the bank’s Delta One desk last year, said the profits and losses on his trades were reported on a daily basis to superiors in Hong Kong and Paris.
A SocGen spokesperson declined to comment on the post, but provided a statement on the dismissal and said the incident “didn’t generate any impact.”

A logo outside a Societe Generale SA office building in central Paris, France, on Monday, Feb. 5, 2024. 
Bloomberg | Bloomberg | Getty Images

A former Societe Generale trader who was fired for unauthorized risky bets has lambasted the French bank for making him a “scapegoat” and failing to take its share of responsibility for missing the trades.
Kavish Kataria, who was dismissed from the bank’s Delta One desk last year, said the profits and losses on his trades were reported on a daily basis to superiors on his Hong Kong team as well as those in the Paris head office, while a daily email about the transactions was also sent out.

“Instead of taking the responsibility of the lapse in their risk system and not identifying the trades at the right time they fired me and terminated my contract,” Kataria said in a LinkedIn post Thursday.
The comments come after SocGen confirmed earlier this week that Kataria and team head Kevin Ng were dismissed last year after an internal review of their transactions. A SocGen spokesperson declined to comment on the post, but provided a statement on the pair’s dismissal.
“Our strict control framework has allowed us to identify a one-off trading incident in 2023, which didn’t generate any impact and led to appropriate mending measures,” the statement said.
Although SocGen did not lose any money from the trades, losses could have spiraled into the hundreds of millions of dollars had there been a market downturn, a person familiar with the matter told the Financial Times.
Kataria had been dealing in options on Indian indexes, which he was not permitted to do, the person said. However, because most were intraday trades, they were not immediately detected, the FT reported.

Kataria said the trades were auto-booked and a “daily email was sent to the entire group mentioning the trades have been reconciled.”
“It’s very easy for other people to say that we were not aware of the trades done by me,” he wrote. “This means either you were not doing your job properly or either you were unfit for the same.”
Kataria joined the bank in Hong Kong in 2021 and claimed he made $50 million for the desk in the last eight months alone.
In his LinkedIn post, he called for better regulation after he was dismissed with seven days’ salary and his bonus for the previous year was withheld.
“Trading Industry is so big but there are no rules or regulations which fight for trader justice,” he said.
Risk management is a critical area of focus for banks, and SocGen remains scarred by the 4.9 billion euros ($5.2 billion) in losses accrued in 2008 by “rogue trader” Jerome Kerviel, who worked on the same derivatives desk as Kataria.
The French bank on Friday reported a lower-than-expected 22% slide in first-quarter net income, as profits on equity derivative sales offset weakness at its retail bank and fixed income trading. More

Adoption of battery and hybrid-powered cars has surged in China, but an onslaught of new models has fueled a price war, while regulatory scrutiny grows abroad.
“The speed of elimination will only pick up,” Feng Xingya, president at GAC, told reporters on the sidelines of the Beijing auto show in late April. That’s according to a CNBC translation of his Mandarin-language remarks.
“The difference today is that the overcapacity now has come together with vehicles that are very competitive,” said Stephen Dyer, co-leader of the Greater China Business at consulting firm AlixPartners, and Asia leader for its automotive and industrials practice.

Chinese new energy vehicle giant shows off the latest version of its Han electric sedan at the Beijing auto show on April 26, 2024.
CNBC | Evelyn Cheng

BEIJING — Chinese automakers, including state-owned auto giant GAC Group, can’t afford to take it easy in the country’s electric car boom if they want to survive.
Adoption of battery and hybrid-powered cars has surged in China, but an onslaught of new models has fueled a price war that’s forced Tesla to also cut its prices. While Chinese automakers also look overseas for growth, other countries are increasingly wary of the impact of the cars on domestic auto industries, requiring investment in local production. It’s now survival of the fittest in China’s already competitive EV market.

“The speed of elimination will only pick up,” Feng Xingya, president at GAC, told reporters on the sidelines of the Beijing auto show in late April. That’s according to a CNBC translation of his Mandarin-language remarks.
GAC slashed prices on its cars one week before the May 1 Labor Day holiday in China, Feng said, noting the price war contributed to its first-quarter sales slump. The automaker’s operating revenue fell year-on-year in the first quarter for the first time since 2020, according to Wind Information.
To stay competitive, Feng said GAC is partnering with tech companies such as Huawei, while working on in-house research and development. The automaker is the joint venture partner of Honda and Toyota in China, and has an electric car brand called Aion.

“In the short term, if your product isn’t good, then consumers won’t buy it,” Feng said. “You need to use the best tech and the best products to satisfy consumer needs. In the long term, you must have a core competitive edge.”

Expanding outside China

Like other automakers in China, GAC is also turning overseas. Domestic sales of new energy vehicles, which include battery-only and hybrid-powered cars, have slowed their pace of growth as of March, versus December, according to China Passenger Car Association data.

Last year, GAC revamped its overseas strategy with an ultimate goal of selling 1 million cars abroad — electric, hybrid and fuel-powered, Wei Haigang, general manager of GAC International, told CNBC in an interview last week.
The company still has a long way to go. It only exported about 50,000 cars last year, Wei said. But he said the goal is to double that to at least 100,000 vehicles this year, and reach 500,000 units by 2030 — with sales targets and strategies for different regions of the world, beginning with the Middle East and Mexico.
“We are now going all out to speed up our overseas expansion,” he said in Mandarin, translated by CNBC.
China’s overseas car sales surged last year, putting the country on par with Japan as the world’s largest exporter of cars. The EU and the U.S. have in the last year announced probes into China-made electric vehicles, amid efforts to encourage consumers to shift away from fuel-powered cars.

Factories go global

Part of GAC’s international strategy is to localize production, Wei said, noting the company is using a variety of approaches such as joint ventures and technology partnerships. He said GAC opened a factory in Malaysia in April and plans to open another in Thailand in June, with Egypt, Brazil and Turkey also under consideration.
GAC plans to establish eight subsidiaries this year, including in Amsterdam, Wei said. But the U.S. isn’t part of the company’s near-term overseas expansion plans, he said.

The difference today is that the overcapacity now has come together with vehicles that are very competitive

Stephen Dyer
AlixPartners, co-leader of the Greater China Business

U.S. and European officials have in recent months emphasized the need to address China’s “overcapacity,” which can be loosely defined as state-supported production of goods that exceeds demand. China has pushed back on such concerns and its Ministry of Commerce claimed that, from a global perspective, new energy faces a capacity shortage.
“There’s always been overcapacity in the Chinese auto industry,” said Stephen Dyer, co-leader of the Greater China business at consulting firm AlixPartners, and Asia leader for its automotive and industrials practice.
“The difference today is that the overcapacity now has come together with vehicles that are very competitive,” he told CNBC on the sidelines of the auto show. “So in our EV survey I was surprised to find that about 73% of U.S. consumers could recognize at least one Chinese EV brand. And Europe was close behind.”
Dyer expects that to drive overseas demand for Chinese electric cars. AlixPartners’ survey found that BYD had the highest brand recognition across the U.S. and major European countries, followed by Nio and Leap Motor.
BYD exported 242,000 cars last year and is also building factories overseas. The company’s sales are roughly split between hybrid and battery-powered vehicles. BYD no longer sells traditional fuel-powered passenger cars.

Tech competition

In addition to price, this year’s auto show in Beijing reflected how companies — Chinese and foreign — are competing on tech such as driver-assist software.
Chinese consumers placed almost twice as much importance on tech features compared with U.S. consumers, Dyer said, citing AlixPartners’ survey.
He noted how Chinese startups are so aggressive that a car may be sold with new tech, even if the software still has problems. “They know they can use over-the-air updates to rapidly fix bugs or add features as needed,” Dyer said.
Interest in tech doesn’t mean consumers are sold on battery-only cars. Dyer said that in the short term, consumers are still worried about driving range — meaning that hybrids are not only in demand, but often used without charging the battery.

Even Volkswagen is getting in on the “smart tech” race. The German auto giant revealed at the auto show its joint venture with Shanghai’s state-owned SAIC Motor teamed up with Chinese drone company DJI’s automotive unit to create a driver-assist system for the newly launched Tiguan L Pro.
The initial version of the SUV is fuel-powered, for which the company’s tagline is: “oil or electric, both are smart,” according to a CNBC translation of the Chinese.
Battery manufacturer CATL had a more prominent exhibition booth this year, likely in the hope of encouraging consumers to buy cars with its batteries, as competitors’ market share grows, said Zhong Shi, an analyst with the China Automobile Dealers Association.
Automotive chip companies Black Sesame and Horizon Robotics also had booths inside the main exhibition hall.

What customers want

Lotus Technology, a high-end U.K. car brand acquired by Geely, found in a survey of its customers their top requests were for automatic parking and battery charging, which would allow drivers to stay in the car.

That’s according to CFO Alexious Kuen Long Lee, who spoke with CNBC on the sidelines of the Beijing auto show. He noted the company now has robotic battery chargers in Shanghai.
Lotus and Nio last week also announced a strategic partnership on battery swapping and charging.
“I think there is a handing over of the baton where the Chinese brands are becoming much bigger and much stronger, and the foreign brands are still trying to decide what’s the best energy route,” said Lee, who’s worked in China since 1998. “Are they still deciding on the PHEV, are they still thinking about BEVs, are they still thinking about the internal combustion cars? The entire decision-making process becomes so complex, with so much resistance internally, that I think they’re just not being productive.”
But he thinks Lotus has found the right strategy by expanding its product line, and going straight to battery-powered cars. “Lotus today,” he said, “is similar to what international brands’ position [was] in China, probably back in 2000.” More