May 2 Berkshire Hathaway Inc (BRKa.N) (BRKa.N) (BRKb.N) Chairman and Chief Executive Warren Buffett and Vice Chairman Charlie Munger draw large crowds to Omaha each year for the company's annual meeting, fielding questions from shareholders for more than five hours.
This year's meeting had a more upbeat tone than last year's, when fallout from the financial crisis and fears of swine flu dampened the mood. Buffett and Munger snacked on peanut brittle and fudge from See's Candies, a Berkshire unit, as they tackled shareholder questions by offering a mixture of business wisdom, wit and occasional humorous asides.
The following are excerpted comments from the meeting:
ON BERKSHIRE INVESTMENT IN GOLDMAN SACHS GROUP INC (GS.N) AND THE BANK'S "ABACUS" TRANSACTION:
Buffett, discussing ABN Amro investment in Abacus: "It's hard for me to get terribly sympathetic ... The bank made a dumb credit deal."
Buffett, explaining why the thinking of a party on the other side of a trade is irrelevant to making your own investment decision: "If they told me (Federal Reserve Chairman) Ben Bernanke was on the other side of the trade, it wouldn't make a difference to me ... For the life of me, I don't see whether it makes any difference whether it was (hedge fund manager) John Paulson on the other side of the deal, or whether it was Goldman Sachs on the other side of the deal, or whether it was Berkshire Hathaway on the other side of the deal.... I don't care if John Paulson is shorting these bonds. I'm going to have no worries that he has superior knowledge."
Buffett, on $5 billion investment in Goldman, which can be called by Goldman, and why recent events may benefit Berkshire: "Our preferreds are paying $15 a second, so as we sit here, 'tick, tick, tick, tick,' that's $15 every second.... The Federal government has probably been telling Goldman you can't call that preferred until we tell you we can.... Recent developments have probably delayed the calling of our preferred for some time, so 'tick, tick, tick' will go on, and we'll be getting $500 million a year.... We love the investment."
Buffett, on experience in fixing problems at Salomon Inc: "Get it right, get it out, get it fast, and get it over."
Munger, on whether Goldman should have disclosed "Wells notice" sooner: "There has to be some materiality standard."
Buffett, on replacing Goldman CEO Lloyd Blankfein: "If Lloyd had a twin brother, I would vote for him."
Munger, on replacing Blankfein: "There are plenty of CEOs I'd like to see gone," but Blankfein is not one of them.
Buffett: "I do not hold against Goldman the fact that an allegation has been made (by the U.S. Securities and Exchange Commission). If it leads to something more serious, then we will look at the situation at that time."
ON REGULATORY REFORM AND BERKSHIRE'S DERIVATIVE CONTRACTS:
Buffett: "If Berkshire were found to be dangerous to the system, then we could be required to post collateral on retroactive contracts.... If the bill passes tomorrow, we would not have to put up a dime."
Munger: "What we need is a new version of Glass-Steagall. (Banks) should have a much simpler and safer way of doing business."
Munger, if he were put in charge of overhauling financial regulation: "I would make Paul Volcker look like a sissy."
ON GREEK DEBT CRISIS AND CURRENCIES:
Buffett on Greece: "I really don't know how this movie ends, and I try not to go to movies like that.... This will be high drama, in my view."
Buffett on currencies: Events of the past few years would make him "more bearish on currencies of all kinds.... If you really could run budget deficits of 10 percent of your GDP and could do it for a long period of time, the world would have been doing it for a long time before this."
ON SUCCESSION AT BERKSHIRE:
Buffett: "If I die tonight, there will be a new CEO in place in 24 hours. (As for new chief investment officers), investors don't need anything done next week. I can go on vacation. They could wait a month, they could wait two months.... I did just have a physical. It came out fine."
ON THE ECONOMY:
Buffett: "The prospects for significant inflation have increased."
Buffett, on stimulus efforts: "They may well have been the correct responses, but we may find that weaning ourselves from the medicine is harder than solving the original (problem)."
Buffett: "We will hire people when we have something for them to do.... I don't think Berkshire Hathaway should be the social safety net.... Significant unemployment (is) not going to go away fast, although it is going to go away."
Buffett, on low interest rates: "People talk about easy money policies, but this is easy for people who've got the money.... If we do run into trouble, the blame should not go to the (Federal Reserve), the blame should go to the Congress."
ON CHINA, WHERE BERKSHIRE INVESTS IN BYD CO (1211.HK):
Munger: "I always thought the Chinese people had enormous potential for huge and rapid progress.... China is setting a new record for advancement of civilization at a very rapid rate. It's fun to watch."
ON LARGE ACQUISITIONS:
Buffett: "If we get a couple of, three or four serious calls that meet our criteria, that's a good year.... We're as interested as ever.... I would love it if, Monday morning, my phone rings with some big deal.... If I get a call for a $10 billion deal on Monday, and I like it, I will say yes."
Buffett: "I like to look in the mirror and say enough of my shareholders love me."
Munger, often after Buffett finished speaking: "I've got nothing to add."
Buffett, after Munger once finished speaking, "I've got nothing to add." (Reporting by Svea Herbst-Bayliss and Jonathan Stempel; editing by Martin Golan)
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