Monday, January 25, 2010

What I Learned Writing a Book about Warren Buffett: Part I


The Mini-Meeting: January 20, 2010, 8:30 a.m.


The most surprising thing about this “mini” Berkshire Hathaway shareholder meeting is the intimacy.

Leaving a raw winter’s morning outside and entering the warm confines of downtown Omaha’s Holland Performing Arts Center, named after Dick Holland, an early Buffett investor (circa 1958) and advertising executive—Buffett would grill him for information before buying shares of advertising agencies in the 1970’s—there are no crowds, no lines, and no spectacle.

There are, in fact, only a handful of shareholders in the lobby.

Some have come by cab directly from the airport—these are East-Coasters, for the most part, wearing suits and ties beneath wool overcoats—while others have driven in from the snowy neighborhoods west of downtown Omaha, wearing parkas or jackets and boots. All are chatting quietly or milling around outside the doors to the 2,000-seat Peter Kiewit concert hall, where the meeting will start in about an hour.

Indeed, so laid back, so folksy and so accessible is this meeting that the reasonably alert observer can see Mid-American Energy CEO David Sokol, Warren Buffett’s heir-apparent (at least, for now: more on this later), chatting it up with a few long-time Berkshire investors from the New York City area.

And there is Mark Hamburg, the Berkshire CFO—head down and papers in hand, moving among shareholders and staff members—but looking more like a harried mid-level accountant for the local electric utility than the CFO of one of the largest companies on earth who happens to be orchestrating a special meeting that will help create more shareholders for that company than its CEO ever cared to have.

Even the CEO himself, Warren Buffett, can be glimpsed in between several moveable screens that were set up to wall off a portion of the lobby from us, the shareholders.

Inside that space Buffett is meeting the press, but if you stand just right you can see him talking animatedly with a half-dozen reporters (all male, for some reason) about the Kraft deal (Kraft has announced an end-around plan in its efforts to buy Cadbury which neuters Buffett, its biggest shareholder, and he is angry), about the Obama tax proposals (the President, whose candidacy Buffett vocally supported, is lashing out at banks, and Buffett is uneasy), and about the economy (stabilized, according to Buffett, but not zooming ahead) while photographers move around him like he is Brangelina, their cameras snapping only a couple feet from his head.

Paparazzi aside, this must be very much like a Berkshire annual meeting back in the days before Buffett created the “Class B” shares and let the riff-raff in.

Ah, but one other difference is now noticeable: a tall, well dressed, man—easily 6’ 4”—stands discretely nearby, on our side of the screens. And though he makes no move to restrict the few curious bystanders edging towards the break in the panels to watch Buffett, we all can see the coiled wire rising from the collar of his dark business suit to something in his ear: he is a bodyguard. So despite the informality of it all, nobody ventures too close to listen to the “Oracle of Omaha.”

Suddenly a woman’s disembodied voice calls out sharply from behind the screens: “Okay, now we’ll do broadcast.”

“Great,” Buffett says in his husky voice, sounding oddly happy about the change despite the fact that he—a billionaire for whom time and money are inextricably linked—is being made to schlep from one group of reporters to another. For a man rooted in the deep-seated sexism of the 1950’s (he once posed his Board of Directors, males and females alike, among the silicone-enhanced staffers of a Hooters restaurant for the annual Berkshire Christmas card), it seems that Becky Quick and Betty Liu are more fun to talk to than a bunch of middle-aged men.

And thus the band of reporters surrounding him disperses, and Buffett moves away from the crack in the partition to an unseen seat in front of unseen television cameras. The few curious onlookers disperse, and the bodyguard relaxes.

It’s time to go inside the concert hall.

But this modest effort requires proving one’s shareholder credentials, which are being checked by two friendly women seated behind a table—a setup more like a church pot luck supper than a shareholder meeting for one of the world’s largest companies. Before entering, you must prove ownership of Berkshire Hathaway stock, otherwise you will not be handed the movie theater-style ticket to the meeting itself (no large plastic “Shareholder” badges here, as at the annual shindig).

Fortunately I’ve brought along a copy of my brokerage statement showing the Berkshire shares—the prospectus did say ownership was required—but next to me is a couple from suburban Omaha who, despite having braved the rotten weather, which is just cold enough to turn the sidewalks to a sheet of ice, have nothing relevant to show the ladies.

The couple protests—nicely: this is Omaha, not Manhattan—that they had no idea they’d have to show proof of ownership, and while I don’t wait around to hear what happens, I can’t imagine they won’t get in: “Woodstock for Capitalists” this is not.


It’s more like an old Allman Brothers concert at the Fillmore East, though decidedly upscale, and without the chemistry experiments in the bathrooms, if you get my drift.


Thus it is that I have journeyed again to the heart of Berkshire Hathaway—downtown Omaha, Nebraska—this time on an icy, overcast day, and taking a chance that the so-called Oracle of that very Midwestern city will take questions above and beyond the stated purpose of this simple, straightforward shareholder meeting: to approve a 50-for-1 stock split in the Berkshire ‘B’ shares. (For reasons why Warren Buffett is, in reality, no ‘Oracle’—world’s great investor, yes; Oracle, no—pick up a copy of “Pilgrimage to Warren Buffett’s Omaha” at Amazon.com.)

And it will prove worth the trip.

No, Charlie Munger—Berkshire Hathaway’s acerbic Vice-Chairman and the business partner without whom Warren Buffett would not have created Berkshire as we know it—is not in attendance, although Buffett will make up for Munger’s absence in a particularly Buffett-like manner.

Nor will attendance approach the 30,000-plus faithful that will likely cram into the nearby Qwest Center arena for the annual meeting come May 1.

Nor will Buffett take questions for anything close to the 5-plus hours he and Munger will do at that event.

But there will still be a few goodies today, including the fact that not a single “What should I do with my life?”-type questions will be asked by the more informed shareholders who bothered to come, which means that we will learn a few things about the Burlington Northern acquisition, about Warren Buffett himself, and about why it is that Kraft’s issuance of under-valued stock bothers Buffett mightily, yet the very reason we are having a shareholder meeting is to approve a stock split that will facilitate an acquisition by Warren Buffett using his own under-valued stock.

Stay tuned.



Jeff Matthews
I Am Not Making This Up


© 2009 NotMakingThisUp, LLC

The content contained in this blog represents only the opinions of Mr. Matthews, who also acts as an advisor: 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, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.

4 comments:

Aaron said...

Jeff: I am really looking forward to your update from Berkshire's latest meeting. What would be interesting to understand is whether, or why, Buffett considers Berkshire's shares "undervalued" when used to purchase Burlington Northern? Thanks, and keep up the great work!

Anonymous said...

Isn't the proper inference that Buffett is issuing "over-valued" stock...follow his actions not words...

Hubert said...

Jeff: I am curious for further parts but has S&P just stolen part of your show?

IF I remember the BNI deal correctly the price ratches with BRKB reaching the 120.000 $ A-shares equivalent. And the deal closes in March. Index funds will/have to buy before.

I do not understand which part of the Capitalization will be included into S&P and therefore cannot count demand for shares but should be big enough and it looks like the only big seller will be the Gates Foundation.

So if A shares go above 120.000 the deal becomes cheaper - and WB has in the end not payed with undervalued shares at all .........

Anonymous said...

Warren Buffett demoted to double A

Well, it's interesting to note that Buffett's Berkshire Hathaway was demoted to AA by the S&P. It's truly correct that the US Dollar is Warren Buffett toilet paper!