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The path ahead for U.S. stocks in 2023 is far from clear but Warren Buffett certainly sees no need to panic.
Buffett once said he “attempts to be fearful when others are greedy and to be greedy only when others are fearful.”
Well, he’s neither fearful nor greedy at the moment it seems, as Berkshire Hathaway did very little in the way of buying and selling at the end of last year.
His conglomerate didn’t open any new positions in companies and its selling was targeted to certain stocks, such as Taiwan Semiconductor and U.S. Bancorp.
That may suggest Buffett isn’t expecting a severe recession ahead—he has long advised investors to approach recessions or downturns as an opportunity to buy good companies.
Unfortunately, investors will have to wait until later in the month for any market or economic insights from the billionaire, when he is set to release his annual shareholder letter.
Maybe he sees the chances of a recession fading. He wouldn’t be the only one.
U.S. inflation fell for a seventh consecutive month in January, which, against the backdrop of a strong jobs market, suggests a soft landing scenario for the economy is back on the table.
But the Federal Reserve’s job isn’t over. The consumer price index fell to an annual rate of 6.4% in January, down from December’s 6.5%, but a smaller-than-expected decline.
The Fed probably needed to see more to start thinking about stopping interest rate hikes soon. So, for now, markets are likely to remain under pressure.
—Callum Keown
*** Join MarketWatch reporter Emma Ockerman and Mechele Dickerson, law professor at the University of Texas at Austin School of Law, today at noon when they discuss the ways in which Black Americans were systemically cut off from homeownership, the structural issues that continue to bar access to housing today, and the pandemic’s effects on homeownership among people of color. Sign up here.
Try your hand at this morning’s Barron’s Daily crossword puzzle and sudoku games. For all games, including a digital jigsaw based on the week’s cover story, click here.
***
Berkshire Hathaway Cuts Stake in Taiwan Semi
Warren Buffett’s
Berkshire Hathaway
sold more shares than it bought in the fourth quarter and didn’t take on any new positions. Instead, Berkshire slashed its stake in
Taiwan Semiconductor Manufacturing
during the fourth quarter and nearly eliminated its previously large stake in
U.S. Bancorp
.
- Berkshire Hathaway reduced its interest in Taiwan Semiconductor to 8.3 million shares in the fourth quarter, from 60 million shares the prior quarter, and its stake in U.S. Bancorp to 6.7 million shares from 52.5 million shares. Taiwan Semiconductor’s shares fell 3.3% in late trading.
- It slashed its Taiwan Semiconductor stake just after increasing its position to $4.2 billion by the end of the third quarter. Berkshire likely made a profit, given the chip maker’s stock gained about 10% in the fourth quarter, but Berkshire missed out on big gains in the current quarter.
-
Berkshire increased its stake in
Apple
to 5.8%. It said in a separate filing that it owned 895.1 million shares of Apple as of Dec. 31, up roughly 300,000 shares and likely reflecting the inclusion of Apple stock held by insurer Alleghany. Apple’s shares have risen 10.6% since the third quarter. -
Berkshire disclosed increased stakes in
Louisiana-Pacific
andOccidental Petroleum
from the third quarter. It decreased its positions inActivision Blizzard
andAlly Financial
.
What’s Next: Buffett has historically released his annual shareholder letter later in February and is expected to do so for 2022. The letter often provides extra wisdom about his views on the economy and market conditions.
—Andrew Bary and Janet H. Cho
***
Boeing and Airbus Land Biggest Commercial Plane Deal
Boeing
and rival plane maker
Airbus
have sealed the biggest commercial aircraft deal in aviation history, arranging the combined sale of nearly 500 planes to Air India. Carriers are upgrading their fleets amid a rebound in air travel.
- Air India is buying 220 Boeing aircraft, including its 737 MAX jets, 787 Dreamliners, and 777Xs, with options for another 70. Based on list prices, the Boeing order would be for $45.9 billion, but airlines usually get discounts, The Wall Street Journal reported. Air India is also buying 250 Airbus jets.
- Airbus will deliver its first A350s to Air India later this year. Air India, owned by India’s Tata Group, spent months negotiating the twin deals. It wants to win back business it has lost to Gulf rivals including Qatar Airways and Emirates, the Journal reported.
- President Joe Biden announced the Boeing part of the deal from the White House, saying it will support one million jobs in 44 states. It’s a potential boon for parts suppliers. GE Aerospace will provide jet engines for Boeing aircraft in the deal, Air India said in a statement.
- Boeing projects India will be the world’s fastest-growing aviation market, requiring about 2,210 new aircraft over the next 20 years. Airbus’s A350 wide-body jets had been headed to PJSC Aeroflot — Russian Airlines before Russia’s invasion of Ukraine resulted in sanctions on aircraft sales, the Journal reported.
What’s Next: Boeing aims to increase production of its 737 MAX planes to 50 a month in 2025 or 2026. The aviation company’s chief financial officer, Brian West, is scheduled to provide an update during
Cowen
’s
aerospace and defense conference later this morning.
—Janet H. Cho
***
Airbnb Has First Profitable Year After Strong Travel Demand
Airbnb
reported its first profitable year in 2022, benefiting from an increase in cross-border travel during the holiday period despite high inflation. Strong travel demand is boosting results at the short-term rental site as Americans took advantage of a strong dollar to venture overseas.
- Airbnb’s stock jumped 11% late Tuesday. For the year 2022, revenue rose 40%. For the fourth quarter, revenue rose 24% from the year-ago period, beating its own guidance and Wall Street forecasts. Nights and experiences bookings increased 20%.
- Airbnb expects average daily rates will fall in the first quarter and for 2023 as a whole because of the mix of rental supply across different regions and affordability efforts. Its shareholder letter references “new and improved” pricing and discounting tools.
-
Travel booking site
Tripadvisor
’s
shares climbed 5.9% late Tuesday after it said fourth-quarter revenue surged 47% amid strong demand for city tours and hotel stays, beating expectations. Adjusted earnings came in at 16 cents a share, above estimates of 4 cents a share. -
Separately,
Marriott International
beat fourth-quarter earnings estimates and offered upbeat 2023 guidance amid robust bookings. Revenue per available room rose 5% compared with pre-pandemic 2019 levels, and was 29% higher than the fourth quarter of 2021.
What’s Next: Airbnb is forecasting first-quarter revenue in a range of $1.75 billion to $1.82 billion, which would beat the expectations of analysts for around $1.7 billion.
—Janet H. Cho
***
Musk Won’t Appoint a Twitter CEO Until Year-End
Elon Musk says he will wait until the end of the year to appoint a new chief executive for Twitter. The billionaire, who is also the CEO of
Tesla
,
said he needed to stabilize the social-media platform before fulfilling his previous commitment to appoint a successor.
- “I don’t know, I’m guessing probably toward the end of this year should be good timing to find someone else to run the company,” Musk said, while speaking remotely at the World Government Summit in Dubai on Wednesday.
- Some prominent shareholders in Tesla had pushed for someone else to helm Twitter sooner rather than later, as the car maker’s stock fell. However, Tesla’s stock has rebounded sharply in recent weeks, potentially relieving pressure on Musk.
- Separately, filings on Tuesday showed that Musk donated roughly $1.9 billion of Tesla stock to charity last year. Musk now owns around 13% of Tesla, having sold around $23 billion of his holdings in the car company throughout 2022.
What’s Next: Tesla is holding an investor event on March 1 where shareholders will get a chance to judge Musk’s focus on the car maker. Speculation is that he could unveil plans for the long-awaited $25,000 electric vehicle.
—Adam Clark
***
Consumer Prices Still Rising. What BofA’s CEO Sees Ahead.
Food inflation has been on everyone’s minds and pressure on American wallets hasn’t subsided. Food prices rose 10.1% in January from one year ago, according to Tuesday’s consumer price index. Cereals and bakery product prices rose 15.6%, meats, poultry, fish and eggs rose 8.1%, and dairy rose 14%.
- Going out instead of eating at home is also more expensive. The price of full service meals and snacks away from home rose 8.1%, according to the Bureau of Labor Statistics. Limited service meals and snacks cost 6.7% more than one year ago.
- The price of used cars and trucks, however, fell 11.6% in the 12-months through January, and the price of bacon and related products is down 3.9% while uncooked beef steaks cost 3% less than a year ago.
-
January’s consumer price index rose 6.4% for the year, more than expected but the seventh straight monthly decline.
Bank of America
CEO Brian Moynihan told Barron’s that the clear trend is “inflation is peaking.” He added: “These month-to-month data sets are going to bounce around a little bit.” - Moynihan has visibility into the economy as head of the second-biggest U.S. bank. On the consumer side, mortgage activity slowed down as rates went up but credit card usage is similar to pre-pandemic levels. Bank of America expects overall loan growth to be in the mid-single digits this year.
What’s Next: Bank of America expects a recession in 2023, starting later this year and lasting for about three quarters. The bank originally expected it to start in late 2022. A delayed recession is a result of a strong American consumer, Moynihan said.
—Liz Moyer and Carleton English
***
Dear Quentin,
After a terrible battle with dementia, my grandmother died a few weeks ago. She did not leave much, but I will—along with my siblings—receive about $40,000 in life-insurance. I am trying to figure out how to best handle it.
I have some credit-card debt that was incurred during a period of unemployment during the pandemic. My spouse and I have student-loan debt. His debt will be paid off within the next year, while mine still has quite a few years left.
We have two middle-school children. We have college accounts for them, but they are not nearly enough. We have pretty well-funded retirement accounts for both of us. We have a mortgage that probably has about 15 years left.
We also have a very old house that really needs some work. We have not really looked into investments but are open to them. So we are trying to figure out what to do with this money.
We are almost positive it is smart to pay off our credit-card debt in full. But we will still have almost $30,000 left to work with after we do so. We would like to work on the house, but is that the smartest financial move?
Should we put more into the college accounts or try to pay off the student loans instead?
Thank you.
—Granddaughter, Wife, Mother
Read The Moneyist’s response here.
—Quentin Fottrell
***
—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner
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