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Thursday, April 30, 2009

KETV: Berkshire Meeting To Boost Omaha Economy

The record turnout expected for Berkshire Hathaway's shareholders meeting will bring an economic boost to the city of Omaha.The city is expecting people from all over the world to come spend money in restaurants, hotels and local businesses, especially those under the Berkshire Hathaway umbrella."They're going to have more people here than ever, and that's just the testament to Warren Buffett," said Bob Batt of Nebraska Furniture Mart.

Buffett and his stockholder meeting get a lot of attention even in good times. The recession has sparked even more interest in what the Oracle of Omaha has to say."They have released 35,000 credentials this year. That is up from last year. In fact, that's 10,000 more than we had two years ago," said Dana Markel of the Omaha Convention and Visitor's Bureau.Now in its 26th year, the Woodstock of capitalism is out in full force to capture consumers, even in bleak times."These last nine months have been the biggest challenge to our economy and our business that we have ever seen," Batt said.

Berkshire Hathaway stocks are down and spending has slowed. But the Buffett name still means gold to many people."He is the ultimate in financial intelligence, so consequently, it attracts people," Batt said. "Omaha is on the map this week."The city of Omaha will reap the revenue from the meeting, especially with a large number of international travelers expected."The rooms are running short and the restaurants are gearing up," said Markel."It's not only good for us, it's good for all of Omaha," Batt said.Berkshire Hathaway does not plan to release its first-quarter earnings report during the meeting. It instead plans to make the announcement after it ends, on May 8.

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INDYBAY.ORG: Klamath River Advocates Ask Warren Buffett to Close the Deal

by Dan Bacher

Wednesday Apr 29th, 2009 5:04 PM
Klamath Basin tribal members, fishermen, and river advocates will ask Warren Buffett, the owner of Berkshire Hathaway and the richest man in the world, to "open the river" and "close the deal" at the annual shareholders meeting in Omaha this Saturday.
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Klamath River Advocates Ask Warren Buffett to Close the Deal

by Dan Bacher

Klamath Basin tribal members, commercial fishermen, recreational anglers and river advocates have traveled to Omaha, Nebraska for the past two years to educate shareholders of Berkshire Hathaway Corporation about the urgent need to remove the Klamath River dams owned by its subsidiary, PacifiCorp. This weekend they will ask Warren Buffett, the owner of Berkshire Hathaway and the richest man in the world, to "open the river" and "close the deal."

Last year over 30 Klamath Basin activists attended the shareholders meeting. Several members of the group spoke before the crowd of over 35,000 shareholders urging Warren Buffett to remove his dams on the Klamath River, while others unfurled banners during the meeting.

"This year, we're as organized and determined as ever to get Klamath River people back to Omaha to call on PacifiCorp to close the dam removal deal and open our river," according to a statement from the Klamath Riverkeeper. "While we are cautiously optimistic regarding PacifiCorp’s ongoing negotiations with local communities on a dam removal plan, we want the corporation to know we are anxious to see a final binding agreement that removes dams and protects our water quality."

The group will be holding a film night in collaboration with Progressive Omaha to help inform members of the public on Klamath River issues, willl hold a press conference for national and international media, and will educate shareholders on the progress to date to remove PacifiCorp’s Klamath River dams. For more information, go to http://www.klamathriver.org/Omaha.html.

"This weekend we want to give the company some praise for coming to the table and doing the right thing," said Craig Tucker, spokesman for the Karuk Tribe. "PacifiCorp has committed to negotiating the dam removal agreement. At the same time, the deal isn't there yet. They're still negotiating the deal and the final agreement hasn't been forged."

"Right now the biggest obstacle to dam removal is the State of California," emphasized Tucker. "The Schwarzenegger administration seeks to link dam removal on the Klamath to a disastrous water bond that includes a peripheral canal and more dams. We think Klamath Dam removal should stand on its own merits and not be linked to destroying somebody else's river."

The Annual Shareholder Meeting, presided over by Warren Buffett and Charles Munger, is set for Saturday, May 2nd at the Qwest Center in Omaha. Over 35,000 people are expected to attend this weekend.

On the same day that Klamath River advocates will be urging Buffett to "open the river" and "close the deal," the socially responsible investment firm Trillium Asset Management Corporation (“Trillium”), a shareholder in Berkshire Hathaway Corporation, is joining two nonprofit advocacy organizations, the International Labor Rights Forum (“ILRF”) and International Rivers, in calling on fellow Berkshire Hathaway investors to back a proposal on the agenda for the company’s upcoming May 2, 2009 annual meeting which requests that Berkshire prepare a “Sustainability Report” on its performance on environmental and social issues.

“Klamath River dams now operated by Berkshire Hathaway’s PacifiCorp subsidiary have been linked to toxic water conditions that produced the largest single salmon die-off in U.S. history," International Rivers Executive Director Patrick McCully stated. "Now PacifiCorp has promised to pay up to $200 million for the dams’ removal, because government studies show this would be cheaper than making the dams compliant with environmental laws. When your company has dams that are so harmful that it's cheaper to dismantle them than get them re-licensed, shouldn’t shareholders know that?”

For more information, go to: http://internationalrivers.org/en/node/4261

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MARKETWATCH: Berkshire Hathaway Press Release - Berkshire Profit Announcement Correction

Last update: 4:20 p.m. EDT April 29, 2009

OMAHA, Neb., Apr 29, 2009 (BUSINESS WIRE) -- There has been some misreporting regarding the timing of Berkshire's first quarter earnings release. Berkshire was never scheduled to release earnings this week. Berkshire has consistently followed a policy of releasing its interim earnings and posting its quarterly financial statements on the Internet on a Friday afternoon within 40 days following the end of the calendar quarter (the latest date we are allowed to file Form 10-Q with the SEC). Depending on how the calendar falls this can be the first or second Friday of the second month following the quarter end. Accordingly, this year, we will be releasing earnings and posting our quarterly financial statements on the Internet on Friday May 8, 2009.
Berkshire Hathaway and its subsidiaries engage in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, retailing and services. Common stock of the company is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B.
SOURCE: Berkshire Hathaway
Berkshire Hathaway
Marc D. Hamburg, 402-346-1400


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BOSTON HERALD: Thousands of Berkshire Hathaway shareholders flock to Omaha

By Associated Press
Wednesday, April 29, 2009

OMAHA, Neb. — Billionaires Warren Buffett and Charlie Munger will spend most of Saturday dispensing sage advice on finance, the recession and life at Berkshire Hathaway’s annual meeting, and roughly 35,000 people are expected to pack an arena and overflow rooms at a nearby hotel to listen.

Berkshire’s chairman and vice chairman spend more than five hours answering any and all questions at the holding company’s shareholder meeting, which Buffett likes to call the "Capitalists’ Woodstock." They’re almost certain to be asked about the state of the economy, Berkshire’s disappointing performance last year and Buffett’s successors.

Andy Kilpatrick, the stockbroker-author of "Of Permanent Value, the Story of Warren Buffett," said he thinks many people want Buffett to reassure them about the economy.

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SEEKING ALPHA: Reviewing Wells Fargo's 2009 Shareholder Meeting: No One Really Knows Anything

April 29, 2009 | about stocks: WFC

Matthew Rafat picture

Matthew Rafat

I attended Wells Fargo's 2009 annual meeting today in San Francisco, California. Wells Fargo (WFC) did not seem to anticipate such a large crowd attending its meeting. It had to scramble to set up more chairs in an adjacent viewing area where shareholders could view the meeting on a large video screen. In a scene reminiscent of a Friday night club, some shareholders (including myself) had to wait downstairs before security allowed us to take the elevator to enter the meeting. Per its conservative image, Wells Fargo did not offer any coffee or refreshments. I asked an employee whether Wells Fargo had served coffee or refreshments at last year's meeting, and she said she didn't remember Wells Fargo serving food or drinks at any annual shareholder meeting.

Chairman Richard "Dick" Kovacevich spoke first and appeared in a good mood, making several well-received jokes. He earned my respect for being forthright in this earlier speech, where he stated, "We [the financial sector] really caused this crisis."

After the formal portion of the meeting had concluded, he turned the meeting over to President and CEO John Stumpf. First, let me give you some visuals. Mr. Kovacevich is a tall man who exudes confidence in a friendly way. Mr. Stumpf, on the other hand, is shorter, more intense, and much more brusque. I would almost compare them to Robert DeNiro and Joe Pesci (Goodfellas or Casino, take your pick)--effective men, each in his own way.

Mr. Stumpf delivered a short presentation. He began by rattling off all the names of failed financial institutions--AIG, Bear Stearns, Countrywide, Fannie Mae, Lehman Brothers, Merrill Lynch, and WaMu. These are "difficult times," he said. He went through some slides showing that Wells Fargo had made money and continues to grow. One slide was confusing--it showed WFC reporting $0.70 of diluted EPS, but had a shadow area that added $1.51 in EPS, which assumed the inclusion of credit reserves. Including the credit reserve build, the additional EPS would have brought the numbers in line with previous earnings. I did not understand what the additional EPS meant, and even after I asked Mr. Stumpf to explain it again during the Q&A, I still didn't fully understand it. (My understanding is that Wells Fargo had set aside billions of dollars to cover expected future loan losses, especially due to the Wachovia acquisition, and had it not been forced to account for its expected losses, its earnings per share would have increased.)

Mr. Stumpf talked about the dividend and the "difficult decision" to cut it. He indicated WFC would increase the dividend when "practicable" to do so. If you go back to a time when banks were staid creatures, people would buy banking shares for the dividend. They would hope that a conservative bank would increase deposits and make more loans over time, allowing the bank to steadily increase its dividend. As a result of their consistent dividends, banking stocks were called "widows and orphans" stocks--held by husbands to protect their families when they died. That age is over. Banks have lost the public's trust, and with it, we have entered a new world of uncertainty.

This change is shocking because even banks that acted conservatively, like Wells Fargo, had to cut their dividends, breaking their implicit promise to maintain steady dividends. It there is one lesson to be learned from this crisis, it's that being good didn't pay off. As a result of widespread and creative financial engineering, the good banks got sucked into the morass created by bad banks like Citigroup (C) and Bank of America (BAC). Now, senior citizens looking for income have few places to invest. Even preferred shares are suspect.

Mr. Stumpf returned to his theme of consistent growth. He said that even during this tough time, WFC "grew revenues by 6%" while reducing expenses by 1%. He said the amounts loaned also increased, although most of that increase came from the commercial and wholesale areas, not the consumer. Deposits also increased as a result of the "flight to quality."

Mr. Stumpf then talked about Wells Fargo's two major events: Wachovia and the government's $25 billion investment in Wells Fargo. He said the Wachovia acquisition was going well, and Wells Fargo would pay back the government as soon as practicable. He said companies fail when they confuse their mission with the results. He said WFC's mission was to help people succeed financially, and the result was that "we make money." Bad companies, he said, mix these up and focus on making money over serving their customers. Mr. Stumpf ended his presentation by pointing out Wells Fargo's charitable contributions, which were impressive.

The Q&A session was longer than usual, and most shareholders had interesting questions. One thing about Mr. Stumpf, though--if he doesn't like your question, he'll give you a quick answer and expect you to move on. Several times, he avoided answering questions by using humor to deflect the question (Yes, those of you who remember my Joe Pesci comparison can start visualizing him saying, "Funny? Funny how?").

One shareholder asked about Citibank's (C) lawsuit against Wells Fargo (which relates to the Wachovia acquisition). Mr. Stumpf said Wells Fargo would defend itself vigorously.

I asked whether the government forced Wells Fargo to take TARP money. After all, if Wells Fargo didn't need it, why didn't they reject it? Mr. Stumpf tried to avoid answering the question, so I asked Mr. Kovacevich directly for an answer. He said government negotiations were confidential, but added, "We did not ask for the money." He said he took the money because it was in the best interests of the company at the time.

Another shareholder talked about a personal issue. Apparently, Wells Fargo had increased his interest rate. The shareholder complained about Wells Fargo's customer service. At first, Mr. Stumpf asked whether the shareholder had a question. (At this point, I started thinking Mr. Stumpf might take a bat to this guy's knees.) After the shareholder meekly said, "I guess I don't have a question," Mr. Stumpf wisely turned on the charm. He said, "I'm sorry," and directed the shareholder to a specific Wells Fargo employee for further assistance.

Another shareholder praised the bank. He was a former employee who had held Wells Fargo shares since at least 1998.

Another shareholder talked about zombie banks and whether nationalization would be a good idea. Mr. Stumpf replied, "We are solvent" and "clearly not a zombie bank." He said his understanding was that the President and Congress had rejected nationalization.

Another shareholder asked whether Wells Fargo anticipated raising its capital base, thereby diluting its common equity shareholders. In a telling sign of how uncertain the current environment is, Mr. Stumpf refused to comment one way or another. When you strip down the optimism, no one really knows. Look at 78 of Wells Fargo's 10K:

Under SOP 030-3 (Accounting for Certain Loans or Debt Securities Acquired in a Transfer), we recorded at fair value all credit-impaired loans acquired in the merger based on the present value of the expected cash flows... using assumptions about matters that are inherently uncertain.

Essentially, Wells Fargo itself admits its numbers are "inherently uncertain." The only thing we know for sure is that Wells Fargo's earnings received a boost from a recent loosening of the mark-to-market accounting rules. Still, regardless of any accounting changes, at the end of the day, no one really knows anything, because there are too many unknown variables. That's why Wells Fargo accepted $25 billion dollars of our money--it doesn't really know, either, and if it did, it would have paid back the government already. So of course the CEO can't promise to avoid further capital injections. Of course the CEO can't promise to avoid diluting the common equity shareholders. Like everyone else, he doesn't really know what's around the corner. When historians study this current time period, the honest ones will admit no one really knew anything. It's sheer hope and faith that's driving many Americans, and, by extension, the banks to which they owe money.

I went up to the mic one last time. I told Mr. Stumpf some people think that "too big to fail" should be "too big to exist." I implied that we weren't addressing any of the root causes of our current problems and that this crisis could happen again. I said it was frightening to see the stock market go up and down based on the appearance of the banking sector's good or bad health. I indicated that banks, a relatively small group, had tremendous power over the average Joe's 401k. I said that Wells Fargo had spoken against some regulation, such as executive pay restrictions (see also 10K: page 78), but it hadn't talked about what regulation it favored. I asked Mr. Stumpf to talk about what regulations he favored so that we could avoid another crisis.

Mr. Stumpf had a two-part answer. He said that only 22% of financial assets are held in commercial banks. He said most financial assets are held by unregulated entities, such as AIG (and others who thought credit default swaps were a great idea). At this point, his answer became somewhat confusing. From what I understood (and discussed with an Aussie couple after the meeting), Mr. Stumpf implied that we should expand financial regulation, but without adding another government agency. He did not favor the current situation, where multiple regulatory bodies cover select financial entities while excluding other major financial players. (Or, according to the Aussie gentleman, "Don't go swimmin' without your trunks"--demand everyone have some covering if they want to play in the pool.)

Mr. Stumpf also suggested we should try to minimize systemic risk. He seemed to indicate that all of the banks' assets should come under one umbrella so that the overall risk of the banking sector could be easily ascertained. Again, I am not certain this is what he said, because Mr. Stumpf talks quickly. While he clearly understands complex financial terms and ideas, he seems to have a hard time communicating those ideas to the general public. From what I heard, however, it sounded like even the banking sector's head honchos acknowledged that greater transparency and governmental involvement was necessary to minimize systemic risk. Perhaps thinking he'd said too much, Mr. Stumpf stopped. That's when I realized the point and theme of the meeting was to project confidence, because at the end of the day, that's what America needs, especially from the banking sector. I think Wells Fargo did an admirable job at the meeting, but again, no one knows anything. Only time will tell whether America exits this banking crisis stronger.

The AP's Michael Liedtke's review of the meeting can be found here. As of the record date, I had 9000 WFC shares, and I actually lost money on my trades. I went on margin and felt uncomfortable with the volatility, selling all my shares at around $14/share. Investors who bought Wells Fargo stock recently and had the fortitude to hold on have been rewarded. As I wrote here earlier, an investor could have made 46% had s/he timed the market properly.

Random fact: Warren Buffett owns approximately 7.4% of WFC common shares. See page 13 of Wells Fargo's 2009 proxy statement.

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FOX BUSINESS: Spend the Weekend With Warren Buffett

Liz Claman

FOXBusiness
Weekend with Warren

The FOX Business crew airdops into Omaha Thursday

We’ll hit the ground shooting to give viewers the ultimate access you won’t get anywhere else.
Starting Friday – we’re live from shareholder central – Borsheims – the largest freestanding jewelry store in America…second only to Tiffany on 5th Avenue.

We’ve got an all-star lineup of guests including an exclusive interview with John Freund – Citigroup Managing Director of Institutional Equity Sales. He’s made Buffett’s biggest trades for the past 30 years. An exclusive interview with Bob Batt – VP of the Nebraska Furniture Mart – Buffett sealed that deal with only a handshake! An exclusive interview with Mario Gabelli – he bought Berkshire Hathaway stock for $1500/share – now it’s trading around $90,000/share.

SPECIAL Send Warren your video questions

Other Friday exclusives include Nebraska Governor David Heineman, TD Ameritrade Chairman Joe Moglia, Borsheim’s CEO Susan Jacques, See’s Candies CEO Brad Kinstler, author Andy Kilpatrick. Plus – we’ll have MidAmerican Energy Chairman David Sokol.

Saturday – we’re the only business network LIVE from the shareholder meeting. We’ll have a rare appearance by some surprise guests. You’ll have to tune in to see who joins us. Plus – an exclusive interview with the CEO of Clayton Homes. We’ll have interviews with the Dairy Queen CEO, BusinessWire CEO, Pat Dorsey with Morningstar and we’ll be grabbing shareholders throughout the hour.

We’ve also got the CEO of Israeli tool company Iscar – Buffett calls it one of his best buys EVER.

Then Monday – we’ll be live with an exclusive interview during the first hour of trading. The two richest men – Warren Buffett and Bill Gates…plus another special surprise guest…. You never know who might show up!

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TRADING MARKETS: New Book -- 20 Buffett Bites by L.J. Rittenhouse -- to Debut at the Berkshire Hathaway Annual Meeting, May 2, 2009

NEW YORK, Apr 29, 2009 (BUSINESS WIRE) -- BRK/A | Quote | Chart | News | PowerRating -- L.J. Rittenhouse, President of Rittenhouse Rankings Inc. and former Wall Street banker will debut a special shareholder edition of her new book, 20 Buffett Bites, at the Berkshire Hathaway annual meeting, May 2, 2009. This concise financial guide, subtitled Delicious Morals for Turbulent Times, distills the key principles in Warren Buffett's latest shareholder letter (February 28, 2009) into "20 Buffett Bites." Each chapter starts with a "bite" from Buffett's letter and a "tip". Rittenhouse expands on these ideas and then draws a moral illustrated with chocolates from See's Candies, a Berkshire company.

Rittenhouse highlights such Buffett wisdom as: "Treat Market Pessimism as Your Friend," "Invest with CEOs Who Treasure Cash," and "Protect Your Money When the Facts Turn Upside-Down." The book does not displace Buffett's 12,335 word letter, but rather, Rittenhouse says "guides readers to look beyond stock tips to focus on the principles at the heart of Berkshire's phenomenal 44-year wealth-building track record." Phillips Talbot, former ambassador to Greece notes: "In turbulent times, Buffett's wisdom and Rittenhouse's tips are needed more than ever."

Rittenhouse will autograph as many of the 1,500 special edition copies as possible at the Bookworm Bookstore in Omaha's Qwest Center before the meeting and during the lunch break. Attending Berkshire Hathaway shareholders will receive their standard 20 percent discount off the book's price of $19.95. In addition, books can be ordered at www.bookwormomaha.com. To get the shareholder discount, orders must be placed between Friday, May 1 at 12:00 a.m. and Sunday, May 3 at midnight CST.

Rittenhouse's book, "Do Business with People You Can Tru$t: Balancing Profits & Principles" debuted at the 2002 Berkshire Hathaway annual meeting. Rittenhouse Ranking's annual survey of CEO candor and corporate performance can be viewed on www.rittenhouserankings.com.

SOURCE: Rittenhouse Rankings Inc.

Rittenhouse Rankings Inc.

Stephen Dandrow, 212-580-9176
Stephen@rittenhouserankings.com
For full details for BRK/A click here.

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BLOOMBERG VIDEO: Collection of Warren Buffett interviews


Buffett, Gates, Sokol, Trott Interview
April 28 (Bloomberg) -- Bloomberg's Betty Liu reports on Warren Buffett and succession plans at his Berkshire Hathaway Inc. This report includes highlights of Buffett's interview with Liu on March 5 and comments from Berkshire board members Bill Gates and Don Keough, Buffett adviser Byron Trott, and David Sokol, head of Berkshire's MidAmerican Energy Holding Co. ("The Inner Circle: Warren Buffett" will air this evening on Bloomberg Television. Source: Bloomberg)

Eveillard, Child, Pabrai, Birinyi on Berkshire, Buffett
April 28 (Bloomberg) -- Jean-Marie Eveillard, senior investment adviser at Arnhold & S. Bleichroeder Advisers LLC, Bill Child, chairman of R.C. Willey, Mohnish Pabrai, founder of Pabrai Investment Funds and Laszlo Birinyi, president of Birinyi Associates Inc., talk with Bloomberg's Betty Liu about billionaire investor Warren Buffett and succession plans at his Berkshire Hathaway Inc. Buffett will play host to a record 35,000 people at Berkshire Hathaway's annual meeting in Omaha, Nebraska, on May 2. Guests also discuss value-investment strategy in the current market environment.

Newport's Ortel Interview on Buffett
April 28 (Bloomberg) -- Charles Ortel, managing director at Newport Value Partners, talks with Bloomberg's Betty Liu about the performance of billionaire investor Warren Buffett. Ortel also discusses Buffett's investments in derivatives. Bloomberg's Erik Holm also speaks.

T2's Tongue Interview About Berkshire Hathaway
April 28 (Bloomberg) -- Glenn Tongue, general partner at T2 Partners Management, talks with Bloomberg's Erik Schatzker about the leadership skills of Berkshire Hathaway Inc. Chief Executive Officer Warren Buffett. Tongue also discusses the outlook for Berkshire's annual meeting on May 2, his investment strategy for Wells Fargo Inc. and the performance of the U.S. housing and credit markets.

Thomas Russo Interview on Berkshire Meeting
April 28 (Bloomberg) -- Thomas Russo, a partner at Gardner Russo & Gardner, talks with Bloomberg's Carol Massar about the outlook for Berkshire Hathaway Inc.'s annual meeting on May 2. Russo also discusses the impact of the swine flu outbreak on the U.S. economy, Federal Reserve monetary policy and Warren Buffett's leadership of Berkshire.

Hagstrom Interview on Warren Buffett
April 28 (Bloomberg) -- Robert Hagstrom, a portfolio manager at Legg Mason Funds Management Inc. and author of "The Warren Buffett Way," talks with Bloomberg's Betty Liu about Buffett's investing style. Hagstrom also discusses Buffett's performance and legacy.


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ASSOC PRESS: Berkshire won't release earnings report this week

By: The Associated Press | 29 Apr 2009 | 11:54 AM ET


OMAHA, Neb. - Warren Buffett's Berkshire Hathaway Inc. will not release its first-quarter earnings report this week on the eve of its annual meeting.

In each of the past three years, the Omaha-based company released its quarterly report on the Friday before its shareholder meeting.

This Saturday, the company expects more than 35,000 people to attend the annual meeting to listen to Buffett and Vice Chairman Charlie Munger answer questions for more than five hours.

But Berkshire spokeswoman Carrie Kizer said Wednesday the company's earnings report won't be released this week. Kizer says the release date has not been set.

Berkshire owns a diverse mix of more than 60 companies, with major investments in such companies as Wells Fargo & Co. and Coca-Cola Co.

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Wednesday, April 29, 2009

SHARE INVESTOR: Warren Buffett faithful ready for big Weekend in Omaha

Darren Rickard, Share Investor, 29/4/09

A big thanks to those of you who contacted me over a doco to be made of Warren Buffett by the BBC around Berkshire Hathaway shareholders and the Berkshire 2009 Annual Meeting in Omaha Nebraska that kicks off this weekend.

I have had many replies, and none more so than the following one encapsulates the deep feeling and respect this great investor and thoroughly interesting man seems to capture from his many millions of followers, including myself:

"I understand you are looking for Berkshire shareholders. I have been a Berkshire shareholder since 2001.

I can say with some confidence that Warren Buffett and Charlie Munger are more important in my life than God! I am a university graduate and a Chartered Accountant. I have worked in businesses for over 25 years but any knowledge I have acquired from these experiences is like a pebble in ocean in comparison to what I have learned from Warren and Charlie.

If you study Berkshire and the people behind it you are tapping into a rich reservoir of knowledge and wisdom that has proved incredibly useful in the real world of business over a long period of time. The Berkshire values are very old fashioned and very simple. It is about taking the long term view, common sense, humility, rationality, hard work and prudence.

Much of what goes on in the world of business and politics looks absurd and grotesque when viewed through the Warren Buffett lens. Why are people so loyal to Warren Buffett and Berkshire? It is just pure Disney. Failing textile mill, Berkshire Hathaway, taken over by young investor Warren Buffett. Investment is a terrible mistake. Buffett uses the company as his investment vehicle choosing not to take a management fee from his fellow shareholders. Over time the company evolves into one of the largest and most respected companies in the world. Warren Buffett turns out to be the greatest investor ever and becomes the richest man on the planet. In the end it’s not about the money and Warren gives the bulk of his fortune to the children of Africa. Who would not want to be part of this?

Good luck with your documentary. It will be easy to make the shareholders look like crazy America cult members. I know the BBC will go deeper than that." Gareth, Northern Ireland.

What Buffett has to say this weekend will be covered by media from around the world and more than 35,000 people will be attending in person to get his pearls of investing wisdom sieved through a down home style of old fashioned hokiness and a wonderful sense of black humour.

The world will be watching closely for some explanation of his frenzied buying activities over the last year and also his view of economic conditions over the following 12 months and of course the years to come.

I will be watching closely and you can keep up to date on what is more commonly known as the "Woodstock for Berkshire Hathaway Shareholders" at Everything Warren Buffett.

Until then I highly recommend reading his 2008 Annual letter to Berkshire Hathaway Shareholders published in February of this year. It will change your way of thinking about investing .

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BLOOMBERG VIDEO: The Inner Circle - Spotlight on Warren Buffett




The Inner Circle - Spotlight on Warren Buffett

Above is the Warren Buffett interview done by Betty Liu from Bloomberg. It was undertaken on 27 April 2009 and broadcast on Tue,28 Apr 2009 17:00 ET.

Below a portion of the same interview, this time with Bill Gates on succession at Berkshire Hathaway.


Buffett's Succession Play Watch
Tue,28 Apr 2009 23:31 ET





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BLOOMBERG: Buffett, at Annual Meeting, Refocuses Attention on Berkshire

By Erik Holm

April 29 (Bloomberg) -- Billionaire Warren Buffett, who entertained shareholders at past Berkshire Hathaway Inc. annual meetings with musings on baseball and Paris Hilton, will focus investor attention this weekend on his efforts to turn around the company after its worst year in four decades.

Buffett needs to reassure shareholders of his Omaha, Nebraska-based firm after a 37 percent stock decline since Dec. 31, 2007, an ill-timed investment in oil producer ConocoPhillips and downgrades by ratings firms.

The annual meeting, scheduled for May 2, gives Buffett and Vice Chairman Charles Munger a platform to discuss markets, the economy and Berkshire’s businesses. Shareholders aren’t screened, resulting in questions on sports and Buffett’s relationship with Jesus Christ. The format was changed this year to ensure half the questions will pertain to Berkshire.

“It’s going to have a much more serious tone,” said Bill Bergman, an analyst with Morningstar Inc. in Chicago. “Berkshire shareholders aren’t used to a 40 percent decline, and we’re in a serious moment for our economic climate.”

Berkshire has posted five straight profit declines on deteriorating results at insurance units and liabilities from derivative bets on world stock markets. Buffett is expected to announce first-quarter results the day before the annual meeting. The company said Feb. 28 that book value, a measure of assets minus liabilities, had dropped by about $8 billion from $109.3 billion on Dec. 31.

Book value per share, a measure Buffett highlights in his yearly letter to shareholders, slipped 9.6 percent in 2008, the worst performance since Buffett took control in 1965, on the declining value of the derivatives and holdings in financial companies including Wells Fargo & Co. The Standard & Poor’s 500 Index has declined about 39 percent in the past 12 months.

‘An Icon’

“This thing we’re in is as bad as anything since the Great Depression,” said Andrew Kilpatrick, who wrote the two-volume “Of Permanent Value: The Story of Warren Buffett” and has attended every annual meeting since 1984. “He knows he’s a business leader for the world, an icon, and I think he’ll want to address that and give us some sort of insight into where we’re headed.”

Buffett told shareholders at last year’s meeting that the firm spent $4 billion investing in municipal auction-rate bonds, taking advantage of payouts that topped 10 percent after regular bidders fled the market. This year, he may discuss Berkshire’s purchases of preferred shares or debt of companies including Goldman Sachs Group Inc. and Harley-Davidson Inc. paying as much as 15 percent.

‘Market Dislocations’

“When there are market dislocations we’re always going to take advantage of them,” he said at last year’s gathering.

Buffett and Munger have used recent meetings to promote Berkshire as a buyer of non-U.S. businesses and distinguish their operations from what they consider the sometimes reckless behavior they see on Wall Street. Their pronouncements reach shareholders, potential customers and ratings firms.

Buffett, in his “Visitor’s Guide” for attendees, cited a paucity of inquires about Berkshire at the 2008 gathering as the reason for restructuring the five-hour question-and-answer session at the annual meeting, which is expected to draw 35,000 attendees, surpassing last year’s record by 4,000.

The new arrangement, in which half the questions are pre- screened by reporters, may ensure more discussion on succession planning, the $37.1 billion in derivative bets tied to stock markets and the loss of the top AAA credit grade in the last two months from Moody’s Investors Service and Fitch Ratings.

‘Something New’

“It’s a fantastic idea,” said Frank Betz, a partner at Warren, New Jersey-based Carret Zane Capital Management, who attended his first Berkshire meeting in the early 1990s. “Now there’s a chance to hear something new.”

Known as the “Oracle of Omaha,” Buffett has grown into a cult figure among investors who admire him as much for his homespun aphorisms as for his stock-picking savvy. He told the audience last year that a commitment from Berkshire was good even if Federal Reserve Chairman Ben S. Bernanke “runs off to South America with Paris Hilton.”

Visitors from 43 countries will fill the arena and the overflow rooms at Omaha’s Qwest Center, and students from 45 universities have been invited to watch from a ballroom in the Omaha Hilton across the street.

Investors in years past queued up in front of the arena before midnight to be first to put a question to Buffett. Attendees still have a chance to ask unscreened questions, though under a second change in policy, they will be picked by lottery instead of the speed at which they can sprint to the microphone once the arena’s doors open.

Not So Fast

“At age 78, I’ve concluded that speed afoot is a ridiculously overrated talent,” Buffett wrote in the program for this year’s meeting.

The three reporters -- Carol Loomis from Fortune magazine, Andrew Ross Sorkin of the New York Times and CNBC’s Becky Quick -- took questions via e-mail and are under instruction from Buffett to ask only about Berkshire.

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BLOOMBERG: Berkshire’s 31% Decline Spurred by Derivatives, Buffett Derided

By Richard Teitelbaum

April 28 (Bloomberg) -- Berkshire Hathaway Inc. shareholders have a chance this year to do something that’s rare among the Sage of Omaha’s followers: count their losses.

Despite Berkshire’s reputation as a bear market bulwark, its stock has been walloped. The Class A shares are down 31 percent since September, to $90,000 as of yesterday, exceeding the 26 percent drop in the Standard & Poor’s 500 Index.

One reason: Chief Executive Officer Warren Buffett’s increasing use of derivatives -- contracts whose value is based on the performance of stocks or bonds or the outcome of a specific event. That Buffett once called derivatives “time bombs” doesn’t calm investors.

Berkshire held contracts with a combined notional value of $67.3 billion at year-end. While this figure is used mostly for reporting purposes and isn’t indicative of potential losses, it dwarfs the company’s $25.5 billion in cash.

Buffett himself has warned of an increasing possibility he might have a loss from one type of contract on Berkshire’s books. Fitch Ratings and Moody’s Investors Service have lowered their credit ratings on Berkshire, partly because of the derivatives.

“People have become uncomfortable with financial investments that they don’t understand, especially anything related to derivatives,” says Charles Bobrinskoy, a manager at Ariel Investments LLC in Chicago.

Equity Index Puts

Berkshire’s derivatives fall into four categories. Because they carry the greatest notional value, at $37.1 billion, most attention is on put options that Buffett sold on stock indexes in the U.S., U.K., euro zone and Japan that expire from September 2019 to January 2028. Berkshire has to pay at expiration if any of the indexes are lower than they were when the puts were written.

While analysis of these bets shows big losses are unlikely, Buffett, 78, hasn’t provided sufficient information on the derivatives to keep some investors from hitting the sell button. Bobrinskoy says he hasn’t been scared away: Of the $250 million he co-manages at Ariel, 5.6 percent was invested in Berkshire as of March 31.

To lose the full $37.1 billion on the equity puts, the indexes would have to fall to zero -- an unlikely event. Berkshire received $4.9 billion in premiums, which together with what the company earns on it, may offset any eventual payments.

Market Scenarios

Citigroup Inc. analyst Joshua Shanker in a March 16 report examined several scenarios to gauge the likelihood of Buffett’s losing money on the puts. Using the S&P 500 as a proxy for all the indexes and assuming a 5 percent annualized return on the premium, the market would have to suffer a cumulative decline of at least 32 percent across the 15- to 20-year life of the contracts for the seller to lose money. In the U.S. market back to 1800, the only way to do that would be to start the bet just prior to the 1929 crash.

Some economists compare today with the Great Depression, and some of the puts may have been written near the U.S. market’s all-time high in late 2007, according to information Buffett has disclosed. The S&P 500 in March was down 57 percent from its peak.

With that in mind, Shanker looked at scenarios that begin with a 50 percent drop in the S&P 500. From that nadir, if the index rose 6 percent annualized over 14 years, Buffett still would not owe any money when the puts expire -- even without consideration of the $4.9 billion in premiums.

Potential Losses

Shanker also sketched out grimmer scenarios. Starting with the 50 percent decline, if the S&P 500 rises at the stock market’s post-1800 average annual rate of 2.8 percent, Berkshire could be out $5.4 billion at the end of the bet. That assumes an initial one-third loss on the premiums followed by 2.5 percent annualized returns.

David Winters says losses from these derivatives are unlikely. His Wintergreen Fund had 6.6 percent of its assets in Berkshire, as of year end. “We’re living in a world where there’s so much negativity, investors are extrapolating something that’s just remotely possible into something that’s probable,” he says.

Berkshire hasn’t disclosed sufficient information to fully analyze its other derivatives, Shanker says. One category is simply municipal bond insurance structured as derivatives; the risks here are similar to those for his municipal bond insurer. Another type consists of credit-default swaps through which Berkshire guarantees payment of individual corporate bonds. Those bets were relatively small, totaling $3.9 billion in notional value at the end of last year.

Worrisome Bets

The final category is the most worrisome, Shanker says. Berkshire has sold contracts that require it to pay when credit losses occur at companies that are included in certain unnamed high-yield-bond indexes. The notional value is $7.9 billion.

Berkshire took in $3.4 billion in premiums on these contracts and has paid losses of $542 million. The company has also recognized a noncash, $3 billion mark-to-market loss. With these contracts, payments are made when a credit event occurs. They expire from September of this year to December 2013.

Losses on these contracts are accelerating as bankruptcies grow, Buffett said in his shareholder letter in February. “Now with the recession deepening at a rapid rate, the possibility of an eventual loss has increased,” he wrote.

Buffett didn’t respond to an e-mailed request for comment. He is scheduled to address shareholders at Berkshire’s annual meeting on May 2, and quarterly results are expected from the company on May 1.

‘Handpicked’ Risks

Mark Curnin, co-founder of White River Capital LP, an investment partnership that specializes in financial stocks, says Buffett’s derivatives are simply smart ways to do what he’s always done: underwrite insurance and buy attractive securities.

“Buffett has handpicked a select group of risks that he understands and thinks are attractively priced,” he says.

The derivative risks are similar to the other hazards that might worry any investor in Berkshire. There are volatile profits from its insurance subsidiaries, for example, and units that depend on the housing industry, such as Acme Building Brands and Clayton Homes Inc. Then there’s Buffett’s portfolio of equity investments: While easy to understand, 7 of the 14 largest holdings listed at year-end were carried at a loss.

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NASDAQ: How derivatives play in Buffett's losses-04/28/2009

commentary by: Chris.McKhann

The use of derivatives by Warren Buffett--who once called them "financial weapons of mass destruction"--is back in the news as the cause of his company's losses.

Berkshire Hathaway is down more than the S&P 500 since September, as reported by Bloomberg today. The story puts the focus back on Buffett's use of derivatives, which we have highlighted on a number of occasions.

Berkshire Hathaway ChartPeople have a fear of derivatives as they are at the heart of the recent crash and Buffett has repeated derided them. So it is not surprising that investors are jumping ship as the Oracle of Omaha has revealed his extensive use of the instruments.

In fairness, however, what Buffett primarily uses are simple option strategies. He sells puts, and it is still unlikely that he will take a loss on these long-term positions.

Buffett acknowledged from the start that he might have to show large paper writedowns on these positions, though his timing in with the majority of the trades was awful, and I am sure those writedowns are more than expected.

As the Bloomberg piece points out, some of Buffett's investors understand how the use of options fits into his overall strategy:

"Mark Curnin, co-founder of White River Capital LP, an investment partnership that specializes in financial stocks, says Buffett's derivatives are simply smart ways to do what he's always done: underwrite insurance and buy attractive securities."

Selling puts on the indexes, as Buffett has done, is really writing insurance. And he took in the large premiums with no margin requirements and can put that cash to good use in the meantime. Anyone who understands options understands that this is a pretty safe bet, and certainly this is a better situation than anyone who bought individual stocks at the height of the market.

But I did have to laugh at the comment that, "To lose the full $37.1 billion on the equity puts, the indexes would have to fall to zero--an unlikely event."

I can't disagree that that it is an unlikely event, for it could happen (the mother of all black swans), but if the primary stock indexes in the U.S., U.K., Eurozone, and Japan all go to zero in the next 10 to 20 years, we will have bigger problems and more important things to talk about than Buffett's use of short puts.

(Chart courtesy of tradeMONSTER)

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