Sunday, May 4, 2008

No Money No Talk!

More than 30,000 of shareholders, gather at Ohama City, just to look for meeting with the world's most richest man, billionaire Warren Buffer, who is the world's most successful investor. The crowd has grown bigger every year as shareholders bring family and friends to hear 77-year-old Buffett and Berkshire vice chairman Charrlie Munger, speak. 

Buffett cautioned shareholders that returns in the years ahead from the company's equities portfolio, as well as gains from its own stock, are likely to be lower than those seen in previous decades. He will be very happy to generate gains of 10 per cent a year from common stocks over the long term, but questions whether that will happen.

Buffett says Berkshire has become so large that it's now difficult to find investments that are big enough to influence the company's results materially.

"What we really like is buying large, first-class businesses and just sitting there." But, he adds, that would not produce returns like the past. "Anyone that expects us to come close to replicating the past should sell their stock. It's not going to happen."

Munger says that the current credit crisis is worse than the market disruptions triggered by Enron's bankruptcy earlier this decade. After Enron collapsed, US legislators passed the Sarbanes Oxley Act to try to prevent such massive frauds rocking markets in future. "We now know they were shooting at an elephant with a pea shooter," 

Unlike most shareholder events at which questions are company-focused, the Berkshire meeting is always full of questions about life, the world, corporate leadership, and governance.

Last year, a 10-year-old girl went up to the microphone and asked for life advice. Buffett told her to read a lot as he had never met any smart people who did not read. Munger told her to be reliable when she grew up. The meeting went quiet and then erupted in applause. Some paused to reflect, some nodded with total agreement.
* The question and answer session began with one shareholder asking how to be a winning investor. Buffett said people should look at stocks as owning part of a business, use the stock market to serve you and not instruct you and to leave a margin of safety. Another questioner asked where Buffett could expand on where the stock market is headed. Buffett laughed and said "I could expand, but I couldn't answer." Buffett said he and Charlie have no idea where the stock market is headed. He said the question never comes up, because Berkshire invests in companies, not the stock market.

* A shareholder asked Buffett how he stays healthy. Buffett took a piece of See's candy and said "You start with a balanced diet." Buffett says he works out 45 minutes three times a week with a personal trainer, otherwise he does what he wants. He says he likes Mar's candy, Coca-Cola and See's. Buffett says very important factors for him have been a job he loves with people he loves to work with. He gets to work in an air-conditioned office with all kinds of help. He asks "How can you be sour about life when being blessed in so many ways?"

* A shareholder asks about Berkshire investing in Kraft. Buffett says most big food companies are good investments. Strong brands are good assets. He says Coca-Cola, See's, Mars candy all are strong and it is difficult to challenge those brands. What Berkshire buys might have something to do with the price and the management.

* A shareholder asks about investing in small banks or large banks. Buffett says it is good to know the culture of the bank. He says Wells Fargo is one bank Berkshire has invested in that it believes will avoid financial stupidity.

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