Berkshire Hathaway just held its annual meeting, in which Warren Buffett fields questions from shareholders. For six hours. He’s 77. I’m just sayin’.
Anyway, the Wall Street Journal had some highlights from the Q&A (I think it’s $-to-read, but that’s probably why Rupert Murdoch bid $5 billion for it, and not the Times or the WaPost). I never really knew anything about Buffett till the dot-com boom, when he was getting lambasted in the press for not buying into internet companies. At the time, he basically responded that none of those companies had a viable business model, and he didn’t understand how any of them could make money. Since he wasn’t one to trade on volatility, he stepped aside, was regarded as a dinosaur, and is now back to being regarded as the sage of investors. Perspective’s a funny thing.
I think his aversion to derivatives mirrors his dot-com experience:
In fielding a question about derivatives, which he once referred to as “financial weapons of mass destruction,” Mr. Buffett told shareholders that he expects derivatives and borrowing, or leverage, would inevitably end in huge losses for many financial participants.
“The introduction of derivatives has totally made any regulation of margin requirements a joke,” said Mr. Buffett, referring to the U.S. government’s rules limiting the amount of borrowed money an investor can apply to each trade. “I believe we may not know where exactly the danger begins and at what point it becomes a super danger. We don’t know when it will end precisely, but . . . at some point some very unpleasant things will happen in markets.”
And, in fact, he brings the derivatives issue back to the mentality that ruled the dot-com era: volatility.
Exacerbating the problem of derivatives and leverage is the short-term trading mentality and high turnover in the stock and bond markets, Mr. Buffett and Mr. Munger added. “There is an electronic herd of people around the world managing an amazing amount of money” who make decisions based on minute-by-minute stimuli, said Mr. Buffett, adding, “I think it’s a fool’s game.”
It seems that the Q&A is also a venue for people to grill Buffett about his personal life:
A shareholder from St. James, N.Y., who said he brought one of his five daughters to the meeting, asked Mr. Buffett to explain why he supports organizations such as Planned Parenthood. “It just doesn’t seem to jibe with the hero that I studied,” the shareholder told Mr. Buffett amid boos from the audience.
“Men set the rules for a lot of years, and I think it’s wonderful that women can make reproductive choices,” Mr. Buffett replied, as shareholders applauded and cheered.
Almost makes you wanna raise $109,500 to buy a single share of Berkshire Hathaway.
(Speaking of which, here’s a link to a PDF of the tangled web of investing in PetroChina.)
(Update: more coverage from a variety of sources.)
Class B shareholders are also invited to attend so you can get in for the bargain basement price of $3633.25 as of Friday.
Coincidentally enough, Buffett talked about Class A/B share structures in his Q&A, when the conversation turned to the share structures at the NYTimes & WSJ. He contended that dual-class shares — in which the family ownership group has voting rights but fewer dividend-paying shares — isn’t a factor in the hammering that newspaper stocks have taken in recent years.
Perhaps he was being disingenuous, given that he’s on the board of one of the major ones, but it seems to me that when the voting rights are controlled by a family that doesn’t have as great an interest in the share price, you could end up with some half-assed decision-making process. Of course, the quarter-to-quarter interest of the normal shareholders isn’t exactly healthy, either. Sigh…