Here are my Tweets from the afternoon session of the Berkshire Hathaway AGM. Have occasionally expanded the original Tweets to provide context (additions in brackets).
• Almost as good as being here. Look at my pics at http://on.fb.me/12B1u1J to get a feeling of what we’re experiencing in Omaha today
• Warren Buffett and Charlie Munger are back on the podium. Another hour and a half of wisdom coming up.
• Warren Buffett: “There’s nothing more fun than finding something to add to Berkshire. It was true 40 years ago and is just as true today.”
• Warren Buffett: “Great thing about investing is the universe has so much in it. If you don’t understand you don’t have to play that part of the game.”
• Warren Buffett: “We’re buying businesses whether we’re buying 100 shares or the entire company. We always think of it as buying the business.”
• Warren Buffett: “We see certain things that shout to us. (My strength is) I have some idea of what a company might look like in 5,10 years and confidence in that idea.
• Warren Buffett: “Some brands travel very well. Some brands don’t travel. We just keep learning about things like that.”
• Warren Buffett: “Charlie and I have worked together for 54 years and I can’t think of a time where we made a decision based on a macro reading.” (Buffett is a great believer in staying away from Big Picture economic forecasting – because he believes it is impossible to predict the future with any accuracy. So he advises investors to stick to individual companies in sectors where they have knowledge and, hence, a better chance of working out what will happen.)
• Warren Buffett: “There has always been all kinds of opinions on what will happen this year or next. Nobody knows that.”
• Warren Buffett offers sound business advice: “Keep costs down; invest in brand building; and work hard on keeping your customers happy.”
• Question from a German shareholder: What book influenced you most?
• Charlie Munger: “I couldn’t name any 10 books that are better than the next 10.” Warren Buffett: “The Intelligent Investor (Benjamin Graham) changed my life.”
• Warren Buffett: “Graham’s book gave me a bedrock philosophy that made sense. I’ve not found any aspect of that philosophy that has flaws in it.”
• Warren Buffett: “We read for the enjoyment. It’s been enormously beneficial to us. But the reason we read is because it’s been fun and is fun.”
• Warren Buffett: “In some businesses you can have only two competitors and they’re still terrible businesses. Like Freddie Mac and Fannie Mae.”
• Asked about new airline ideas – Warren Buffett: “The airline industry has been a death trap for investors.” Charlie Munger: It goes into my too hard pile.” (Buffett added that if he’d been a capitalist, one of the Wright Brothers would have shot the other the instant their airplane lifted off the ground – no industry has been as detrimental to investor’s health. Largely because its perceived glamour, there’s always someone ready to invest, but rarely has an operator managed to get ratios right between the high fixed cost and marginal cost of adding additional passengers.)
• Warren Buffett: “The airline business is sexy for some reason. You can go out and raise money for a new airline. But the record isn’t good.”
• Warren Buffett on share buybacks: “Look at intrinsic business value with buybacks. Book value has little relevance in most businesses.”
• Warren continues to answer the question on share buybacks by repeating the excellent explanation in his 2012 letter to shareholders.
• Warren Buffett: “We have mixed feelings on buybacks. We don’t like running a company where you’re buying your partners out at a discount.”
• Charlie ever considered moving back to Omaha? Charlie Munger: “No.” Warren Buffett: “(There’s no need) We know exactly how the other partner thinks. We don’t even need the phone.”
• Charlie Munger: “When I look around Omaha I feel like Rip van Winkle. It’s amazing how much Omaha has changed (Munger grew up here)”
• Charlie Munger on global warming: “To change habits, the correct answer is carbon taxes. The US should have way higher taxes on motor fuel.”
• Would you ever short sell? Short seller Kass wants Berkshire to give him $100m to prove he can short sell successfully. (This is where the Florida short seller lost his last remaining vestige of credibility. Most in the audience saw this as an attempt to tout for new business. Inappropriate.)
• Charlie Munger to Kass: “The answer to your question is No (giving him $100m to sell short). Who wants to go though agony for money?”
• Warren Buffett: “Generally speaking if you have a chance to buy a wonderful business, you probably should stretch yourself (on the price).”
• Warren Buffett: “The stock market will offer you percentages for profit that you will almost never see in negotiated purchase businesses.”
• Warren Buffett: “You will see opportunities in the stock market that you will not see in the business purchase market.”
• Charlie Munger offers a classic: “The game of life is the game of everlasting learning.”
• Question to Buffett on why he voted for Obama. Some applause for the critic. Far bigger cheer for Warren Buffett’s riposte supporting Obama.
• Warren Buffett: “US needed stimulus after 2008. Question is how do we get off of that.” Charlie Munger: “Agree with you completely – so did George Bush.”
• Warren Buffett: “The USA came out of World War II with debt higher in relation to GDP than we have now. We came out of that sensationally. We will do fine.”
• Charlie Munger: “Our current problems are confusing. In fact, if you aren’t confused by them, then you don’t understand them very well.”
• Charlie Munger: “All of our (the US’s) problems will fade into insignificance if we can grow the GDP faster (at more than the current 2%).”
• Warren Buffett: “The distinction in investing is between one who spends an appreciable amount of time on (analyzing and researching) businesses or on their own profession.”
• Warren Buffett: “If you’re an amateur investor you have a very logical course of action and that is buying a spread of businesses (through index funds).
• Charlie Munger: “Knowing the edge of your own competency is very important. If you think you know more than you do, that’s looking for trouble.”
• Warren Buffett on giving away his money: “It has a lot more utility in the hands of other people than sitting in my safety deposit box.”
• Warren Buffett: “Ever since the Fall (autumn) of 2009 we’ve seen a gradual improvement in business (in the USA). I wouldn’t be surprised if it keeps going.”
• Warren Buffett: “You can’t make a lot of money thinking about what’s going to happen tomorrow – if you don’t (know what tomorrow is actually going to bring…..)”
• Warren Buffett: “My advice to young people is start developing your track record as early as you can; one that’s a product of sound thinking.”
• Is Ajit (Jain, the brilliant head of Berkshire Reinsurance) your successor and what will happen to his businesses if he’s not there (ie if he were to leave should someone else be appointed CEO of Berkshire)? Warren Buffett’s passes: “Ajit will be around a long time.”
• The bear Kass takes a swing at Warren Buffett’s view that Howard Buffett, his son, will be the next chairman of Berkshire Hathaway.
• Warren Buffett: “I’m sorry for people who put their money into fixed interest investments. For 90% of my life it’s been better owning equities.”
• Warren Buffett: “The meek inherit the earth but after they do will they remain meek? We don’t want a (future) CEO to use their Berkshire Hathaway as power base.
• Warren Buffett: A board is a social institution. I know nobody who will be better than Howard at taking a tough decision like changing the CEO.” (Buffett argued that his son Howard knows the culture of the group better than anyone else. And as the independent non executive chairman who would be strong enough to fire the person is they misbehave, the best protection for shareholders against a future CEO abusing his/her position.)
• Warren Buffett: “It won’t be Howard’s job to allocate capital or run the business. He’ll be there as a protector of the culture, a non exec.”
• Warren Buffett tells us there’s 45 minutes left. Shareholders at the microphone stands dotted around the arena will now pose rest of the questions. Nice touch. Time flying past here.
• Warren Buffett: “A risk with the IBM investment is its $80bn pension liability. Balls take funny bounces in annuities. But we’re aware of it.”
• Warren Buffett: “Managing $1bn is a different game to running $50m. If we were (still small and running a $50m portfolio), we’d be looking for small things. Opportunities are out there.”
• (Asked by a shareholder whether Berkshire will be following the current trend towards investment in developing countries) Warren Buffett: “We don’t start out looking at emerging markets in particular. We don’t think that’s where our strength is.”
• Charlie Munger: “Emerging market products are a great way to sell investment advice. Lots of commissions (are earned on them). They’re better at selling than investing (the promoters of these products).”
• Charlie Munger on US housing market boom: “Instead of pulling the punch bowl when people were getting drunk they (the Fed) added to the proof.”
• WB: “When people get scared it’s very hard to deal with. People get fearful en masse. When we see falling prices we see opportunity.”
• Warren Buffett: “The European Monetary Union has an innate flaw. They’re grappling with a way to correct that flaw. They’ll do it in time.”
• Charlie Munger: “Letting Greece into the European Union was like putting rat poison into whipped cream. Greece is not a responsible country.”
• Warren Buffett: “It would be a terrible mistake to put me in charge of social media at Berkshire Hathaway. Charlie also wouldn’t be a good choice.”
• Charlie Munger when asked for his views on social media: “There’s a time when ignorance and folly should be hidden.”
• Warren Buffett: “It’s important when buying businesses we assess with some accuracy the people running them. You can spot those playing games.”
• Warren Buffett: “There are many ways you can cheat in accounting. Financial institutions are particularly prone to it. Plenty (of examples of abuse are also evident) in insurance.”
• Charlie Munger: “The financial statements of big banks are way harder to understand than they used to be. There’s so much gobbeldy gook.”
• Charlie Munger on the financial statements of would-be sellers of businesses: “Once people get into a competitive frenzy, things just get out of control.”
• Charlie Munger on accountants: “With accounting you can do what they do in Italy when the mail piles up. They just throw away a few cartons.”
• (Asked by a shareholder whether he would consider buying a company in Sub Saharan Africa – South Africa excluded). Warren Buffett: “If a business in Sub Saharan Africa was attractive enough, I’d get advice from someone but I wouldn’t exclude investing.” (Charlie Munger was more reserved, mulled it over for a while and then said no, he’d rather invest elsewhere in the world.)
• Warren Buffett: “Your children are going to read your Will some day. It’s crazy to only let them see it after you’re dead. (Once they have hit their) mid-30s it’s good.” (He said it is important to talk through your Will with your children so that they could understand why certain decisions were taken and ask questions – obviously not possible once you’ve passed on.)
• That’s a wrap. Another fabulous 5 and a half hours of wisdom from the investment world’s favourite octogenarians. Awesome. Again.
• That was fun. The experiment (of Tweeting the conference live rather than the usual process of taking notes and writing later) worked for me! Loved our interaction and thanks for getting into the spirit with those copious re-tweets.
• Putting the laptop away. Need to get to basement + acquire the 4 books Warren recommended in his letter to shareholders. Cheers until later.
• The four books Warren recommended are: Tap Dancing to Work by Carol Loomis (missed – it was sold out, damn). The Outsiders by William Thorndike.
• Did get Warren’s 2 other recommended books – The Clash of The Cultures by Jack Bogle + Investing Between The Lines by Linda Rittenhouse. (Met Linda Rittenhouse, a charmer who chatted and happily signed my copy. The sales attendants said Loomis’s book was sold out before the AGM started. I was lucky to pick up the last copy at the Omaha Airport – one advantage of having a very early morning flight. Looking forward to reading and reviewing the books over the next few weeks.)
