Don't listen to Buffett, heed what he does

The coronavirus pandemic has changed so much that even the Oracle of Omaha - who, for years, has met his fans face-to-face during Berkshire Hathaway's shareholder meeting - had to be connected with them via remote conferencing technology.

The arrangement was a tiny bit ironic because Warren Buffett - who only recently gave up his flip phone for an iPhone - has never been fond of the new economy.

With the exception of Apple, his flagship vehicle Berkshire Hathaway has mainly committed to traditional businesses like insurance and railways. And let's not forget Kraft cheese and Coca Cola.

So it's not surprisingly that, as others catch up fast to invest in Amazon and Facebook, the 89-year-old is just learning how to use a smart phone.

But the generation gap does not stop Buffett from seeing a fundamental shift in consumer behavior due to the pandemic.

He told his investors on Saturday evening that the company had sold all its stakes in major US airlines - including United, American, Southwest and Delta - and that, even if life returned to as normal as possible after the pandemic, people would fly fewer miles than before.

The billionaire never considers himself a trader who buys stocks to sell them for a windfall. Rather, he invests in companies and treats them as businesses.

So, was his caution about a change in consumer behaviours also a warning of some kind of paradigm shift that could rewrite the economy that we've grown so used to?

Nobody has a crystal ball - not even Buffett - but it's the consensus that things won't be the same again after all that's happened.

Stock markets have rebounded substantially from their first pandemic leg. A pertinent question is whether a second leg will follow to find the bottom after the pandemic recedes and governments lift lockdowns here and elsewhere.

While Buffett reiterated his commitment to America, his action - or to be accurate, lack of action - seems to suggest otherwise. With US$137 billion (HK$1,062 billion) in cash in Berkshire Hathaway's reserves, he has been shying away from acquisitions of late despite the recent crash. Why?

Nonetheless, despite his warning that the drastic reduction in the interest rate to zero and unlimited quantitative easing by the US Federal Reserve are bound to create new problems for years to come, there is no better alternative than QE to preempt a collapse in the economic structure.

For the time being, the concept of dollar-cost-averaging - a so-called winning idea touted by Buffett in earlier days - may still apply. At a time markets are inundated with excessive liquidity, would it be more dangerous than cautious to be speculative with short positions? There are problems down the road; deal with them later.

Better still, keep your powder dry. Wait to see what Buffett actually does, not what he speaks.