Nation in uncharted territory, Buffett says at Berkshire Hathaway meeting

OMAHA, Neb. — The Warren and Charlie show, dubiously dubbed the Berkshire Hathaway annual meeting, wowed thousands of shareholders Saturday.

Billionaires Warren Buffett and Charlie Munger, chairman and vice chairman of the holding company with subsidiaries galore and a $261 billion market capitalization, fielded questions with ease and humor while making more than a few serious points.

“This is like watching a good movie because I don’t know how it ends,” Buffett said of ways in which the Federal Reserve handles monetary policy, nurses economic recovery and deals with its huge balance sheet going forward.

Both Buffett and Munger said the nation and the Fed are in uncharted territory, which Buffett called an experiment while praising Fed Chairman Ben Bernanke’s handling of problems of the past few years.

“I’ve got a lot of faith in Bernanke,” he said. But he also acknowledged results from keeping interest rates low, while helping such economic sectors such as housing heal, may be felt later in the form of higher inflation.

“It certainly has the potential for being very inflationary,” he said. “It hasn’t been so far.”

He called interest rates key.

“Interest rates power everything in the economic universe,” said Buffett. “It’s a huge factor.”

One questioner preceded his inquiry with thanks to Buffett and Munger for letting folks come into the massive CenturyLink Center in downtown Omaha early on a rainy and blustery spring morning, though that meant seats were almost all taken in the arena for upward of 18,000 by 8 a.m. The question-answer session began at 9:30 a.m. Buffett’s rejoinder:

“If we had a company that sold coats, we would have left you out there.”

Munger, a terse if not taciturn man, usually added little or nothing when Buffett asked him if he had any comment, occasionally using his patented line: “Nothing to add.”

But at one point he did have direct advice for the Berkshire shareholders: “Don’t be so stupid as to sell these shares.”

Both men responded to a question about whether or when the United States currency, which used to be called the almighty dollar, could be threatened and lost its reserve currency status.

“If you lose that you lose some advantage,” Buffett said, though he didn’t see it as catastrophic. Munger, sounding a bit more pessimistic, prompted a dialogue from Buffett about whether reserve currency status would be lost in 20 years.

Munger said no, not in two decades, but took the long view of when the dollar might meet its demise: “That doesn’t mean forever.”

Buffett said the BNSF Railway and GEICO, a major property and casualty insurer, did well of late and acknowledged Berkshire wants to become a major player in commercial insurance as well.

Munger, meanwhile, talked of the incredible Berkshire record of putting together a major holding company in Omaha with just a few managers to lead it. He said if someone had projected that 20 years ago, it would have been ridiculous.

“But it happened and it works,” he said. He said that is because “decentralization to the point of abdication.”

Buffett, speaking on similar points, said the larger Berkshire subsidiaries account for much of the firm’s success and pointed out eight of them would, if they were independent, be Fortune 500 firms.

Matters of Buffett succession again were front and center in shareholders’ minds, and once again the chairman kept his intentions close to the vest. But he did say whomever takes over will do well in part because he or she will have ready cash to buy in bad times.

That point and some others caught the attention of Bill Glaser, an Omaha native who now lives in the Carson City area.

“He talks of the future, and whoever takes over will be in the same position,” said Glaser.

Glaser and his wife, Cheryl, have owned stock about 15 years and have been to a dozen annual meetings.

“It was great,” he said. Cheryl echoed that sentiment and also enjoyed opportunities at the center to check out things with the Pampered Chef, another Berkshire company.

The Glasers met Buffett at a Dairy Queen in Omaha years ago when they began attending the meeting, but such opportunities are rarer now that thousands flock to Omaha for each meeting.

Even as the arena was packed for the question-answer session, thousands more were in the downstairs exhibit hall shopping at places set up for the weekend to provide shareholder discounted merchandise from. Dairy Queen, Fruit of the Loom, Justin Boots, Clayton Homes and a host of others were on hand selling wares. Meanwhile, off-site purchase opportunities were going on at local Berkshire businesses, such as Borsheims Jewelry and Nebraska Furniture Mart.

Buffett announced Saturday that today’s festivities would afford shareholders a chance to play table tennis at Borsheims against Ariel Hsing, a Buffett acquaintance and world-class player who in the past played Buffett and Bill Gates of Microsoft and the Berkshire board.

“I met Ariel when she was nine,” he said. Now 17, she has played at three Berkshire annual meetings and this time will take on shareholder challengers.

“If you’re courageous, you can show up with your paddle and end up looking like an idiot,” Buffett said.

The annual meeting ended in the late afternoon, but the business portion for the board took much less time than the five or so hours allotted to the Q&A sessions.

Festivities today also include a 5K run for the fitness-oriented, plus shareholders, and Buffett selling jewelry to interested shareholders at Borsheims during the afternoon for “Crazy Warren” price.