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Saturday, May 05, 2007

Berkshire Hathaway - Meeting Notes Part I

The meeting opened with the cousin Jimmy Buffett playing the Berkshirehathawayville version of his song.
WB announced his plan for a cartoon series for children to impart financial education in an enjoyable manner.
The Q1 2007 results were posted with WB explaining that insurance rates have come down recently, but the effect will start showing up in a couple of quarters or so due to a lag effect in rates ratcheting down. He offerd caution on cat. insurance and mentioned that over a long term berky would be expect to break-even in tnis business and still come ahead because of its ability to manage float and generate float income.
He brought up the issue of a high accounts receivable by 7 billion than normal due to the Equitas deal closing in April.
Views on:-
Private Equity
* Funds invested are locked in. It's hard to get out for the investor.
* Fund Managers are compelled to invest since it is in their interest to earn more fees by generating more funds. They cannot go back to investors with surplus funds in hand.
* Trigger for the slow down could be junk bond yield spreads going up higher hampering leverage.
Overseas investments
WB has no bias against. Low holdings not reported in annual report. Reporting limit threshold of 3% in Europe a deterrent.
Executive Compensation
* Ratcheting and envy at play
* Non-independent comp committees.
* Compensation should be based on controllable factors. For instance, extraction cost based comp for an oil executive, not oil prices. Factor should be relevant as well.
Interest rates
* Credit contraction as a result of higher rates.
Contraction as was historical is not probable. Fed not likely to orchestrate a credit crunch. Follies of excess liquidity may bring about unhealthy legislation.
High Corporate profits
WB - Share in GDP getting higher, labor's share down It is not likely to persist.
CM - Share of financials is higher is the causw. Investment banks etc earning abnormal profits. Historically high consumer credit is also the reason.
Naked Shorting
WB welcomes shorters, sees it as a money making opportunity by lending stocks.
It is a hard position to take.
* Excitement seeking is the underlying.
* Tax on ignorance - making it easier to gamble is preying on ignorance, not the job of a govt that serves people.
How to become a good investor
* Read everything you can
* Fill your minds with ideas, sort out the good ones
* Jump into investing. Reading about investing and actually doing it is as different as reading a romance novel and actually doing "something else".
* WB has same thought pattern as when he was 19 abt investments
CM - Rationalise - "What do you own and why do you own it?"
WB - Write an essay on why you would buy the company at the price

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