The Best of “Woodstock for Capitalists”…Highlights from the 2009 Berkshire Hathaway Annual Meeting

Part 1: The Power of Free Chicken Wings; Snidely Whiplash’s Mustache; Munger’s John Lennon to Buffett’s Paul McCartney; a Bit of New-News; and We Get a Question Asked!

To the Berkshire shareholder making the annual trek to Omaha this May, not much changed from years past.

Hotel rooms were hard to come by, airplanes were full, and local restaurants booked, months before the shareholder meeting even began. And on the eve of the meeting itself, there were the usual long, polite lines of Berkshire shareholders waiting for free chicken wings under the Borsheim’s tent Friday night. (Never underestimate the willingness of Berkshire shareholders to wait in line for free food.)

Also, come Saturday morning, well before the sun was fully up over Council Bluffs and the Missouri River, the familiar pair of lines had sprouted from the main doors of the Qwest Center, snaking several hundred yards in opposite directions before curling back part way around the Qwest Center itself.

(From the Hilton across the street, the two long, curling lines looked like nothing so much as a human representation of Snidely Whiplash’s mustache—something for the Guinness folks to think about.)

Once inside the arena—itself the size of Madison Square Garden—the seats filled up quickly, as usual, and yet there remained a few empty spots in the vertigo-inducing seats up near the rafters, as usual.

And shortly before 8:30 a.m. a familiar excitement began sweeping through the crowd down on the floor of the arena—near the stage where Warren Buffett and his long-time business partner, Charlie Munger would later take questions from the assembled multitudes for more than five hours—when the Oracle himself made his way to center court, to take a seat to watch the movie that kicks off the proceedings.

But, at the same time, much else was indeed changed.

Despite the pronouncement by Becky Quick of CNBC (who along with Fortune Magazine Editor Carol Loomis and the New York Times’ Andrew Ross Sorkin was one of the three reporters selected to read questions submitted by email—the biggest change this time around) that 35,000 were in attendance, the crowds were noticeably thinner than last year, when 31,000 descended on Omaha for “Woodstock for Capitalists.”

And the mood of those who made the pilgrimage this year was notably subdued: the Not-Since-1937 Bear Market of 2008 had made itself felt even in Berkshire Hathaway’s comfortable epicenter. The crowd seemed older and quieter, with fewer groups of the giddy, high-fiving young men that had been making the trek in recent years.

Another notable difference—once the question-and-answer session started—was a greater participation by Berkshire’s Vice Chairman than in years past.

Now, Munger’s clipped, dry, trademark method of declining to answer when called on after many minutes of energetic, gesture-filled commentary by Buffett (“Nothing to add,” he says flatly; “Nothing on that one, either”) can bring down the house.

But many Berkshire shareholders immensely enjoy hearing Munger’s dour, morality-infused codas after one of Buffett’s snappy, upbeat, riffs—Munger’s John Lennon to Buffett’s Paul McCartney.

And this year Munger declined to comment only a handful of times (last year, by contrast, he passed on close to twenty questions) and his remarks added immeasurably to the proceedings.

They also slowed things down a bit: only 51 questions were asked, and answered, this year, compared to 63 last year.

Munger’s greater participation surely had something to do with the fact that the questions were almost entirely focused on Berkshire Hathaway’s investments and insurance businesses.

Thanks to the new Q&A format, in which three reporters alternated with shareholders picked by lottery, there were few of the “What Would Warren Do?” style questions that had clogged up the proceedings in recent years.

Indeed, NotMakingThisUp readers who participated in our “Top Ten Questions for Warren Buffett” competition should feel a measure of satisfaction for having been very much on target in anticipating the topics selected for discussion by the three reporters.

Of our “Top Ten Questions,” eight were asked in roughly the form voted for by our readers. These covered Ajit Jain, Moody’s, derivatives, the economy, capital-heavy businesses, and Buffett’s “hold forever” time horizon.

Only two of our “Top Ten Questions” did not make it: Buffett’s purchase of Conoco-Phillips at the peak of the oil mania, and a “What did you know and when did you know it?” question regarding the General Re transaction with AIG.

Not a bad hit ratio.

Furthermore, one of our “Top Ten Questions” was asked straight from the blog by Aznaur Midov, a student at San Francisco State University’s Financial Analysis & Management Education group.

“How do you justify holding a stock ‘forever’ when the fundamentals have changed?” Aznaur asked.

Buffett’s answer was instructive: “We make only two exceptions—if they promise to start losing money permanently and if they have labor problems.”

A few minutes later, Buffett was asked the corollary to this question: whether hanging onto the Washington Post was a good use of shareholder capital; and if there was a price at which any newspaper investment might be “compelling.”

Buffett responded with a bit of new-news: a decade ago he’d been urged to sell the Buffalo News—Berkshire’s wholly owned and once mightily-profitable newspaper—by the Publisher of the Buffalo News himself, Stan Lipsey.

“I said I agreed 100%,” Buffett noted, saying Berkshire could have sold it “for hundreds of millions.” Nevertheless, he said, repeating his earlier response to Aznaur, “As long as we don’t face unending losses or union problems,” Buffett wouldn’t sell the paper.

We’ll be back with other key highlights of the Berkshire meeting, including:

· Best Question Not on Our List, Answered · Best Question Not on Our List, Avoided · Sharpest Implied Put-Down · Mystery Revealed! · Least Logical Answer · Most Logical Answer · One Industry Not to Expect Buffett to Buy Into

And

· The Most Philosophical Start to Any Answer at Any Annual Meeting in History, Since the Beginning of Recorded Time

Stay tuned.

Jeff Matthews I Am Not Making This Up

© 2009 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.