Woodstock for Capitalists


LTphoto1_touchedUp_smallLast month, I made the pilgrimage for the first time.  My CIFA (Council of Independent Financial Advisors) “study group” of 13 owners of prominent financial advisory firms from around the country held its bi-annual meeting in Omaha so that we could also attend the annual meeting of Berkshire Hathaway to hear Chair Warren Buffett (age 79) and Vice-Chair Charlie Munger (age 86) speak.  It was quite a memorable experience seeing them live.

The annual shareholder meeting attracts investors from around the globe and there are related events that go on for several days.  There are trips to Dairy Queen and the Nebraska Furniture Mart, both Berkshire holdings.  There is a shareholder shopping night at another Berkshire subsidiary, Borsheim’s jewelry store, offering a 20% discount – and a full no-host bar and band.  It’s no surprise that the mood is very upbeat, which probably also speaks to the demographic of the shareholder base of a stock that sells for $120,000 a share!  (For the less well-heeled, the “Baby Berkshire” Class B stock is available for about $80 a share.)

Approximately 50,000 filled the Qwest Center in downtown Omaha for the main event – the annual meeting itself.  Berkshire is a holding company with about 50 diverse wholly-owned subsidiaries and many significant majority and minority holdings as well.  With well-recognized names like Geico, Burlington Northern and Fruit of the Loom, Berkshire owns companies across many industries. Adjacent to the Qwest Center is a huge exhibit hall where most of the Berkshire companies are represented, many selling their products and offering discounts.  It’s quite a party, but you really get a sense of the extraordinary domestic and international reach of Berkshire, Buffett and co.

For about six hours straight, Buffett and Munger answered questions that came alternatively from the erudite financial press panel and the audience members who had to win a lottery to ask a question.  Buffett and Munger were not given any of the questions ahead of time.  Both of them sat in front of the microphones munching See’s candy (another Berkshire subsidiary) and delivered non-stop brilliant, incisive and often, humorous answers to questions that ranged from the very sophisticated to the more philosophical and practical.  The range of issues addressed spanned about every topic you could imagine.  It was quite impressive – and entertaining!

Here are just a few sound bites:

On tax policy:

“If you want to give away all of your money to charity, it’s a great tax dodge.” – Warren Buffet

On regulation:

“It’s hard to keep people disciplined when there are no penalties for the undisciplined.” – Warren Buffett

On the downfall of newspapers and investigative journalism in a post-Internet world:

“The politicians are not behaving better as the newspapers are weakening.” – Charlie Munger

On Buffett’s time management:

One questioner asked if frequently appearing on TV was the best use of his time for shareholders. “Probably not. Lots of things I do aren’t a good use of my time for shareholders. I play bridge on the Internet 12 hours a week.” – Warren Buffett

On Harley Davidson, a company Berkshire invested in:

“You have to love a company whose customers tattoo its name on their chests.” – Warren Buffett

On happiness:

“The secret to happiness is to lower your expectations.” – Charlie Munger

On inflation:

“Your talent at your job is your best hedge against inflation.” – Warren Buffett

On optimism:

One questioner asked how they can say they’re optimistic while concurrently saying that they expect higher inflation going forward and are worried about the deficit.  “I can be optimistic when I’m nearly dead, surely you people can handle a little inflation.” – Charlie Munger

Of course, there was much detailed discussion of the Berkshire companies, the markets, and the economy.  Overall, Buffet was fairly upbeat about the U.S. economy and favored the domestic stock market over other alternatives.  Their approach is to buy good value and not to try to time the market.

The Berkshire success story and the values preached by Buffett and Munger are universal and timeless.  When asked to describe their fundamental, overarching belief, Munger immediately answered, “Pragmatism.  We are demonstrating the fundamental algorithm of life…repeat what works.” Their core values of honesty, transparency, patience and loyalty were also clearly on display throughout the annual meeting.

The trip to Omaha was very worthwhile and one I hope to make again while these two are still around to put on the show.

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