More than 35,000 people descended on Omaha, Nebraska, on Saturday for the annual shareholder meeting of Warren Buffett’s ice cream-to-insurance conglomerate, Berkshire Hathaway Inc. Following are selected comments by Buffett, Vice Chairman Charlie Munger and other Berkshire executives on a broad range of topics:
BUFFETT ON HIS SON HOWARD’S QUALIFICATIONS TO BE NONEXECUTIVE CHAIRMAN AFTER THE ELDER BUFFETT IS NO LONGER RUNNING THE FIRM:
Buffet says Howard is taking the role “in case a mistake is made” in choosing a CEO, the odds of which are “less than 1 in 100.
“He has no illusions at all of running the business. He won’t get paid for running the business.
“He’ll only have to think about whether the board … needs to change the CEO. … I know of nobody who will feel that responsibility more as to doing that job responsibly as my son Howard.”
BUFFETT ON DEFICIT SPENDING:
“The amount of deficit spending in the last four years, the amount of stimulus provided … I think has been quite appropriate in relation to the threat to the economy that was posed by the greatest panic in my lifetime.
“The question is, how do you get off that.”
BUFFETT ON ECONOMIC RECOVERY:
“We are seeing some recovery in housing prices which has psychological effects.
“(By the next annual meeting) I think we will have moved forward … I don’t think there will be a surge of any sort, but I don’t think we will stall.”
BUFFETT ON HIS FUTURE:
“There’s nothing more fun for me than to find something to add to Berkshire.
“I hope it’s true 10 years from now.”
BUFFETT, ON ASSET BUBBLES:
“I do not worry about the banking system being the cause of the next bubble.”
MUNGER, IN RESPONSE TO BUFFETT:
“I am less optimistic about the banking system than you are long-term.”
BUFFETT, ON WHY HE WOULD NOT BUY AN AIRLINE:
“It’s a labor-intensive, capital-intensive, largely commodity-type business, and it has been, as (Legg Mason’s) Bill Miller points out, a death trap for investors since Orville (Wright) took off.”
BUFFETT AND MUNGER ON SHORT-SELLING:
Buffett: “Charlie and I are no strangers to short selling. We both failed it.”
Munger: “We don’t like trading agony for money.”
BUFFETT, ON WHETHER HIS SUCCESSOR’S STAMP OF APPROVAL WILL BE AS VALUABLE AS HIS OWN:
“Berkshire is the 800 number when there is really some panic in the markets, and people really need significant capital.
“If you come to a day when the Dow has fallen 1,000 points a day for a few days and the tide has gone out and you find some naked swimmers, those naked swimmers … will call Berkshire.”
BUFFETT, ON BERKSHIRE’S NEWSPAPER INVESTMENTS:
“We will get a decent rate of return. Our after-tax return, with declining earnings, which I expect, would be at least 10 percent average … and I think it could be somewhat higher.
“Everything we have seen to date, and we have a number of papers now, indicates we would meet or beat the 10 percent. It’s not going to move the needle in Berkshire … we are buying the papers at very, very low prices with (regard to) current earnings.”
BUFFETT, ON U.S. FEDERAL RESERVE ACTIONS TO STIMULATE THE ECONOMY:
“We’re in uncharted territory. The Fed’s balance sheet is around $3.4 trillion now, and that’s a lot of securities.
“Banks’ reserve positions are incredible; Wells Fargo has $175 billion sitting at the Fed earning 0.25 percent. There’s all this liquidity that has been created, and it hasn’t really hit the market because the banks have let it sit there.
“This is like watching a good movie, and I do not know the end.
“We have benefited significantly, and the country has benefited significantly, by what the Fed has done.”
BUFFETT, ON INVESTMENT MANAGERS TODD COMBS AND TED WESCHLER:
“I gave them each $1 billion (to manage) on March 31. We thought they deserved the trust we had when we hired them, and we believe that more than ever.”
MUNGER, ASKED HOW TO EXPLAIN BERKSHIRE TO A 13-YEAR-OLD IN TWO MINUTES:
“We always tried to stay sane when other people, a lot of them, go crazy. That’s a competitive advantage.
“We want to treat subsidiaries the way we would want (to be treated). You try to be a good partner.
“We are leaving behind a field that is very competitive, and we’re getting to a place where we are more unusual. This was a very good idea. I wish we had done it on purpose.”
BUFFETT, RESPONDING TO SHORT-SELLER DOUG KASS ON WHETHER BERKSHIRE HAS GROWN TOO BIG TO OUTPERFORM THE MARKET:
“There’s no question that we cannot do as well as in the past, and size does matter. In terms of the acquisitions we’ve made in the last five years, we think we’ve done pretty well.
“You haven’t convinced me to sell the stock yet, Doug.”
MUNGER, ON THE SAME QUESTION:
“You look at companies that got really big in the world, the record is not very good. We think we’ll do a little better than the giants in the past. Maybe we have a better system.”
BUFFETT (@WARRENBUFFETT) ON USING TWITTER TO DISCLOSE MATERIAL FINANCIAL INFORMATION:
“The key to disclosure is accuracy and simultaneity … I do not want it, if I am buying Wells Fargo, to keep hitting up their Web page and hoping I’m not 10 seconds behind someone else for some important announcement.”
BUFFETT ON HOW SOCIAL MEDIA HAS IMPACTED BERKSHIRE’S BUSINESSES:
“At a place like Geico it makes a difference and over time it will make a huge difference. We have to listen to our customers. I’ve been amazed at how the world has changed.”
BUFFETT ON GROWING IN COMMERCIAL INSURANCE
“I think you will see Berkshire become a very significant factor in commercial insurance.” He added that the business’s size could ultimately be “a fair number of billions.”
BUFFETT ON BERKSHIRE’S NEXT CEO:
“The key is preserving a culture and having a successor, a CEO that will have more brains, more energy, more passion for it than even I have … We’re solidly in agreement as to who that individual should be.”
MUNGER ON BERKSHIRE’S RETURNS:
“I don’t pay attention to five years, three years in terms of annual gains because our past returns were almost unbelievable. We are slowing down a little bit but still pleasant.”
BUFFETT ON BERKSHIRE’S SIZE:
“We are now the fifth-most valuable company in the world.”
BURLINGTON NORTHERN CEO MATT ROSE, ON THE ECONOMY:
“It feels like a 2 percent economy. If we want to see GDP click up to 3.5 percent, 4 percent, you need to see more consumption.
“Long-term the question is how the Fed makes the transition from QE to backing out of the market. That’s the million-dollar question.”