Warren Buffett comforted investors until he described selling

It was very comforting last weekend to hear Warren Buffett from the stage of the Berkshire Hathaway annual shareholders meeting in Omaha, even though no one could attend this year and he was coming through an iPad perched on a couch arm.

Buffett still had the same folksy charm and was still gently poking fun at himself. He started off the webcast exploring one of his favorite themes, too, the amazing economic vitality of this country.

Yet the sense of well-being started leaking away as one of the world's most famous investors had to switch from the long-term promise of American business to more down-to-earth topics, such as Berkshire selling its holdings in major airlines.

Buffett can't be blamed for talking about Berkshire Hathaway at an annual meeting of its shareholders, of course. It wasn't a TED Talk or revival meeting. But in one of the most uncertain periods in our long history, here was one of the greats of long-term investing talking about selling.

He clearly doesn't know how much the world we knew is being changed by the COVID-19 pandemic, but it was sobering to realize he had already concluded that the airlines likely won't be the same.

I admit I could have had unreasonable expectations of Buffett when looking forward to the annual meeting of Berkshire Hathaway. Even in ordinary times, the meeting in May is a must-attend event for lots of Minnesotans. I've made the trip to Omaha with a group that never misses.

Tens of thousands usually gather there, completely filling a large, NBA-style arena downtown along with thousands more following along in nearby ballrooms. The highlight is the Q&A session with Buffett and his longtime partner Charlie Munger, who lives in California and also didn't make the trip.

For those who have never understood the appeal of Buffett or the Berkshire Hathaway story, part of it is simply its remarkable longevity. Buffett took control of Berkshire in 1965.

Now 89, on Saturday Buffett explained that he has enjoyed a tailwind for nearly his whole career. All folks would have had to do when he was starting out to earn 100 times their money was buy what he termed "a cross-section of America" in the form of broadly diversified stocks, then do nothing.

"You didn't have to read the Wall Street Journal," he said. "You didn't have to look up the price of your stock. You didn't have to pay a lot of money in fees to anybody. You just had to believe that the American miracle was intact."

Buffett decided to talk at length about selling Berkshire's holdings in the four biggest U.S. airlines — American, Delta, Southwest and United — because he didn't want this decision to look like he had made some sort of call on the stock market.

It was a decision about one industry. "I just decided I'd made a mistake," he said, with characteristic candor.

Berkshire's airline investments first made news in the fall of 2016, and altogether Berkshire had spent $7 billion to $8 billion for 8% to 10% or so of the stock of four major carriers.

And, Buffett continued, he thought Berkshire was getting a roughly $1 billion share of annual airline earnings in return.

The industry has been crippled by the pandemic, and the open question is what demand for air travel will look like after the pandemic recedes.

"The airline business — and I may be wrong, and I hope I'm wrong — but I think it changed in a very major way," Buffett said.

What he's suggesting is that a lot of customers may not quickly return, whether to fly to a business conference or a vacation getaway. As Buffett pointed out, if the demand returns to 70% or 80% of its pre-pandemic normal, the industry will have far too many planes.

One part of the explanation could be read as good news, that unlike in the 2008 Great Recession when Berkshire injected capital into companies like General Electric Co., Berkshire hasn't yet become a funder of last resort. So far the market — with Federal Reserve and other government support — has met those needs.

Yet one of Buffett's first questioners Saturday wondered how Buffett could sketch out the great long-term opportunity for investing in American business even as Berkshire continued to hold so much cash.

Part of his response is that Berkshire has big insurance operations, which could need money to cover highly improbable but still possible losses like from an awful hurricane or earthquake.

But he had already carefully explained the cash position, even talking about the character Blanche DuBois from the classic play "A Streetcar Named Desire." She famously remarked that she had always depended on the kindness of strangers. Berkshire, Buffett said, keeps that much cash because he doesn't want to rely on the kindness even of friends.

So as Saturday evening wound down, and shareholders didn't quite hear from Buffett that everything is going to be just fine, they did hear something they could count on amid so much other uncertainty.