Warren Buffett's Advice for a Donald Trump Presidency
More than half of Americans say they are either "concerned" or "scared" about Donald Trump as President of the United States. There are several reasons for this -- for example, many people worry about Trump's divisive rhetoric or lack of political experience. One big area of concern is the economy, so if you're worried, here's some advice from Warren Buffett that can help put things into perspective.
An outspoken Clinton supporter
Warren Buffett has made no big secret of who he supported for president, and it certainly wasn't Donald Trump. Buffett has campaigned for Clinton, participated in her rallies, and has had some particularly harsh words condemning Trump's actions and proposed policies.
He called Trump out on his refusal to release his tax returns, saying that he was under audit as well, and would gladly release his returns if Trump would do the same.
He even spent election day shuttling Omaha voters to their polling places on a trolley. A Trump presidency was definitely not what Warren Buffett wanted to see. However, that doesn't mean that Buffett is worried for America -- at least from an economic point of view.
A threat to American business? Don't bet on it.
During Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) 2016 annual meeting, Warren Buffett responded to a question that asked whether a Trump presidency would pose a threat to Berkshire's business. Buffett didn't specifically address the potential effects of Trump on Berkshire, simply saying "That won't be the main problem."
Buffett went on to say that Berkshire has done just fine in a variety of political and economic climates, and that it would continue to do so. "We've operated under price controls, we've had 52% federal taxes applied to our earnings... we've had regulations come along," Buffett said. "I will predict that if either Donald Trump or Hillary Clinton become president Berkshire will do fine."
"The luckiest crop in history"
In his most recent letter to shareholders (well before the election), Buffett discussed the overall negative tone of this years' campaigns, and how many Americans believe their children won't do as well as they have.
Buffett says nothing could be further from the truth. "The babies being born in America today are the luckiest crop in history." He went on to discuss how dramatically the standard of living for Americans has changed in his lifetime -- in real terms, per-capita GDP is six times greater than in the year Buffett was born. People today take luxuries for granted that even the wealthiest Americans couldn't dream of.
While the recent GDP growth rate of around 2% per year is admittedly low, even such a small growth rate would produce some pretty impressive growth over time. I'll spare you the mathematical details of Buffett's calculation, but even adjusting for population growth and inflation, this "sluggish" growth rate would produce per capita real GDP growth of 34.4% in 25 years. Standards of living will increase, even with less-than-stellar growth. As Buffett put it, "Today's politicians need not shed tears for tomorrow's children."
As a final thought, Buffett said that "For 240 years it's been a terrible mistake to bet against America, and now is no time to start."
Although your 401(k) and stock portfolio could take a hit in the days and weeks following Trump's election, Warren Buffett is confident that the economy will continue to grow and America will continue to innovate. In a nutshell, Buffett's message to Americans who didn't necessarily want to see Donald Trump in the White House is to relax -- America is going to be just fine.
What will Buffett do now?
In the letter to shareholders, Buffett pledged to keep doing what he does best. He and the rest of Berkshire's team will continue to improve the earnings power of its subsidiaries, acquire more businesses, and repurchase Berkshire shares when it makes good financial sense to do so.
If anything, I believe that Buffett would view a post-election stock market sell-off as a buying opportunity, and I would not be surprised to see Buffett scoop up some stocks at a discount during the fourth quarter. There's no way of knowing exactly what Buffett will do, but he has a history of taking advantage of market weakness, preferring to take the long-term view on investing as opposed to the effect of a single recession, correction, global event, or newly elected U.S. president.
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Matthew Frankel owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.