Buffett stars at festival of finance
If there's a chink in the armour of Warren Buffett's insurance-to-chocolates conglomerate, it was left undiscovered at Saturday's Berkshire Hathaway annual meeting.
The meeting, known to the business and investment community as "Woodstock for Capitalists", drew what some suggested was close to a record crowd of about 40,000 to a stadium more used to concerts and sporting events, while Mr Buffett, 82, and his long-time business partner, 89-year-old Charlie Munger, answered questions from all comers for about 5½ hours.
Shareholders come from as far away as Australia, Europe and South America to the US midwest city of Omaha, Nebraska - Mr Buffett's home town and the headquarters of the business that is now the fifth-largest on the US stock exchanges by market capitalisation.
The event has something of a carnival feel, with shareholders lining up outside the stadium before dawn to secure the best seats, while inside is an exhibition hall full of products made by Berkshire Hathaway subsidiaries and available for sale - prompting Mr Buffett to joke that his is the only annual meeting that makes a profit.
In the question-and-answer session journalists, analysts and shareholders rotated to probe the thinking of the billionaire octogenarians on topics as broad as Berkshire Hathaway's paint business, succession plans and US tax and monetary policy. For the first time, Mr Buffett chose a Berkshire Hathaway "bear" - an analyst who had a short position in the company's stock - to grill him. (A short position delivers gains for the investor as the share price falls, suggesting a pessimistic view.)
The aim, unheard of at annual meetings, was to have the business probed by a less-than-friendly - though cordial - inquisitor. If fireworks were expected, they failed to materialise, as Mr Buffett and Mr Munger deftly addressed concerns raised by the bear - Doug Kass of Seabreeze Capital - and made him look a little silly in the process.
Mr Kass seemed unable to land any blows on the company, questioning the prices Berkshire pays and the board composition (Mr Buffett's son Howard will succeed him as non-executive chairman) and somewhat strangely trying to goad Mr Buffett into investing $US100 million in Mr Kass' short-selling managed fund as part of a bet Mr Kass could beat the market.
The two Berkshire Hathaway leaders dealt with each concern with relative ease - Mr Buffett pointing out that Berkshire had paid full prices before when the situation warranted it and that Howard Buffett would not have day-to-day control of the company. While Mr Buffett seemed to humour Mr Kass, Mr Munger seemed irritated - if energised - and took the last question, answering with a flat "No".
Mr Buffett and Mr Munger seemed in top form. They riffed on whether the current profit levels of US corporations were sustainable (possibly but not definitely), quantitative easing (the US Federal Reserve is doing a good job but depositors are suffering), buying newspapers (the returns will not be stellar but they like them) and whether the wide-ranging conglomerate should be broken up (another flat "No").
Questions still remain for Berkshire. While Mr Buffett dismissed most of them during the meeting, shareholders are still none the wiser about his hand-picked replacement and the extent to which Berkshire's huge size will affect returns (Mr Buffett has been predicting lower returns for almost 15 years now).
Mr Buffett and Mr Munger were also asked about the new would-be virtual currency, Bitcoin. Mr Munger replied: "I have no confidence in Bitcoin whatsoever."
The day concluded with a formal meeting, in which all directors were re-elected and one shareholder moved a motion requiring Berkshire to set goals for the reduction of greenhouse gases. The proposal was voted down, concluding another Woodstock for Capitalists.
The author owns shares in Berkshire Hathaway.