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Lindley Estes is a business writer for The Free Lance-Star and This blog is on Fredericksburg-area business. Send an e-mail to Lindley Estes.

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First half of Berkshire meeting in the books

It’s lunchtime here at the Qwest Center in Omaha, Neb. Warren Buffett and Charlie Munger spent the past few hours answering questions from shareholders on the state of Berkshire Hathaway and the overall economy. I’ll do one more blog post after the second half concludes at 3 p.m.

Here is a recap of the first half:

As always, the meeting kicked off with a humorous movie about Berkshire. It featured commercials and other highlight reels from many of the Berkshire subsidiaries, including GEICO. Perhaps the most clever part featured Buffett helping Tiger Woods fix his golf swing.

Then the questions and answers began. Half the questions were asked by journalists Becky Quick, Carol Loomis and Andrew Ross Sorkin. The other half came from shareholders in the crowd. Here are among the comments Buffett made:

  • Buffett thinks the big derivative bets that Berkshire made on the stock market not collapsing over the next couple of decades will pay off in a big way, even if they’re down now.
  • The U.S. government is doing the right thing with the stimulus. To do nothing last fall would have made a total meltdown possible. The government has made mistakes but has done as good of a job as could be expected. When consumer spending pulls back like it has, the government must step in.
  • People shouldn’t need to calculate precise business values before making an investment. If it’s a good idea it should jump out at you. The key to investing success is controlling one’s emotions as much as intelligence.
  • Rating agencies erred by giving residential mortgage-backed securities such high ratings, but had they been tougher Congress would have criticized them for preventing homeowners from reaching the American dream.
  • The housing market is getting healthier as building activity drops, interest rates and prices fall and buyers begin to sop up the excess inventory. But the market won’t recover overnight, and it differs everywhere.
  • Berkshire still has three internal candidates for CEO, but Buffett didn’t name names. He said there’s no reason to groom a successor because they’re all already running large businesses successfully.
  • GEICO is prospering as people look to save money. All that advertising is well-spent, he says.
  • When Wells Fargo was under $9 a share, he told an investing class that if he had to put all his money into one stock that would be the one.
  • The only time Buffett looks to sell a business is if the fundamentals have deteriorated to the point that it’s losing money, or if there’s a labor problem. He also said he’ll sell to ensure Berkshire has enough cash to sustain itself.
  • There will be inflation over time due to the federal government’s current policies. The people who will suffer worst are those buying fixed investments that will have less purchasing power over time.
  • Newspapers are in a long-term decline, and in many cases, Buffett said, "we would not buy them at any price." Berkshire owns The Buffalo News, and Buffett said he’ll keep running it as long as it makes a reasonable profit. Munger called the decline of newspapers a "national tragedy."
  • Retailers will probably struggle for some time. Commercial real estate will see relatively high vacancy rates.

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