Latertweets from BRK. Morning session.
Mostly quotes from Warren Buffett (“B”). C is Charlie.
Teary moment. Coke ad.
Another one. Paul Anka duet. My waaaay.
Started. First time in a room with Warren Buffett and bonus: Bill Gates.
Carol Loomis. Fortune. Kicking off the Q’s.
On Coke:
“Strange is frequently Buffettlike.”
Buffett: answers on the coke issue
Charlie: “I think you handled the situation very well.”
C: A lot of businesses spill a little on staffing. And that’s alright. They don’t have to be fanatic about it.
B: American business is very strong. We have extraordinary returns on net tangible assets. Corporate tax as percentage of GDP have fallen from 4% to 2%.
B: The nature of boards is part business organizations and part social organizations. In 55 years of being on corporate boards, I don’t think I have ever seen a comp committee report come in and get a dissenting vote.
C: 1, we do what we do because we like doing it. And 2, the system works and we are unlikely to stop.
B: Independent directors are not independent.
B On Intrinsic value: We want to trade at 85% of our intrinsic value, and grow the intrinsic value.
The clip from Warrens opening apology at congressional hearings is stellar.
B: Very seldom that publishing compensation accomplishes much for the shareholders. Only human to look at proxy statements and negotiate for more.
C: We are way better off without adding to the culture of envy in America.
B: When you need cash, it is the only thing you need. It’s like oxygen. You never notice it. Except when you don’t have it, it’s the only thing you notice.
B: $20bn minimum cash reserve.
B: Charlie and I have never had an argument. We met when I was 29. We have disagreed around a lot of things. It’s just never led to an argument. We argue with other people.
C: We think a like. That’s one of the problems. If one of us misses it the other one will too.
B: If you look at any of our really big mistakes, I’ve made them. I would say I am a little more inclined to action than you. Would you say that’s fair Charlie?
C: You once called me the Abominable No-man.
B On managing cash: I know where it is. If I make a commitment I know where I will get it. But I don’t really keep it very organized.
B: Our weak points
– cash management/sweep might be good. Who knows what the subs are doing
– we are very disciplined in some ways but by ordinary business standards sloppy
– I am slow to make personnel changes. I like the managers we have. We love the guy. And it wasn’t killing us.
– our “lack of supervision” will miss something some time. On the other hand giving them the freedom that they enjoy, is part of our system. Dozens of people who have leeway.
B on Candy:
Boxed chocolate market is not growing. Pepsi predecessor company was a candy shop across NYC. He acquired Pepsi and sold it in his store called Lofts. Boxed chocolates have lost position to salted snacks. Sees has done really well – vs Russell Stover also did well in some channels. We can’t expand the markets very well, and expanding out of California has been hard. It doesn’t travel.
Sees opened my eyes to brands from 1972. And made us look at Coca Cola in 1988.
C: Main contribution to BRK was ignorance removal. We were pretty damn stupid when we bought Sees. The key to BRK is we are pretty good at ignorance removal. And the good news is we have a lot of ignorance left.
(Weird no mention of Wrigleys)
C: We are going to make a lot more energy directly from the sun and wind. Transmission lines. Generation. We are beautifully positioned.
B on the Fed: I am surprised how well things are going. I would like to say I would do exactly the same things. Bernanke was a hero at the time of the crash and panic, and subsequently. He is very smart man and handled things very well. It was interesting to read the minutes of the Fed from 2008 that didn’t understand just how serious things were.
B: Cash is king but it’s the dumbest thing you can own unless you are going to use it.
B: There isn’t a bubble situation at all but it is unusual (economy, long recovery).
Can BRK show an example of its business model?
B: The Dow Jones Index. Owning a group of terrific businesses, is not a bad business plan. Many if the conglomerates were put together for pure financial magic — owning 10x companies with 20x stock.
B: We are well situated to allocate capital — from candy to wind farms for example. Allocation based on business principles not stock-promotion principles.
B: Any of the serial acquirers are running a chain letter scheme. Our method is acquire for cash, acquire earning power, fund through float.
C: Also we don’t hunt deals. No rush. We just wait.
B: Not an MBA type at all; he’s a terrific guy.
Vishal! First Indian guy to speak. From Toronto.
The weather was a huge factor for BNSF and Energy businesses.
B Re Keystone: we are using rail to do 700k barrels per day. Rail is twice as fast as pipelines.
C: The oil sands are an important asset for mankind. But the pipeline doesn’t matter to us for now.
Protege partners — S&P vs Hedge Funds
2008 to 2013
-37 27 15 2 16 32 44 = 204%
-24 16 9 -2 7 12 13 = 127%
// Amol Sarva, Ph.D. // @amol // a.sarva.co // 530-727-8277 // Sent from my Peek //
Knotable testing in progress. Thanks for the help and apologies for the noisy messages.