Saturday, May 5, 2012

The WSJ's Deal Journal is "Live-blogging Buffettpalooza" (BRK.b)

As I said in the post immediately below, live-blogging is one of the toughest jobs in journalism.
Here's Deal Journal:

OMAHA, Neb. — Berkshire Hathaway Inc. Chief Executive Warren Buffett will address shareholders here at 10:30 Eastern time Saturday, in his first appearance at the company’s annual meeting since his announcement 18 days ago that he has early-stage prostate cancer. Deal Journal will be there soaking in every minute.
  • "What you've suggested is a very conventional approach," Mr. Munger tells the questioner, making it clear that he views that approach as nonsensical.
  • Questioner asks if Berkshire shouldn't be more aggressively buying back shares, paying dividends and using its richer stock for acquisitions. A run-up in the stock "is likely to occur in the future," Mr. Buffett says. But he doesn't "think the dividend would be a plus ... and might be just the opposite," unless the company finds it can't invest the funds profitably.
  • Asked why he bought J.P. Morgan Chase stock for his personal account but not for Berkshire Hathaway, Mr. Buffett explains that he prefers Wells Fargo -- of which the company owns 400 million shares worth $11 billion or so at year-end -- better. "My best ideas are all in Berkshire," he says. "That I can promise you."
    "I know Wells better and it's easier to understand," he says, adding that he bought Wells Fargo in the first quarter.
  • I don't own your stock for the glamour, a questioner says, pointing to the outperfomance of gold in recent years. Mr. Buffett replies that Berkshire Hathaway stock has vastly outpaced gold, as have common stocks as a group, over longer time periods. He urges people not to give in to the urge to "caress" gold even though it has gone up for the past 12 years.
  • Question is about insurance-business valuations, which Mr. Buffett turns into a discussion of the high worth of the company's car-insurance unit. "Geico has an intrinsic value that is significantly greater than its net worth and its float," Mr. Buffett says, referring to the premiums the company has received and is free to invest while it awaits claims. "I wouldn't say that about all our insurance businesses.
    Valuing businesses based on Ebitda, a cash flow measure, "is nonsense," Mr. Buffett says. "I don't even like hearing the word," Mr. Munger adds.
  • Question: Who will manage Berkshire's derivatives book when you go?
    "I don't think there will be much of a derivatives book when I go," Mr. Buffett says. He says managing it "is not a big deal." Most of the company's ongoing derivatives activities are in the energy business.
    He adds that the company "hit a home run" with its investment managers, Todd Combs and Ted Weschler, who would be among those managing derivatives after Mr. Buffett leaves. But "the rules have changed" regarding collateral presentation for derivatives -- Berkshire has in the past written contracts that don't force it to post collateral to its trading partner, but now doing so is mandatory -- and so the company is unlikely to dabble in derivatives.

See also:
DealBook is liveBlogging Berkshire Hathaway"s 2012 Annual Meeting (BRK.b)
Morningstar is Live Blogging the 2012 Berkshire Hathaway Annual Meeting (BRK.b)