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Lindley Estes is a business writer for The Free Lance-Star and Fredericksburg.com. This blog is on Fredericksburg-area business. Send an e-mail to Lindley Estes.
Berkshire meeting, part two
The Q&A is in the books at the Berkshire Hathaway meeting. Here are among the points Charlie Munger and Warren Buffett made during the second half:
- BYD, the Chinese car company, has a very bright future, Munger said. "It may be a small company, but its ambitions are large," Munger said. There are BYD models out in the exhibition center at this meeting.
- Outlook on the U.S. dollar? "The dollar will buy less 10 or 20 years from now," Buffett says. Policy makers are doing things we haven’t seen before, and it will have consequences. "You can bet on inflation," Buffett said. Munger says a little inflation is OK, but you want to avoid runaway inflation.
- Impact of Berkshire losing its AAA credit rating? Buffett says it makes very little difference in their borrowing costs. But he was disappointed when Moody’s downgraded them. "It does cause us to lose some bragging rights," Buffett said. But "we’re still a triple-A in my mind."
- Berkshire is investing heavily on wind energy, especially in Iowa. "We’ll continue to be a leader" in wind power, Buffett said. They’ll also invest in additional utility businesses.
- Buffett called the Congressional vote to tax 90 percent of the bonuses paid at AIG "an act of uncontrolled fury."
- Future targeted growth rate for Berkshire? Buffett says company won’t come close to 20 percent growth of the past due to the company’s size. Shooting for a few percentage points better than the Standard & Poor’s 500.
- A man from China asked Buffett how he plans to invest in the country. "We respond to opportunities as we see them," Buffett said. Says it’s very likely that company will invest there more in the future. "I’ve got nothing but admiration for the way the Chinese have conducted their affairs," Munger said.
- Would Berkshire consider dividing? Not a chance. "We will not be spinning off any companies," Buffett said. "At Berkshire we buy to keep."
- On General Electric and Goldman Sachs investments last fall: Feel good about the companies and management, but got into them for the terms of the investments. "It took good terms in order for us to do it," Buffett said.
- About world economy: "There’s always a lot of things wrong with the world," Buffett said, "but it’s the only world we’ve got." Over time people will live better and better in this country. "We have a system that unleashes human potential," Buffett said. He said we’re sputtering right now, but we’ll get back on track.
- Munger (84 years old): "Now that I’m getting so close to death I’m feeling more cheerful about the economic future." He sees huge advances in energy technology in the future.
- Munger: Corporate boards would work better if directors weren’t paid at all.
- Buffett: There have been layoffs at some of Berkshire’s housing-related businesses (carpet, brick, etc.). "Our managers have to look at the reality of the current situation," he said.
- How to evaluate management? Talent usually stands out. We have no retirement age, Buffett says, so the toughest decisions are when someone no longer has the same management ability. "It’s the only part of my job that I hate," Buffett said.
- Still buying American stocks? How do today’s opportunities compare with others in your career? Stocks not as cheap today as in 1973-74, but interest rates were far higher then. Recently have bought both corporate bonds and stocks. "We don’t try to pick bottoms," Buffett said.
- Avoid capital-intensive businesses.