Random thoughts on Berkshire annual meeting weekend

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(Update 04May09) Buffett CNBC interview. (Monday Becky Quick)

I did not go to the Berkshire annual shareholder meeting, partly because of the recession (cost cutting), partly because I sold the stock recently (note: one does not have to buy stock to get the admission ticket, they sell it at $5 on eBay). There are live blog and twitter on the meeting (6 hours Q&A), such as MarketBeat (WSJ), CNBC BuffettWatch and NY Times Andrew Sokin. But there are no webcast, because Warren and Charlie are old fashioned.

Succession plan
I have no doubt Buffett and the board have great plan and good people in line to take over if something happen to Warren. But let’s be honest, Warren is 79 years old, we know he lives a much healthy live style than Chairman Mao, but I don’t expect he run this thing for 20 more years (as said by David Sokol yesterday). The real problem is: nobody can replace Warren, 2 persons or more combined (Warren’s idea of a CEO, and a few investment managers) can make things more complicated. Who is going to make the investment call then: use latest example, the Constellation Energy acquisition decision is made in one day between Warren and Sokol. When new guys come in, can we expect that kind of coordination? If conflicts happen, who is going to be middleman and impose influence? Bill Gates seems like a logical choice. As matter of fact he pledged to be a guardian of Berkshire recently. He got the ownership (as Warren pledged majority of Berkshire stock to Bill Gates Foundation).

Recent Buffett investment decisions
Basically Warren did a few big 10% yield preferred stock deal. Many people cried he overpaid for the Goldman and GE stock, he did not (he got the warrants priced at $115 for Goldman, and $22.25 for GE). But here is my rationale why he did the 10% deal: he must think 10% yield is good considering the risk. We know in the past Berkshire annual return is more than 20%, but now Warren is satisfied with 10% yield. As the ship get larger, it’s increasingly difficult to speed up.

Another reason (I think), he want to use up some of the cash (more than $40 billion in early 2008), in case his health situation goes bad, some new guy comes in and does some dumb thing.

Common traits of 4 horseman
Amazon, Apple, Google and Research in Motion. All have founders are still making the call. Interestingly, Bill Gates is still the biggest shareholder of Microsoft, but he is not actively engaged. One reason the stock did not do anything in last 10 years?

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