OMAHA, Neb. (AP) - Berkshire Hathaway chairman and CEO Warren Buffett and
vice chairman Charlie Munger spent more than five hours Saturday answering
questions from shareholders.
Here is a sample of their wit and wisdom on a variety of topics:
THE OLYMPICS
Neither Buffett nor Munger thought it would be a good idea to use this
summer's Olympic games to penalize China.
"I think it's very hard to rate a couple hundred countries that are
participating on their behavior," Buffett said.
Berkshire owns a sizable stake in the Coca-Cola Co., which is a major
sponsor of the Olympics.
"I think the more people that participate in them, the better," Buffett
said.
Munger said he thinks the most important question is whether China has been
improving in recent years. "The answer is, China is moving in the right
direction," Munger said.
CREDIT DEFAULT
Buffett said he doesn't think the roughly $60 trillion market for credit
default swap derivatives will implode like subprime mortgage funds, although the
number of defaults is likely to increase.
Those credit default derivatives are essentially an insurance policy on the
chance that a company will go bankrupt.
Munger said that there could be problems with those derivatives, but that it
likely won't be nearly as bad as the subprime mortgage mess.
"I think the stupidity -- while it's extreme -- is not quite as bad as
sweeping bums off skid row to give them a house," Munger said.
The Federal Reserve's bailout of Bear Stearns reduced the chances of
widespread problems with the credit derivatives, Buffett said.
Berkshire has written some of those credit-default derivatives and accepted
$2.9 billion in premiums.
"I think we're going to make significant money, although we can lose money,
too," Buffett said.
SECURITIES
The recent credit crunch that has created turmoil in financial markets has
also created opportunities.
Buffett said Berkshire has invested about $4 billion in auction rate
securities because the interest rates those bond funds offered became
attractive. Buffett offered one example of a municipal bond fund that offered
3.5 percent interest one week and 8 percent the next as the market was
disrupted.
"This happened with billions and billions and billions of securities,"
Buffett said.
The $330 billion auction rate securities market used to offer investors the
chance to buy and sell long-term bonds frequently, because the interest paid on
the bonds was reset every seven, 28 or 35 days.
But investors began fleeing late last year as the credit crunch intensified,
and investment banks, in turn, starting backing away from their promise to buy
the bonds at auctions.
That caused many auctions to technically fail.
HEALTH
Neither Buffett or Munger are likely to win a doctor's endorsement of their
health advice.
Buffett, 77, took a bite of candy from the box in front of him, and then
recommended a balanced diet of See's Candy, Wrigley's gum and Coke products.
Berkshire owns See's and a large stake in Coke, and it will soon own part of
Wrigley.
Munger, 84, said he and Buffett ignore every health rule out there.
"It seems to have worked for us," Munger said. "I don't think we could
recommend it for everybody, but I, for one, don't plan to change."
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