Wall Street Brunch: Bye Bye Buffett (NYSE:BRK.B)

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The Oracle of Omaha will cede the helm of Berkshire Hathaway this year. (0:17) The Fed is expected to hold rates steady this week. (3:03) Is this the start of a new bear market? (3:56)

The following is an abridged transcript:

It’s the end of the Warren Buffett era.

Berkshire Hathaway’s (NYSE:BRK.A)(NYSE:BRK.B) top boss said at the company’s annual shareholder’s meeting that he will ask the board to replace him as CEO with his already-chosen successor, Greg Abel, at the end of the year.

Though the actual succession wasn’t a surprise, the timing of it was. According to Buffett, only two of the company’s 11 directors – his children Howard and Susan – were aware of his plans. Buffett added that Abel was also hearing of this for the first time.

“The time has arrived where Greg should become the chief executive officer of the company at year-end,” Buffett said.

It has been almost sixty years since Buffett won control of Berkshire on May 10, 1965. Abel emerged as the front-runner for taking over Buffett’s job back in 2021.

Buffett said a board meeting on Sunday would kickstart the process before the directors.

“Let them have the time to think about what questions or what structures or anything they want, and then in the meeting following that, which will come in a few months, we’ll take action on whatever the view is of the 11 directors.”

“I think they’ll be unanimously in favor of it. And, that would mean that at year-end, Greg would be the chief executive officer of Berkshire,” he added.

As per Buffett, Abel would have the “final word” on operations, capital allocation and acquisitions. “He would be the chief executive, period,” the 94-year-old said.

Moreover, Buffett said he had “no intention, zero, of selling one share of Berkshire Hathaway.”

“This was probably a very tough decision for him – but better to leave on your own terms. I think there will be a concerted effort at Berkshire to maintain a ‘business as usual’ environment,” Catherine Seifert, analyst at CFRA, said. “There may be some uncertainty overhanging the shares as the market ponders this question: ‘How does Berkshire maintain the Buffet premium when Buffet’s no longer at the helm?'”

Looking ahead, it’s Fed week.

The FOMC will announce its latest interest rate decision on Wednesday, with the market pricing in a near-certainty of no move.

Wells Fargo economists say: “Although GDP came in soft in Q1, the underlying data do not signify a lull in economic activity. Job growth is steady, business investment sturdy and strong income growth continues to propel consumer spending.”

“That said, plenty of ‘soft’ indicators are trending in worrisome directions. Stock market indices are lower and corporate bond spreads wider than when the FOMC last met in March. Consumer surveys reveal mounting economic anxiety, while surveys of businesses point to rising input cost pressures and a hesitancy to invest.”

“With tariff policy still evolving, recent public comments place FOMC members squarely in “wait-and-see” mode while economic developments unfold,” they added. “Our hunch is, once tariffs do start to influence hard economic data, the hit to U.S. economic growth and the labor market will induce the FOMC to lower rates even in the face of higher inflation.”

On the earnings calendar:

Ford (F), Disney (DIS), AMD (AMD), Palantir (PLTR) and Novo Nordisk (NVO) are the big names.

• On Monday, Ford and Palantir and joined by Vertex (VRTX), Realty Income (O) and Cummins (CMI).
• Joining AMD on the Tuesday are Arista Networks (ANET), Ferrari (RACE), TransDigm (TDG) and Zoetis (ZTS).
• Disney and Novo Nordisk report on Wednesday with Arm Holding (ARM), AppLovin (APP) and Emerson Electric (EMR).
• Shopify (SHOP), ConocoPhillips (COP), McKesson (MCK), Coinbase Global (COIN), and Cheniere Energy (LNG) weigh in on Thursday.
• Plains All American Pipeline (PAA), Dr Reddy’s Laboratories (RDY), Essent Group (ESNT), TXNM Energy (TXNM) and Construction Partners (ROAD) issue numbers Friday.

For income investors, Citigroup (C) goes ex-dividend on Monday, paying out on May 23.

Las Vegas Sands (LVS) goes ex-dividend on Tuesday, with a May 14 payout date.

JB Hunt (JBHT) and Pfizer (PFE) go ex-dividend on Friday. JB Hunt pays out on May 23 and Pfizer pays out on June 13.

And in the Wall Street Research Corner, Marko Kolanovic — former head global strategist at J.P. Morgan who also happens to have a PhD. In theoretical physics – states his case for a New Bear Market.

Writing in the financial blog The Last Bear Standing, Kolanovic said that markets have entered a “protracted bear market” with a “very high” probability of a recession ahead.

He says the S&P could fall around 20% from current levels, with “substantial” downside risk remaining.

“Current market prices assume an optimistic resolution to significant economic, political, and geopolitical challenges,” Kolanovic said.

His 3 pillars for the New Bear Market are:

1. Macroeconomic risk: “Growth is sputtering: Real GDP is decelerating, credit stress is growing, consumer sentiment hovers near a 70-year low, and factory surveys flash bright red. These cracks, formed before the latest policy shocks, have been split wide open.”
2. Policy risk: “Washington has flipped the script on globalization: Tariffs have halted Chinese goods and alienated allies, while shocking ports, supply chains and prices. The fiscal impulse has reversed.”
3. Market risk: “The foundation is brittle: Valuations assume earnings growth that no sober model supports. Leverage in ETFs and options will serve to shatter the glass house they helped construct. Complacency sets the stage for a slide worse than 2022’s shake-out.”

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