Highlights from Berkshire Hathaway’s Annual Shareholder Meeting Q&A

Michael Teague  |

Berkshire Hathaway (BRKA) held its annual shareholder meeting on Saturday Omaha, Nebraska to the usual fanfare. The event drew some 35,000 people, and featured a question and answer session between CEO Warren Buffet and Vice Chairman Charlie Munger with various journalists, shareholders, analysts, and others that last several hours.

The questions covered a wide variety of topics from the global economy, to specific questions about Berkshire’s numerous holdings, to the more touchy issue of succession once Mr. Buffet, now 82 years of age, no longer occupies his position as the company’s CEO.

One of the more commented-on participants to the discussion was hedge fund manager Doug Kass. Kass, of Seabreeze Partners Management, has a short position on Berkshire’s stock and he was invited by the company to ask some of his own questions. On the whole, those exchanges were often as humorous as they were contentious, though Kass did touch on serious subjects such as succession, as well as the future growth possibilities for Berkshire as it makes larger and more expensive acquisitions.

On the whole, Buffet and Munger dealt with all questions irrespective of their nature with the mixture of seriousness and humor that is one of the more anticipated aspects of the yearly event.

The recent naming of Buffet’s son Howard to the position of non-executive chairman of the company was one that elicited many questions about the move itself, along with subsequent ones regarding succession.

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Buffet clarified that his son’s main concern would be the preservation of Berkshire’s corporate culture, simultaneously leaving no room for doubt about the importance of this aspect of the business, as well as all the room necessary for speculation about who the next CEO of the company could be.

The oracle of Omaha also revealed himself to be cautiously optimistic about the Federal Reserve’s quantitative easing program, though he contended that both his company and the country had “benefitted significantly from what the Fed has done.”

By extension, another and more animated question came from one participant who complained about the Obama administration and its responsibility in running up the budget deficit, to which Buffet responded by reminding the audience that the Bush administration also ran up the budget deficit, and went on to praise the choice of stimulus over austerity.

Vice Chairman Charlie Munger provided a dry counterpoint to his partner on certain occasions. One notable instance, in particular, occurred when Buffet expressed a lack of concern about the next bubble resulting from the financial sector. Munger was less optimistic, and to the delight of the audience summed up his skepticism about the banks by saying “I do not see why massive derivative books should be mixed up with insured deposits.”

The two men are by now well-known for their tendency to quip poignantly and treat serious questions playfully, as well as for playing off of their occasional differences. One subject on which they spoke in complete unity, however, was the culture they had nurtured at Berkshire Hathaway over the years.

The attitude is perhaps best summed up by part of Buffet’s response to a question about increasing competition from hedge funds in the insurance business. While noting that hedge funds have certain advantages, particularly in terms of their ability to cut costs by selling risk, he was unequivocal: “That said, Berkshire will hold fast to what it believes are appropriate prices for its products. It will not bow to pressure to do “dumb things.””

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