April 30, 2011, 8:08 am Berkshire Meeting 2011
Live Blogging the Berkshire Annual Meeting
By MICHAEL J. DE LA MERCED
http://dealbook.nytimes.com/2011/04/30/live-blogging-the-berkshire-annual-meeting/
Berkshire Hathaway Chairman Warren Buffet wanders the company trade show before his company's annual meeting.Rick Wilking/ReutersBerkshire Hathaway Chairman Warren Buffett at the company trade show before his company’s annual meeting.
OMAHA, Neb. — It’s time once again for Berkshire Hathaway’s annual shareholder meeting, the two-day frenzy of Warren Buffett aficionados who have descended here to listen to his latest musings. This year’s meeting promises to be even more interesting than ever, given the controversy over David Sokol, whose resignation has cast a pall over the normally jovial proceedings.
DealBook is on hand for the goings-on: Michael J. de la Merced will be live blogging the meeting, while Andrew Ross Sorkin will be part of the panel of reporters asking Mr. Buffett questions. And don’t forget to check out the rest of our Berkshire meeting coverage.
5:17 p.m. |The meeting has adjourned
On that subdued note, Buffett has closed the annual meeting for this year, and the lights in the Qwest Center have flickered back to life.
A fair bit on Sokol — and some interesting disclosures on what happened — though Buffett delivered a more nuanced response than some had anticipated.
And of course the tidbits on succession (is Ajit Jain the chosen one?), Berkshire’s investment philosophy (commodities aren’t the company’s game), its deal approach (no auctions! no stock as currency!) and more.
Thanks for joining us. Make sure to keep checking our ongoing Buffett-stock coverage throughout the weekend!
5:13 p.m. |More on the climate change proposal
After taking nearly a half-hour of debate on the climate change disclosure proposal, Buffett speaks out against it. He says that the state laws governing such matters are complex and could pose problems for Berkshire.
No matter. The vote failed.
5 p.m. |Investors’ claws come out
Two shareholders have spoken in favor of a proposal for Berkshire to disclose its overall carbon footprint, citing a desire for greater transparency and to improving the environment.
But another shareholder has taken to the floor to pooh-pooh the idea, deriding the initiative as one of several possible “silly rules” that shouldn’t impinge on their abilities as managers. A smattering of applause breaks out, and a couple of cat calls from the press box as well.
As of now, a few more investor speakers have come out in favor of the initiative than against.
Buffett has been paying attention, though he has worn a poker face throughout the two-minute speeches. Munger looks like he has been nodding off.
4:53 p.m. |Where have all the shareholders gone?
Just because Berkshire’s board is handling legal matters like say on pay and climate change initiatives doesn’t mean one can’t have fun. A lot of the company’s shareholders apparently disagree, however: the main floor of the Qwest Center is half-empty now.
Perhaps they’ve gone back to the exhibition floor. Or they’re preparing for the picnic. They certainly aren’t here.
4:42 p.m. |An end to Q.&A.
After a short break, it appears we’re done with the shareholder question-and-answer session. This being an annual investor meeting, we’re now down to the nitty-gritty of annual investor meetings, including the election of directors and other legal niceties.
4:29 p.m. |Berkshire’s elephant gun might take a rest
Responding to a question from a shareholder about Berkshire’s drive to do a big deal — c.f. the investor letter about the conglomerate reloading its elephant gun — Buffett says that he might take a breather.
“We can’t do a really big elephant now,” he says, citing the size of the Lubrizol deal. And as DealBook recounted earlier, Berkshire isn’t going to issue stock unless it really, really needs to.
“We won’t stretch,” Buffett elaborates. “We’ve never really taken a risk because we don’t have to.”
4:09 p.m. |Was NetJets destined for bankruptcy?
DealBook’s Andrew Ross Sorkin passes along a provocative shareholder question about a prior Buffett quote: Was NetJets headed for bankruptcy?
Buffett says that the company probably couldn’t have survived were it not owned by Berkshire.
“Absent Berkshire’s ownership, or something to that effect …” Buffett says, trailing off as he pores through his investor letter to find the exact quote. He asks Munger for help. Munger helpfully rests his chin on his hand.
4:01 p.m. |It’s tough having a big cash pile
An investor asks where Berkshire keeps its cash: Treasurys? Other short-term investments? Isn’t that wasteful? asks said shareholder.
Buffett concedes that it’s not ideal. (Berkshire keeps its war chest in Treasurys.) But when called upon to pony up $6 billion during the financial crisis, Buffett says that he knew he had to show up with cold, hard cash.
“Our ability to come up with cash when the rest of the world was petrified for some reason has allowed some deals to get done,” he says.
Who knows what will happen, he further posits. “What if Bernanke runs off with Paris Hilton tomorrow?” (It won’t, he reassures folks.)
3:50 p.m. |Bashing the business schools
Munger again got to weigh in against some of his favorite bêtes noires: business schools and investment bankers. He can’t recall Buffett having ever hired a graduate of such a school or a former banker.
He notes that Berkshire doesn’t do exact financial projections or modeling, and that the company leaves a lot of wiggle room. When Sokol had spoken with Lubrizol officials, he reported back that the company had done projections out for several years. Those numbers went unexamined.
Buffett sneaks in a crack against bankers: “I don’t think i’ve ever seen a projection from an investment banker that doesn’t show everything going up. It’s like why you don’t ask a barber if you need a haircut.”
Munger admonishes current or incoming business school students to learn how to do financial projections the Berkshire way. But pay their teachers some lip service for the time being.
3:43 p.m. |The thorny problems of charitable giving
Buffett reflects on Berkshire’s previous contributions to charity and why the company has scaled back.
When people were protesting See’s Candy, that’s one thing. But when boycotts began hitting the Pampered Chef, which consists mostly of contractors, that was a line too far.
“We ceased when it started hurting individuals,” Buffett says. “Reluctantly, we stopped, and that’s too bad.”
3:35 p.m. |Buffett backs nuclear power
Don’t question Buffett’s commitment to nuclear power. He views it as essential to helping fill the United States’ energy needs.
“I think some people misinterprted my interview when I said that it had suffered a major setback,” he said. “That does not change my view that nuclear power is important for the world.”
Munger adds that we can’t be so risk-averse about possibilities that are relatively remote that we forego useful solutions. He also says that there are always long-tail risks, like a tsunami hitting Iowa. (That’d be a hell of a storm, he cracks.)
3:32 p.m. |The debt ceiling will get raised
Buffett is often a man of certitude. And when it comes to whether the United States will raise its debt ceiling, or will it default, the Berkshire chief has no doubt.
“There’s no chance they don’t increase the debt ceiling,” he says, blaming the usual political game of posturing for the current battle.
The United States can cover its debts by issuing more money, a huge advantage over, say, European countries tied to a currency they don’t control. The only real concern is inflation, Buffett says.
Munger boils the fight down to this: “Both political parties in a race to see who’s the most stupid. And they keep trumping one another.” He gets laughs with that line.
3:26 p.m. |Warren Buffett, not-so-speedy reader
A shareholder asks about how Buffett can read so deeply and so fast.
But wait one second: Buffett says he’s not a fast reader. And he’s not as fast as he used to be. He certainly wishes he could read faster, and wishes he could find a speed-reading class that works.
Buffett then retells an old Woody Allen joke about speed-reading. When Allen tells someone he read “War and Peace” in about 20 minutes, his conversation partner is stunned. “What’s it about?” the other person asks.
“Russia,” Allen responds.
Cue the rim shot. (And Buffett handing Munger a box of See’s Candy that has been sitting on their table all day.)
3:20 p.m. |An easy Lubrizol question
DealBook’s Andrew Ross Sorkin passes along a question from an anonymous shareholder. Did Lubrizol’s board breach its fiduciary duty to its shareholders by not running an auction of the company, per Berkshire’s request?
Munger jumps in: No, it didn’t. A fundamental tenet of Doing a Deal With Berkshire is “no negotiating.”
“They get a very certain deal, and they got a very significant price in my view,” Buffett chimes in. “If they said, ‘we want to conduct an auction,’ we’d say good luck and would moved onto something else.”
3:12 p.m. |Berkshire’s bigger picture
Buffett reminds everyone that he and Berkshire invest with a much longer time horizon than most. “We’re looking at three, five, 10 years down the road,” he says.
He adds that there are “a number of societal issues that really do not enter” into his investment thesis.
One, according to Munger, is clean water. If there’s enough energy available in the world, clean water’s not going to be a problem. (On the other hand, he mocks the idea of “drill, drill, drill.”)
3:05 p.m. |Growing up rich
Buffett is well-known for not having showered his children with Berkshire riches, and remember that the billionaire has pledged most of his wealth to the Bill and Melinda Gates Foundation.
A shareholder asks, why?
Buffett says that growing up rich could rob children of crucial drive and enterprise. And if a child of privilege grows up unproductive, it’s a matter of parenting.
“If your kids grow up rich and without incentive, I don’t think you should point the finger at them,” he says. “You should point it at yourself.”
Munger agrees with Buffett’s thesis. And then makes a proctology joke. Moving on …
3:03 p.m. |The Buffett-Munger comedy routine
Buffett relates with just a hint of a wry smile a recent trip he and Munger had taken when their plane was hijacked. The kidnappers said they would grant each man one request.
According to Buffett, Munger asked to have one more opportunity to speak about the virtues of Costco (where he’s a board member). Complete with illustrations.
The kidnappers found that a reasonable request. They then turned to Buffett and asked what his last wish was.
“Shoot me first,” he said. The audience chortled.
2:54 p.m. |A love-fest for Ajit Jain
Buffett always keeps his list of potential advisers close to the vest, even after Sokol resigned. But earlier today, the billionaire mentioned that the he would lay money down on the current leading candidate’s being a real straight-arrow.
And a few minutes ago, Buffett has expressed yet more admiration for his reinsurance guru, Ajit Jain. Jain’s mind is a machine, and he puts Berkshire first and foremost, Buffett gushes.
2:31 p.m. |The matter of ‘too big to fail’
Getting back to a previous discussion that Buffett had, on “too big to fail.” He makes it clear that he believes it’s still going to happen — “There will be too big to fail institutions 10 years from now,” he says flatly.
He also quips that Fannie Mae and Freddie Mac are “too big to figure out,” but says that finding a proper solution there is better than finding a fast one.
Ultimately, Buffett believes in government intervention. But such a rescue must come at cost, perhaps by requiring directors to forfeit five years’ worth of fees, for instance.
Munger says that a discussion of bubbles and crashes “isn’t one of evil, but of stupidity.” That said, he blames unyielding devotion to theories of economics and other fields as a contributing factor. And this being Munger, he takes a shot at finance as being an especially big culprit.
2:26 p.m. |Buffett’s sticking with The Washington Post
DealBook’s Andrew Ross Sorkin quotes an anonymous shareholder who asks that since Buffett has stepped down from The Washington Post Company board, does that signal a coming sale of Berkshire’s holdings there?
Buffett’s pretty unequivocal on the matter. It’s because he’s 80 and isn’t as interested in more involved participation. But he will still readily make himself available to Don Graham and others there. “I can save a lot of directors’ fees and a lot of travel,” he quips before saying that he will not sell Post shares.
2:19 p.m. |A ‘clarification of a clarification’
Ron Olson takes the mic again quickly to clarify his clarification — very lawyer-like, he notes to Buffett’s evident amusement — that Lubrizol wasn’t on Berkshire’s restricted-trade list. That’s reserved for stocks that Buffett owns and discloses publicly.
2:13 p.m. |Buffett doesn’t do commodities hedging
When a shareholder asks Buffett if she should bet on or against oil, the Oracle of Omaha admits something: He can’t predict the price of commodities. And he has no intention of trying.
“We don’t hedge anything in the way of commodities,” he says. “Some of our subsidiaries do, and that’s fine.”
If Berkshire could better make money by sitting in an empty room trading the price of oil, Buffett suggests, why not just do that instead?
“I really think that an intelligent person can make more money over time thinking about productive assets instead of speculating on commodities or fixed-dollar investments for that matter,” he said.
2:07 p.m. |Back to BYD
Fortune’s Carol Loomis reads a shareholder question about the auto parts maker BYD. Is Berkshire worried about product delays and other problems at the company?
Buffett punts to Munger, who basically says he still believes in the company. “The price is still higher than what Berkshire paid,” he notes of BYD’s stock.
2:05 p.m. |Back with a word from a Berkshire lawyer
We’re returning from lunch with some clarifications on dates by Ron Olson, a Berkshire director and partner at the company’s law firm, Munger Tolles & Olson. It’s because Berkshire is establishing a legal record w/r/t all matters Sokol.
12:56 p.m. |Lunch break!
Back in about an hour.
12:50 p.m. |Buffett’s message on compliance: Trust me
DealBook’s Andrew Ross Sorkin asks: Given what’s happened, why doesn’t Berkshire institute stricter controls for employees’ trades?
Buffett’s answer hinges on trust. The company lays out what he says are clear rules about what is and isn’t permitted. Berkshire isn’t an investment advisory firm, and it isn’t a mutual fund, he says, suggesting that it’s not obligated to have a big compliance department.
He also cites the expansiveness of Berkshire — some 260,000 employees — and how subsidiaries handle most of the issues with their workers.
To Buffett, his view appears to boil down to this. People determined to break the rules will do so, regardless of compliance policies. How can the company stop someone from trading in his cousin’s name?
“If there’s anything we can do in the rules that will make it even more explicit that rules are not made to be danced around … we want to make sure we do it,” he says.
Munger adds that having a big compliance department doesn’t necessarily preclude problems. Wall Street banks have armies of compliance officers and still suffer huge numbers of scandals. (His exact words were “the most scandals.”)
“This general culture of trust is important,” Munger says. “And you know, Berkshire hasn’t had that many scandals of consequence.”
That may not sate critics of Berkshire’s legendarily hands-off management style. Bankers, lawyers and other advisers DealBook has spoken to since the Sokol affair came to light have been puzzled as to how the executive was able to make his trades without much oversight. (In fact, Buffett was first tipped off about the Sokol trades almost by chance, as John Freund of Citi happened to mention the bank’s role in putting the Lubrizol deal together.)
12:34 p.m. |The dollar’s inevitable decline: not a big problem
The dollar’s purchasing power will inevitably decline as inflation rises, Buffett says flatly. It’s inescapable. But it’s not the end of the world, he says.
“I hate inflation,” Buffett says. “But we’ve adapted to it pretty well over the years.”
It’s all in keeping with Buffett’s “Buy American” line. Munger goes so far as to pillory a “really God-awful” culture, modern Greece, which he dislikes on many levels. Tax evasion being one of them, and the habit of impertinently closing tourist attractions often apparently being another.
Buffett concludes with this: “I think we’ll see a lot of inflation, but I think i’d rather live in the United States than in any other place at any time in history.”
12:28 p.m. |The humorous stylings of Buffett
When asked about legacies, and what he’d like to be known for in 100 years, Buffett responds: “old age.” Munger helpfully adds that he thinks Buffett would want to be known as “the oldest corpse I’ve ever seen.”
Later on, Buffett makes a crack about Wilt Chamberlain: On his gravestone, a line will read, “At least I sleep alone.”
12:21 p.m. |The problems of fondling gold
When asked by DealBook’s Andrew Ross Sorkin about why Berkshire wasn’t investing in commodities like gold, Buffett turned back to one of his much-used comparison.
(This is after Buffett treated the crowd to what he described as a historical event: He pulled out his wallet and took out a dollar bill to illustrate another point.)
Buffett says that if you collect all the gold in the world and melt it together, you could form a cube with 67 feet on each side.
Here’s what you could do with it: “You could get a ladder and climb on top of it and say I’m sitting on top of the world. You could fondle it, you could polish it, you could stare at it.”
But Buffett’s kicker is this: You can’t do anything with it. It has no inherent value. Buying into gold is betting that someone else will come along and pay more for it — who then is hoping that someone else will pay even more for it down the line.
The commodity play is largely a highly speculative bet, as opposed to investing in companies that are producing things. Of the gold play, he says, “Over time, that has not been the way to get rich.”
Berkshire knows this from experience when it bought up a lot of silver years ago. “We were only 13 years too early,” Buffett cracks.
The ever-dry Munger adds his two cents. “There’s something peculiar about an asset that will really only go up if the world really goes to hell,” he says. “I think you’d do better by buying our stock.”
12:08 p.m. |Buffett praises banks
Buffett says that America is still a good place for banks to lend money, and singles out Wells Fargo and US Bancorp as two particularly well-run firms. He also praises the recent letter to shareholders by JPMorgan Chase’s Jamie Dimon as a “tour de force” and a must-read.
12:01 p.m. |Berkshire dividends: Folly or inevitability?
CNBC’s Becky Quick asks a question on behalf of an absent shareholder: When will Berkshire offer a dividend? Otherwise, the only way that investors can realize a gain from their holdings is to sell their shares.
Buffett has this to say: Shareholders benefit more from leaving their money with him and reaping a handsome return than by getting a regular payout and depleting the Berkshire war chest.
There will come a time when Berkshire will offer a dividend, he adds. But that would signal that the company can no longer offer attractive returns from its deal machine.
“I think the day berkshire declares a dividend is a day when the stock goes down,” he says. “As it should.”
11:58 a.m. |Berkshire 2011: Bringing people together
Buffett took a quick break from the Q.&A. to announce some important news. His niece, Cynthia, visited the Borsheim’s jewelry store around 3 p.m. on Friday with her boyfriend — who then proposed.
In keeping with the spirit of the Berkshire investor weekend, they then bought an engagement ring at Borsheim’s.
11:37 a.m. |A Berkshire deal that didn’t happen
In addressing a shareholder question about the value of Berkshire’s stock, Buffett relates this intriguing tidbit: a deal that didn’t happen.
“I would say that we had very, very recently a large international company that might well have been interested in doing something with Berkshire. It’s a very nice company, but it’s bigger than we can handle unless we use a lot of stock. But we won’t use the stock. We just think our shareholders would come out behind.”
Buffett is famously reticent to use stock to pay for deals, and with Berkshire’s cash hoard at $38 billion, he feels no compelling need to resort to stock. The last time he did a stock-and-cash deal was Burlington Northern, a takeover that Buffett described as stretching Berkshire to the last nickel.
Even at $9 billion, if Lubrizol wanted a stock deal with Berkshire, Buffett says he would have turned the company — and the takeover possibility — down.
11:27 a.m. |On why Buffett changed his mind about a Lubrizol deal
DealBook’s Andrew Ross Sorkin relays a reader question about why Buffett initially turned down the possibility of a Lubrizol deal, only to change his mind and go for it.
Buffett says that initially he was unsure about his knowledge of the oil industry and how it affects the market for chemical additives. The Berkshire chief spoke with Munger, who he says is “a lot smarter on oil” than he is, but the company’s no. 2 had no thoughts either.
Then after Sokol had a dinner with Lubrizol chief executive James Hambrick — and Buffett had a subsequent lunch with Mr. Hambrick in Omaha — the billionaire said he got a better handle on the economics of Lubrizol and its industry.
What Lubrizol had was what a lot of classic Berkshire takeover candidates have: a strong business model, coupled with a defensible market position.
“I think Lubrizol will be the leading company for a very long time,” Buffett says. “I didn’t have a fix on that, prior to Dave relaying onto me what he had learned at the dinner.”
11:24 a.m. |Howard Buffett, Berkshire’s future independent chairman
CNBC’s Becky Quick reads a shareholder question about how to prevent someone like Mr. Sokol — talented but apparently lacking in intangible qualities that Mr. Buffett prizes — from succeeding him as the head of Berkshire.
Buffett says that his son Howard will take over as an independent, unpaid chairman of the Berkshire board. That would ensure that the possibility of making a mistake would be very low.
Buffett also tosses out this intriguing nugget: “The guy who’s the leading candidate now, I would lay a lot of money on the fact that he’s straight as an arrow.”
He expounds a bit on the benefits of separate chairman and chief executive roles, noting that it’s more difficult to remove a leader if he holds both posts. And it’s even harder if the leader is performing at only a mediocre level, as opposed to being bad.
Munger adds that keeping some of the leadership in the family has some precedent, citing the Rockefellers and Standard Oil.
11:14 a.m. |Munger weighs in on Sokol
“The facts were complicated, and we didn’t foresee appropriately the nature of the reaction. But I feel like you don’t want to make important decisions in anger.”
The ever-blunt Munger adds: “You can always tell a man to go to hell tomorrow.”
11:13 a.m. |Buffett on his Sokol response
First question is read by Fortune’s Carol Loomis. The shareholder asks why Buffett wasn’t angry when he first disclosed the Sokol trades.
Referencing the now-famous Salomon quote, the shareholder wrote: “Being ruthless would have meant firing sokol on the spot.” The letter concluded: “Why were you not incensed? Why did you not express your anger?”
There’s some clapping from the crowd.
Buffett begins his answer by talking about a conversation he had with John Freund, his longtime equities broker at Citigroup (which as you’ll recall first identified Lubrizol to Sokol as an acquisition target).
He then runs through a lot of what we know: Berkshire’s chief financial officer interviewed Sokol about the trades, and the company’s law firm, Munger Tolles & Olson, conducted interviews regarding the matter.
Here’s where Buffett directly addresses the issue of his response to the matter.
“So from my standpoint, Dave was gone, there was minimal severance costs … and we had turned over some pretty damning evidence in my view to the public and to the S.E.C.
What I think bothers some people is that there wasn’t some big sense of outrage in the release. I plead guilty to that. This fellow had done a lot of good.
10:53 a.m. |Buffett on Sokol’s previously undisclosed generosity
Buffett has related what he says is an anecdote he’s never spoken about publicly.
When Berkshire bought MidAmerican Energy Holdings in late 1999, bringing Sokol on board, Berkshire director Walter Scott told Buffett that the company should put together a special compensation practice for the new rising star. Buffett devised a payout that would have paid Sokol more than $25 million.
In a private meeting to discuss the plan, Sokol told Buffett that he was happy with the proposal, but suggested one change: Give half to his lieutenant, Greg Abel.
Here’s what Buffett’s takeaway is: “So I witnessed, and Walter witnessed Dave voluntarily — Greg had nothing to do with it, he wasn’t there – transferred $12.5 million with no credit to his junior partner. I thought that was rather extraordinary.
And yet who would have known that $3 million, ten or so years later, would have led to the kind of troubles that it has led to. That really is the fact that I find inexplicable.”
10:36 a.m. |Buffett speaks on Sokol
The moment we’ve been waiting for.
Buffett refers back to the clip of the Salomon Brothers testimony he gave, 20 years ago this August. He recalled being elected the chairman of Salomon and then heading to his first press conference in that role. He was asked, just how did this happen?
Buffett recalls his response: “The phrase that came out of my mouth then was that what had happened was inexplicable and inexcusable.”
More: “I think that for reasons that are laid out in the audit committee report, I don’t think there’s any question about the inexcusable part. He violated the code of ethics. He violated our insider trading rules. He violated the principles i lay out every two years.”
“The inexplicable part … I’ll tell you what goes through my mind when I think about it. He made no attempt to disguise the fact that he was buying the stock.”
10:33 a.m. |The effect of this year’s natural disasters
Buffett says that it’s hard to estimate the cost of the Japanese earthquakes. Same with the antipodal flooding.
Here’s what he has to say about the tornados that tore through the South, killing more than 300 people: “Incidentally, the tornados in April, just at Geico, and all we’re talking about here is automobiles … we estimate that 25,000 cars will get automobile claims. That’s a lot of automobiles. Our market share is about 9 percent. But it’s been an extraordinary tornado season. That doesn’t hit the reinsurance business, I don’t think.”
10:28 a.m. |The troubles with Berkshire’s insurance business
“Probably those catastrophes cost the insurance industry on the order of $50 billion. Usually we participate in about 3-5 percent.”
Buffett points out that the business of underwriting insurance lost $821 million in the first quarter. He says, our insurance underwriting was done at better than break-even for eight consecutive years.
Still, it’s unlikely that we would have an underwriting profit for 2011. If there’s no catastrophe for the rest of the year, Berkshire could break even or make a small profit. But that’s impossible, he says.
“I think we will have an underwriting loss this year,” he says.
He also speaks of the calling of Berkshire’s investments in Goldman Sachs and General Electric, as well as special income from Swiss Re. That’s all income that Berkshire won’t have going forward.
This could all affect Berkshire’s float, or the cash it has to spend that hasn’t been used for insurance claims payouts. But Buffett adds: Don’t forget about the $38 billion in cash Berkshire had as of end of April.
“I think over time, our insurance investment income, even though it will dip throughout this year, I think we will have a similar level of investments to grow at the level we’ve shown this year.”
10:23 a.m. |The state of Berkshire’s businesses
Buffett’s introduced the directors, though he told the audience to hold its applause until he finished. Or don’t, whatever, he said. Of course, the crowd claps.
And now Buffett’s speaking about first-quarter earnings. “Basically, all of our businesses, with the exception of those related to residential housing, are getting better. And you can see it with most of them quarter by quarter.”
More: “We are a cross-section of the economy.”
“What was very different in the first quarter was that we had probably the second-worst quarter for the insurance industry in terms of catastrophes around the globe.” The third quarter’s usually the worst because of hurricanes, Buffett explains.
10:22 a.m. |Play time’s over, and Buffett to speak about Sokol
The lights have come back on, and Buffett and Munger are taking their usual seats on the floor of the Qwest Center. “We’re going to talk briefly about the David Sokol-Lubrizol situation,” Buffett says, his voice catching.
Everything said about Sokol will be transcribed and posted to Berkshire’s Web site, Buffett says, so that all shareholders can hear what he has to say about the matter.
10:17 a.m. |More from Dunder Mifflin
Michael Scott: “I’m sorry, there’s something about your cadence that’s put me to sleep.”
Kelly’s whispering into her cellphone, “Invest in ukeleles.”
Then Stanley does a talking-head moment, singing Buffett’s praises as a role model. Among his takeaways: He’s not going to leave his kids “squat.”
Of course, we need some Dwight, who appears to ingratiate himself with Buffett with the aim of becoming his number 2. Enter Charlie Munger.
Dwight: “You don’t look so tough.” Munger, as he straightens out Dwight’s lapel: “You know, there are 18 ways I can kill you right now.” Exeunt Dwight.
Again, this was by far the most popular segment, including with my colleagues in the press box.
10:11 a.m. |‘The Office’
How timely! It’s the cast of “The Office,” with Michael Scott (Steve Carrell) telling Dunder Mifflin about a possible replacement. Enter Warren Buffett.
When asked what he thought when he bought Burlington Northern, Buffett responds, “C’mon kid, no one likes a suck-up.”
Scott says Berkshire Hathaway is best known for producing all of Anne Hathaway’s works.
The crowd is eating this up.
10:07 a.m. |Revisting Salomon Brothers
In light of the David Sokol controversy, Berkshire is now playing a clip of Mr. Buffett testifying before Congress about Salomon Brothers, the investment bank that the billionaire bailed out.
Mr. Buffett’s pledging Salomon Brothers’ full cooperation and delivering a candid message about how he intended to guide the firm. “Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless.” The line draws a few cheers from the crowd.
Of course, one has to wonder whether Mr. Buffett will adopt a similar posture this year.
10:03 a.m. |Yet more commercials
There’s been a clip of “The Late Show With David Letterman,” in which the late-night host treated guests to Dairy Queen.
And now we’re watching yet another Geico commercial, this time set to a dance beat with sunglass-wearing employees and featuring an auto-tuned Mr. Buffett in an impressively goofy green top hat show casing what I suppose can be called “break dancing.”
The clip ends with Geico’s Tony Nicely awakening in his bed, only to find a more normally dressed Mr. Buffett strumming his ukelele in the corner. “Am I dreaming,” Mr. Nicely asks? “No,” Mr. Buffett responds. “Get a move on, you’re gonna be late for the meeting!”
It draws big laughs from the audience.
9:53 a.m. |A self-referential moment
Up now is a trailer for “Too Big to Fail,” the forthcoming HBO movie based on the book by DealBook’s own Andrew Ross Sorkin.
The all-star cast includes Ed Asner as the avuncular Mr. Buffett, who’s shown at a Dairy Queen with two granddaughters. “Grandpa, they keep calling,” one says as she tucks into a Blizzard. “It must be important.”
Asner-as-Buffett responds as he flips closed his cellphone, “They always think it’s important.”
9:50 a.m. |More commercials
A set of clips from last year’s shareholder gathering at Borsheim’s last year, mostly of investors praising Mr. Buffett.
Then a DQ commercial that has gathered some guffaws.
Now it’s a clip of Mr. Buffett sitting with Henry M. Paulson Jr., probably around the time that the former Treasury secretary’s memoirs came out. Mr. Buffett quotes former President George W. Bush from the financial crisis, about how if they didn’t act, “this sucker will go down.” That gathers some laughs from the crowd.
9:46 a.m. |A paean to railroads
We’ve been watching an ode to railroads, set to a modified version of “God Bless the USA”. Of course, it’s for Burlington Northern Santa Fe, Berkshire’s biggest deal to date. Mr. Buffett has praised it as helping to power Berkshire’s earnings last year.
There’s some polite applause afterward. But the crowd has been mostly quiet so far.
9:41 a.m. |A brief commercial break
Because this is a haven for capitalism, there’s a brief commercial break. There’s Coca-Cola, one of Mr. Buffett’s most famous investments, and there’s Geico’s commercial about woodchucks chucking wood.
9:38 a.m. |The Gekko arrives, and the day is saved
The Geico Gekko is one of several Berkshire employees to appear — along with Charlie Munger and Mr. Buffett’s assistant Debbie Bosanek — offering the MBA cyborg insurance. The MBA responds: “I’m self-insured.”
Of course, Ah-nuld and Mr. Buffett show up to save the day.
9:35 a.m. |Buffett, action movie star
The movie begins with an animated segment about the “MBAs,” ruthless trading machines who plan to destroy the world.
The only hope is Warren Buffett.
We’ve already got a couple of celebrity cameos. Arnold Schwarzenegger is suiting up as “The Governator,” shortly after having stepped down as governor of California. (And there’s Larry King asking him a question!)
9:30 a.m. |The lights have dimmed
After a brief introduction from Mr. Buffett, explaining the movie and asking shareholders not to record it (in part to assuage the famous people — who, “surprise, surprise” work for Berkshire for free), the movie begins.
It’s a time-lapse video of the prepping of the Qwest Center for the Berkshire annual meeting, set to U2’s “Beautiful Day.” It’s really amazing to see just how people flow into the arena and fill it to the brim.
It’s also amazing how the crowd, so noisy just minutes ago, has turned silent in the dimness.
9:26 a.m. |Ladies and gents, take your seats
It’s almost showtime. A gravelly announcer — who sounds awfully similar to that guy from all the movie trailers — tells of those who have gathered for “one gloriously capitalistic weekend.” He further intones, “All roads led them to Omaha” before the big finish: “You’ve arrived at the Berkshire Hathaway shareholders meeting. The movie will begin in 10 minutes.”
8:13 a.m. |A walk with Warren (and 100 close friends)
Berkshire Hathaway Chairman Warren Buffet talks with cheerleaders at the company trade show before his company's annual meeting.
Rick Wilking/ReutersBerkshire Hathaway Chairman Warren Buffett with cheerleaders at the company trade show before his company’s annual meeting.
Just got back from a trip around the exhibition hall, trailing Mr. Buffett. To say that there was a crowd around the Oracle of Omaha is understatement: Easily more than 100 people were gathered around him at any given moment.
Mr. Buffett made a trip to various vendors in the hall, surrounded by scores of TV cameras and even more shareholders with iPhones and personal cameras. When he stopped by the Justin Brands college boots booth, four University of Nebraska cheerleaders greeted him with chants of “Go Big Red!”
The mob followed the billionaire around — to See’s Candy, to Dairy Queen. Even from five feet away from Mr. Buffett, it was virtually impossible to hear what he was telling Liz Claman of Fox Business and Becky Quick of CNBC. Dozens of investors shouted, “Look over here, Warren!” and many contorted themselves into strange angles just to have a photo taken of themselves with the back of his head.
8:09 a.m. |Welcome to Berkshire madness
Good morning from the Qwest Center in Omaha, Neb. It’s a little after 7 a.m. and within the span of about 5 minutes, nearly all of the floor seats here have been claimed by eager Berkshire Hathaway shareholders. Numerous event staffers have asked folks to “walk, please” and a command from the public announcement also asked people to “please slow down.”
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