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2011 Berkshire Hathaway Meeting Notes

2011 Berkshire Hathaway Meeting Notes

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Published by Cale Smith
Notes on the 2011 Berkshire Hathaway meeting from Dustin Hunter of Swiftcurrent Capital Management.
Notes on the 2011 Berkshire Hathaway meeting from Dustin Hunter of Swiftcurrent Capital Management.

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Categories:Business/Law, Finance
Published by: Cale Smith on May 03, 2011
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05/03/2011

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Berkshire
 
Hathaway
 
Annual
 
Meeting
 
Notes
 
April
 
30,
 
2011
 
Dustin
 
Hunter
 
(dwhunter10@gmail.com)
 
Swiftcurrent
 
Capital
 
Management
 
Indianapolis,
 
IN
 
(These
 
notes
 
are
 
to
 
the
 
best 
 
of 
 
my 
 
recollection
 
and 
 
trusty 
 
ink 
 
 pen.
 
Discrepancies
 
are
 
likely 
 
due
 
to
 
my 
 
error 
 
in
 
understanding
 
&
 
transcribing.)
 
Opening
 
Comments:
 
 
Transcriptions
 
of 
 
the
 
Questions
 
pertaining
 
to
 
David
 
Sokol
 
&
 
Lubrizol
 
are
 
posted
 
on
 
the
 
BRK
 
website.
 
 
Earnings
 
(except
 
housing
 
related
 
businesses)
 
have
 
been
 
improving
 
quarter
 
by
 
quarter.
 
 
2nd
 
worst
 
quarter
 
for
 
insurance:
 
o
 
$50B
 
hit
 
to
 
Re
insurance
 
industry
 
o
 
BRK
 
is
 
typically
 
5%
 
of 
 
industry
 
o
 
BRK
 
re
insurance
 
unlikely
 
to
 
profit
 
in
 
2011
 
 
GS
 
preferred
 
shares
 
were
 
called
 
in
 
 
GE
 
preferred
 
shares
 
will
 
likely
 
be
 
called
 
in
 
September
 
 
Burlington
 
Northern
good
 
year,
 
and
 
for
 
rail
 
in
 
general
 
 
Reinsurance
 
estimated
 
losses:
 
o
 
Australia
 
195B
 
o
 
New
 
Zealand
 
412B
 
o
 
Japan
 
1,066B
 
o
 
Total
 
1,673B
 
(20%
 
from
 
arrangements
 
w/
 
Swiss
 
Re)
 
o
 
(Based
 
on
 
population
 
comparison,
 
New
 
Zealand
 
situation
 
10x
 
worse
 
than
 
Katrina)
 
 
Geico
April
 
tornados
 
will
 
likely
 
result
 
in
 
25k
 
auto
 
claims
 
o
 
Significant
 
policy
 
increase:
 
2011
Q1
 
(318k)
 
vs.
 
2010
Q1
 
(218k)
 
o
 
Goodwill
 
(14B)
 
significantly
 
understated
 
on
 
balance
 
sheet
 
o
 
Buffett
 
estimates
 
$1.5k
 
goodwill
 
for
 
each
 
policy
 
holder
 
 
Accounting
 
comment
 
regarding
 
Wells
 
Fargo
based
 
on
 
time
 
&
 
original
 
purchase
 
price
 
o
 
3,704k
 
shares
 
with
 
gains
 
not
 
marked
 
up
 
o
 
337k
 
shares
 
with
 
'losses'
 
marked
 
down
 
o
 
Net
 
'loss'
 
shown,
 
but
 
not
 
an
 
accurate
 
reflection
 
 
Warren
 
Buffett
 
(WB)
 
discussion
 
of 
 
David
 
Sokol
 
(DS)
 
&
 
Lubrizol
 
(LZ)
 
acquisition:
 
o
 
Events
 
at
 
Salomon
 
Brothers
 
20
 
yrs
 
ago
 
were
 
"Inexplicable
 
&
 
Inexcusable"
 
o
 
DS
 
failed
 
to
 
say
 
that
 
he
 
contacted
 
Citigroup
 
&
 
had
 
bought
 
LZ
 
shares
 
o
 
DS
 
did
 
not
 
try
 
to
 
hide
 
his
 
purchases
after
 
a
 
big
 
deal
 
occurs,
 
they
 
are
 
usually
 
required
 
to
 
submit
 
a
 
list
 
of 
 
who
 
knew
 
what
 
and
 
when
 
they
 
knew
 
it
FINRA
 
reviews
 
o
 
DS
 
has
 
a
 
high
 
net
 
worth
 
&
 
made
 
something
 
like
 
24M
 
last
 
year
 
o
 
Mid
 
American
 
Energy
 
ownership:
 
 
80%
 
Berkshire
 
 
10%
 
Walter
 
Scott
 
 
 
Balance
 
owned
 
by
 
Greg
 
Abel
 
&
 
DS
 
 
In
 
the
 
past,
 
WB
 
laid
 
out
 
a
 
bonus
 
plan
 
for
 
Greg
 
Abel
 
&
 
DS
 
based
 
on
 
5
 
year
 
performance
 
factors
 
with
 
$50M
 
to
 
DS
 
&
 
$25M
 
to
 
Greg.
 
DS
 
changed
 
it
 
to
 
be
 
split
 
50/50,
 
thus
 
forgoing
 
$12.5M
 
(
note:
 
DS
 
shares
 
of 
 
LZ 
 
increased 
 
$3M
 
after 
 
acquisition
 
announcement 
)
 
 
Charlie
 
Munger
 
commented
 
that
 
it
 
is
 
a
 
mistake
 
to
 
assume
 
that
 
people
 
will
 
always
 
make
 
perfectly
 
rational
 
decisions.
 
Morning
 
Q&A
Warren
 
(WB)
 
unless
 
noted
 
otherwise
 
&
 
Charlie
 
(CM)
 
1)
 
Q)
 
When
 
you
 
found
 
out
 
about
 
the
 
DS
LZ
 
situation,
 
why
 
were
 
you
 
not
 
"ruthless"?
(
in
 
reference
 
to
 
the
 
statements
 
in
 
the
 
Salomon
 
Brothers
 
video
 
clip
 
 played 
 
at 
 
the
 
meeting
 
each
 
year)
 
A)
 
(
WB
 
ran
 
through
 
the
 
 play 
 
by 
 
 play 
 
of 
 
the
 
events
)
 
 
Aware
 
of 
 
potential
 
deal
 
on
 
Jan.
 
14th
 
 
March
 
14th
John
 
Freund
 
of 
 
Citi
 
called
 
to
 
congratulate
 
&
 
noted
 
Citi's
 
work
 
with
 
deal
 
 
This
 
triggered
 
a
 
'yellow
 
light'
 
&
 
prompted
 
WB
 
to
 
call
 
Mark
 
Hamburg,
 
who
 
then
 
contacted
 
DS
 
 
March
 
18th
LZ
 
submitted
 
a
 
draft
 
proxy
 
statement
 
for
 
WB
 
outlining
 
the
 
history
 
of 
 
the
 
transaction
noted
 
Citi's
 
involvement
 
up
 
front
 
 
Ron
 
Tolles
 
traveling
 
with
 
WB
 
at
 
the
 
time
 
receiving/communicating
 
info
 
via
 
Ron's
 
phone
planned
 
BRK
 
board
 
meeting
 
upon
 
return
received
 
DS
 
resignation
 
 
Upon
 
return,
 
WB
 
drafted
 
the
 
press
 
release
 
for
 
DS
 
review
DS
 
removed
 
wording
 
about
 
hopes
 
of 
 
succeeding
 
WB
 
dashed,
 
saying
 
never
 
intended
 
to
 
succeed
 
WB
 
(
WB
 
commented 
 
that 
 
he
 
could 
 
have
 
been
 
more
 
careful 
 
with
 
the
 
'not 
 
illegal' 
 
wording
 
in
 
the
 
 press
 
release
)
 
 
Per
 
the
 
proxy
 
statement,
 
LZ
 
was
 
interested
 
in
 
the
 
deal
 
on
 
Dec.
 
17th
 
 
BRK
 
notified
 
SEC
 
through
 
Munger
 
Tolles
 
Olsen
 
 
CM
The
 
press
 
realease
 
could
 
have
 
been
 
better.
It
 
is
 
better
 
to
 
not
 
include
 
anger
 
in
 
one's
 
decisions
Quoted
 
Tom
 
Murphy
 
"You
 
can
 
always
 
tell
 
someone
 
to
 
go
 
to
 
hell
 
tomorrow."
 
2)
 
Q)
 
What
 
will
 
be
 
the
 
effect
 
on
 
stock
 
prices
 
of 
 
the
 
government
 
ending
 
permanent
 
open
 
market
 
purchases?
 
A)
 
Although
 
it
 
is
 
a
 
huge
 
force
 
that
 
will
 
be
 
gone,
 
it
 
is
 
well
 
known
 
&
 
likely
 
factored
 
in.
 
3)
 
Q)
 
How
 
can
 
you
 
insure
 
that
 
there
 
are
 
no
 
other
 
DS's
 
in
 
line
 
at
 
BRK
 
now?
 
A)
 
Commented
 
that
 
the
 
likely
 
person
 
is
 
'straight
 
as
 
an
 
arrow'
 
 
CM
Comment
 
"The
 
meek
 
shall
 
inherit
 
the
 
Earth,
 
but
 
will
 
they
 
stay
 
meek?"
 
 
Safety
 
measures
 
including
 
Howard
 
Buffett
 
as
 
an
 
independent
 
chairman
makes
 
it
 
easier
 
to
 
change
 
a
 
CEO
 
if 
 
needed
 
 
CM
noted
 
similarity
 
to
 
Rockefellers
 
&
 
one
 
instance
 
where
 
they
 
had
 
to
 
remove
 
someone
 
4)
 
Q)
 
If 
 
you
 
had
 
an
 
additional
 
50
 
years
 
to
 
go
 
with
 
your
 
investment
 
career,
 
what
 
additional
 
area/sector
 
would
 
you
 
add
 
to
 
your
 
'Circle
 
of 
 
Competence'?
 
A)
 
Would
 
want
 
it
 
to
 
be
 
a
 
large
 
sector
Tech
 
likely
 
 
Large
 
disparity
 
between
 
the
 
winners
 
&
 
losers
ability
 
to
 
pick
 
winners
 
is
 
key
many
 
players
 
 
CM
Tech
 
or
 
Energy
 
 
5)
 
Q)
 
You
 
mentioned
 
that
 
you
 
were
 
initially
 
unimpressed
 
with
 
LZ,
 
and
 
then
 
quickly
 
warmed
 
to
 
it.
 
What
 
changed?
 
A)
 
Knew
 
nothing
 
about
 
the
 
business
 
initially
Charlie
 
smater
 
about
 
oil
 
 
James
 
Hambrick
 
subsequently
 
gave
 
a
 
good
 
explanation
 
of 
 
the
 
business
 
through
 
DS
 
 
Oil
 
companies
 
are
 
big
 
buyers
 
from
 
LZ
it
 
is
 
hard
 
to
 
break
 
in
 
&
 
compete
 
with
 
them
 
due
 
to
 
existing
 
customer
 
connections
 
&
 
some
 
patents.
 
 
CM
LZ
 
&
 
Iscar
 
are
 
'sisters
 
under
 
the
 
skin'
in
 
that
 
there
 
are
 
barriers
 
to
 
entry
 
for
 
potential
 
competitors
 
6)
 
Q)
 
With
 
$95k
 
book
 
value
 
per
 
share
 
+
 
discounted
 
value
 
of 
 
future
 
earnings,
 
it
 
seems
 
that
 
180k/share
 
is
 
a
 
fair
 
value.
 
(
Basically 
 
this
 
questioner 
 
was
 
asking
 
Buffett 
 
to
 
verify 
 
his
 
intrinsic
 
value
 
number 
)
 
A)
 
He
 
and
 
Charlie
 
would
 
come
 
up
 
with
 
slightly
 
differing
 
'ranges'
 
of 
 
intrinsic
 
value,
 
not
 
a
 
precise
 
number.
 
 
Commented
 
that
 
they
 
have
 
given
 
signals
 
about
 
attractiveness
 
of 
 
BRK
 
price
 
in
 
the
 
past
 
 
Currently
 
not
 
overpriced
They
 
have
 
been
 
looking
 
at
 
a
 
large
 
international
 
acquisition.
 
However,
 
the
 
large
 
price
 
tag
 
would
 
require
 
issuing
 
stock
 
&
 
they
 
are
 
not
 
willing
 
to
 
do
 
so.
 
 
BNSF
 
purchase
 
was
 
30%
 
stock
 
and
 
was
 
painful
 
 
CM
questioner
 
was
 
looking
 
at
 
the
 
two
 
right
 
factors
 
&
 
it
 
won't
 
always
 
be
 
as
 
attractive
 
7)
 
Q)
 
you
 
remain
 
positive
 
about
 
America's
 
economic
 
future
 
despite
 
the
 
current
 
turmoil.
 
Why
 
do
 
you
 
see
 
gold
 
where
 
others
 
see
 
salt?
 
A)
 
How
 
can
 
you
 
not
 
be
 
positive...
 
When
 
he
 
was
 
born,
 
there
 
was
 
the
 
market
 
crash,
 
the
 
depression,
 
and
 
so
 
on...
 
still
 
the
 
standard
 
of 
 
living
 
has
 
increased
 
6
 
for
 
1
 
 
Doc
 
Thompson
 
(
 father 
 
in
 
law 
)
 
gave
 
him
 
a
 
talk
 
prior
 
to
 
marriage
 
saying
 
that
 
"You'll
 
fail,
 
but
 
it's
 
not
 
your
 
fault
 
b/c
 
the
 
Democrats
 
are
 
in
 
office."
 
 
In
 
1951,
 
Ben
 
Graham
 
&
 
his
 
father
 
told
 
him
 
not
 
to
 
get
 
into
 
selling
 
stocks
 
right
 
now
 
believing
 
the
 
results
 
will
 
be
 
unattractive
 
&
 
people
 
will
 
blame
 
him.
 
 
Our
 
potential
 
is
 
not
 
used
 
up
It's
 
 just
 
that
 
the
 
rest
 
of 
 
the
 
world
 
is
 
catching
 
on
 
 
CM
Europe
 
survived
 
the
 
Black
 
Death
 
8)
 
Q)
 
(
The
 
question
 
was
 
about 
 
inflationary 
 
environments
 
and 
 
the
 
best 
 
businesses.)
 
A)
 
A
 
business
 
with
 
a
 
wonderful
 
product
 
that
 
requires
 
little
 
capital
 
reinvestment
 
is
 
better
 
in
 
an
 
inflationary
 
environment
 
than
 
a
 
business
 
that
 
requires
 
a
 
lot
 
of 
 
tangible
 
capital
Assuming
 
that
 
the
 
business
 
has
 
pricing
 
power
 
 
Think
 
Sees
 
Candy
 
vs.
 
BNSF
refer
 
to
 
his
 
old
 
Fortune
 
article
 
'How
 
Inflation
 
Swindles
 
the
 
Equity
 
Investor'
 
 
CM
They
 
didn't
 
always
 
know
 
this
and
 
they
 
don't
 
do
 
as
 
well
 
with
 
larger
 
amounts
 
of 
 
money
 
to
 
invest
 
9)
 
Q)
 
At
 
what
 
point
 
can
 
we
 
expect
 
to
 
see
 
BRK
 
pay
 
dividends?
 
A)
 
When
 
BRK
 
does
 
it,
 
should
 
do
 
100%
(
I
 
took 
 
this
 
to
 
mean
 
that 
 
all 
 
dry 
 
 powder 
 
 formerly 
 
waiting
 
 for 
 
acquisitions
 
should 
 
be
 
distributed 
 
at 
 
once.
)
 
 
The
 
basic
 
question
 
is
 
whether
 
or
 
not
 
they
 
can
 
turn
 
$1
 
of 
 
earnings
 
into
 
more
 
than
 
$1
used
 
comparison
 
of 
 
a
 
savings
 
account
 
where
 
you
 
can
 
pull
 
out
 
5%
 
vs.
 
selling
 
it
 
for
 
20%
 
over
 
the
 
amount
 
you
 
put
 
in.
 

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