Maybe we’ll get a real banking crisis, after all?

I bet Warren Buffett will spend a lot of time answering questions about banks at the Berkshire Hathaway Annual Meeting tomorrow… and who knows, maybe he’ll also reveal that Berkshire has done something big to help save some regional banks, though that would be a surprise (as Charlie Munger noted in an FT interview recently, it’s pretty easy to see banks being an ugly investment right now, particularly those with a lot of commercial real estate exposure… and that’s a lot of what the regional banks do).

From that FT article:

“Berkshire has a long history of supporting US banks through periods of financial instability. The sprawling industrials-to-insurance behemoth invested $5bn in Goldman Sachs during the 2007-08 financial crisis and a similar sum in Bank of America in 2011.

“But the company has so far stayed on the sidelines of the current bout of turmoil, during which Silicon Valley Bank and Signature Bank collapsed. ‘Berkshire has made some bank investments that worked out very well for us,’ said Munger. ‘We’ve had some disappointment in banks, too. It’s not that damned easy to run a bank intelligently, there are a lot of temptations to do the wrong thing.’

“Their reticence stems in part from lurking risks in banks’ vast portfolios of commercial property loans. ‘A lot of real estate isn’t so good any more,’ Munger said. ‘We have a lot of troubled office buildings, a lot of troubled shopping centres, a lot of troubled other properties. There’s a lot of agony out there.'”

As I think I’ve noted a couple times as this year has slogged on, I’ve had one little mantra running through my head during this banking crisis (or mini-crisis, or whatever you want to call it): “Warren Buffett isn’t buying banks, so why the hell should you?”

Buffett probably knows more about banking than 99.9% of investors, and has historically loved investing in his favorite banks.  He reduced his exposure to banks in 2022, and hasn’t bought any bank shares this year that we know of, and certainly hasn’t done anything big in that sector just yet… so me being tempted by the fact that some smaller and regional banks that might survive and be OK are trading at wild discounts, well, that’s probably just knee-jerk stupidity. Thankfully, I haven’t actually followed through with that temptation and ...