As an Omaha resident, it is a breeze for me to hop into my car and catch the afternoon session of the Berkshire Hathaway, Inc. annual meeting. Warren Buffett and Charlie Munger are really something to experience in person. Buffett is, in many ways, a teacher. He has an extemporaneous eloquence that is simply astounding. His answers to questions combine hard facts, wisdom and wit in a way that only he can do. Charlie Munger is sometimes Warren’s straight man, but when Charlie talks, Warren listens.
The second question of the afternoon was to the effect of had Buffett ever seen the country so divided as it is now. Since Warren will be 88 in August (not a typo), he had a different view. He started his answer with a funny story. His first wife’s father wanted to talk to young Warren before the wedding. Her father had been a minister and was also a Republican. In fact, he had managed Warren’s dad successful campaign for the House. Dr. Thompson told his future son-in-law that he would fail as a stockbroker but it wouldn’t be his fault. The reason for his failure was because Truman was the President in 1952.
During Buffett’s lifetime, there have been 14 Presidents; evenly split between the parties. We have survived riots in the streets back in the 60’s. We also survived the assassination of one President and the forced resignation of another. We’ve had two recessions and one depression. And, of course, there was that Civil War thing. Munger quipped that we’ve had worse politicians than the current crop but people have short memories.
Buffett noted that, in age, he wasn’t all that far removed in years from when Thomas Jefferson purchased the Louisiana Territory for three cents an acre. Two hundred years ago there was nothing on the land where Omaha sits today. The building where the meeting was held seats 17,000 for Creighton basketball games and 42,000 were in Omaha for the meeting. Today 64% of Americans own homes on land that was empty not all that long ago. When Warren was a young man, the richest person in America was John D. Rockefeller, Sr. The average American lives better today than Rockefeller did in his prime. America’s GDP has grown remarkably during Warren’s lifetime.
The afternoon answer was tied into Buffett’s morning opening. As a boy of 11, he purchased three shares of City Services preferred stock. He displayed to the crowd the New York Times (three cent newsstand price) for that day. We were losing the war in the Pacific quite badly. The other headlines were equally dire. While the young capitalist was, even then, confident that we would win the war, he shortly sold his stock and pocketed a profit of five dollars and change. If he would have held, he would have tripled his money.
His real lesson was that if he would have invested $10,000 in the S&P 500 on the same day he bought his first stock, today he would have more than $50 million. The American system works.
In response to another question Buffett said that while he spent his own money backing Hillary Clinton, it would have been completely wrong (and illegal) to spend corporate money backing one political candidate. I can say with complete confidence that Warren Buffett is not part of the Resistance and he has moved on from Hillary’s defeat.
I found it very interesting that Buffett seemed to back President Trump on some of his trade policies and particularly on steel. Warren rattled off some numbers about how much of our economy is dependent upon foreign trade and how it is generally good for America. But lectures about natural advantage, David Ricardo and Adam Smith are cold comfort for the unemployed shoe makers in Dexter, Maine or textile workers in Massachusetts. Today there is a significant gap of 3 to 5 GDP points between our imports and exports and Buffett was of the view that it should be narrowed.
Many times Warren and Charlie spoke favorably of the Trump tax cuts. Their point is that the corporate tax cuts will be channeled into more investment in America and higher wages for workers as confidence in the American economy grows. Buffett thinks that the full effect of the tax cuts is still not fully priced into the market.
Berkshire Hathaway owns a number of newspapers; including the Omaha World-Herald. Buffett and Munger bought the papers at good prices, but even they have been surprised at the swiftness of the decline in readership. Charlie Munger commented that the “figures are not good.” Buffett added the economic problems of newspapers is one of enormous significance to society. I would add that the media has done itself no favors with its shameful partisan coverage of the Trump Administration.
In all the years I have attended the annual meeting, this year’s contingent from China had to be the largest. I learned on Saturday that Warren Buffett’s picture is used to sell Duracell batteries and Coca-Cola in China. The shareholder questioners from China nearly worshiped Warren.
Charlie Munger said that if he was younger, he would learn Chinese. Munger is an admirer of the Chinese people for their savings rate and capitalistic sensibilities. But I found it odd that Munger didn’t mention how great China could really be if it didn’t have a command-and-control economy run by a small group of unelected Communist party elites. And, of course, there is no freedom of the press in China. Government censorship is the rule of the day.
Buffett’s perspective on American greatness and exceptionalism was great to hear. I only wish President Trump’s speechwriters would pick up on Buffett’s cues. Donald knows the same facts in his gut but he doesn’t express himself as well as Warren does.
DDB
The Art of Twenty-First Century Wisdom: An Internet Oracle 