SOUTH DAKOTA STRAIGHT TALK

Warren the “Oracle of Omaha” not Jimmy - Wow – what an experience!

This past Saturday I had the unique and special opportunity to attend the “Woodstock of Capitalism”, the Berkshire Hathaway annual shareholder’s meeting in Omaha, as the guest of a good friend and political colleague of over twenty years. I traveled to Omaha with another friend my former banker to witness Warren Buffet opine on many varied and important topics.

I was not alone in my pilgrimage.

While the Indianapolis 500 is copyrighted as the “The Greatest Spectacle In Racing” clearly this annual Road To Omaha (no not the “Greatest Show on Dirt” – the College World Series) might be dubbed The Greatest Spectacle in Business and Finance. 24,000 persons strong we were there to hear the Chairman and his sidekick and straight man, Charlie Munger. This is not your typical Shareholder’s meeting. The mood was festive; there were no disgruntled stockholders. It was really more like a large and overflowing arena filled from 8:00am until 3:00pm with disciples to hear their muse.

Make no mistake Buffet has made many of these attendees a lot of money. They were there from everywhere. I identified attendees from Japan, India, Germany, Great Britain, Israel, and Australia. It was announced that Shareholders from outside of North American numbered almost 600. As economic and tourism development the BH annual meeting is like having the Major League World series come to your city for the weekend.

It’s remarkable that so many traveled so far just to hear someone talk for about six hours about pragmatic approaches to important subjects and ideas. This was not a sporting event, not a concert, and not a Broadway show – there were no dancing girls. – Serious stuff!

The meeting kicked off with a forty-five minute very entertaining and fun video that pokes fun at Warren and makes rather salient points about his investment philosophy. Some of the celebrities in the video, included both in film and cartoon form, were Oprah, Bill Gates (a member of the Berkshire Board of Directors, who was present at the meeting), The Donald, Arnold, Snoop Dog, The Desperate Housewives, Jamie Lee Curtis, Ellen DeGeneres and Tom Brokaw.

At the conclusion of the video, Buffet made brief comments about the company and explained that unlike most investment funds, Berkshire is organized in a unique way. He touched briefly on the company’s results, its limitations (like in the newspaper business – Berkshire is a very large stakeholder in the Washington Post Companies) and its opportunities.

Buffet’s remarks then led into what was about a fifteen-minute presentation about Berkshire’s most recent acquisition Iscar Metalworking (that was announced on the previous day) including another brief video and presentation by the CEO of Iscar. This purchase represented Buffet’s first purchase of an enterprise not headquartered in the US – giving a strong indication that Berkshire is now looking globally for investment opportunities.

Buffet then took questions from the audience of about four and one half hours with a brief recess for lunch.

Buffet has a well-founded opinion on everything. He handled everything that was thrown at him by the questioners. His answers were quick, thoughtful, knowledgeable, opinionated and with humor. Warren Buffet has an almost magical way to take complex questions and problems and articulate his answer or solution in a way that is precise in its simplicity.

At the conclusion of each of his five or ten minute answer, Buffet then would turn to his Vice Chairman and partner Munger and say – “Charlie?” Then Charlie usually says “Nothing further to add” to a houseful of laughs. Occasionally however, Charlie had an insight or in a few rare cases even a slightly different opinion than the Chairman.

Both men are deep thinkers and to a certain extent “idea men” – ultimately they are about pragmatism. They want to keep things working. They want positive results. Buffet clearly articulated that they want “great businesses not cheap businesses.” I felt an overwhelming sense that Buffet’s overriding message throughout the day was “Trust Me”.

Warren Buffet recently celebrated his seventy-fifth birthday and Charlie Munger is even older. Age in their case surely brings wisdom. Some of their thought gems were “People have a chance to make a difference”, “Our world demands better solutions” and “Envy is a bigger motivator than greed”

The questions were wide ranging – Some of the topics covered were the Financial Health of the Social Security System (they said not to worry to much about it) Executive Compensation, the Berkshire Culture, Where Are The Emerging Markets, Management Competency, The Economics of Ethanol (they are not big fans), the Housing Market and Real Estate Speculation, Commodity Prices, South American Investment Opportunities, Manufactured Housing, What they will do with their excess cash (about $40 billion), Global Warming and Weather Related Risks to their Casualty Insurance Businesses, Corporate Governance, Investment Fund Managers, The Environment, and Charitable Giving.

Even discussed was Nuclear Proliferation. Munger opined that it was not a question of if but rather when as to a nuclear device being exploded either by a nation or a terrorist. Of course where and when would be the real question he said.

The 10,000-pound Gorilla in the room was the unanswered question, of who replaces Warren when he’s gone? Charlie at one point did state that succession wouldn’t be a problem as Warren surely has an answer.

Interspersed at the event were product sales by Berkshire owned companies featured at the event. During the lunch hour the adjacent Convention Center was packed with attendees carrying out Sees Candies, Ginsu Cutlery, Justin Boots, Fruit of The Loom Underwear, and of course everyone was chowing down on Dairy Queen Dilly Bars, all Berkshire owned companies.

Throughout the weekend discounted sales to stockholders were also being conducted at the Berkshire owned Nebraska Furniture Mart and Borshiem’s Jewelers in Omaha. At one point during the meeting Buffet announced that sales at the Furniture Mart to stockholders over Friday and Saturday had reached $27 million. He added that at this pace sales would reach about $33 million, typically the average monthly volume for the store.

As a tribute to the reverence that those in attendance hold Buffet and even Munger, there was a bookshop set up in the Convention Center where books were being sold about Berkshire Hathaway or authored by or about Warren Buffet, or Charlie Munger. The approximately 2500 square foot store was packed solid with people buying books about their Omaha Idols. Amazon.com would be jealous. The bookstore was so crammed with people they needed to call the Fire Marshall.

The day flew by – The entire event seemed like a one-hour briefing. For anyone interested in what is happening in the world – this is a Do Not Miss Event!

Sidebar - The price of admission is ownership of one share - the low priced Class B shares sell for BRK-B  - Well worth the price of admission.