Warren Buffett’s Q&A With Shareholders 2009

“Google has a huge new moat,” Munger said. “In fact I’ve probably never seen such a wide moat.” Google’s main business of charging companies when people click on their ads after running an Internet search is “incredible,” the Berkshire chairman said. “I don’t know how to take it away from them,” he added. “Their moat is filled with sharks,” Munger said.

“All banks aren’t alike by a long shot, and in our view Wells Fargo, among the large banks, has some advantages the others do not,” Buffett said today at Berkshire’s annual meeting in Omaha, Nebraska.

The stock closed at $19.61 yesterday after falling below $9 in March. Buffett said he was speaking to a class the day the shares dropped that low and told students that, at that price, “If I had to put all of my net worth into stock, that would be the stock.”

Buffett, who has said he values lenders partly on their ability to acquire funds from depositors, told shareholders today that he’d “love” to buy the entire bank and is unable to do so because Berkshire wouldn’t get permission from regulators.

Reflecting on the near implosion of the financial system last fall, Buffett said officials should be judged more leniently when facing “as close to a total meltdown as you can imagine.”

But he warned that efforts such as the Treasury’s $700 billion Troubled Asset Relief Program and the $787 billion fiscal stimulus plan passed this year by Congress will have to be paid for, one way or another. And with political leaders showing little inclination to raise taxes, one sure way to pay for excess spending is to inflate the value of the currency, Buffett said. The biggest losers in a surge of inflation, he added, would include holders of bonds and other fixed-income assets.
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“Government does need to step in,” Buffett said, referring to the 6% contraction of the U.S. economy in the fourth quarter of 2008 and the first quarter of 2009.

That’s not to say he is pleased with the earmarks Congress has attached to some of the rescue legislation. Inevitably, Buffett said, when big organizations turn massive resources on a problem, “there’s a fair amount of slop.”

Munger said policy makers should seek to impose limits on banks that are deemed “too big to fail” after financial institutions worldwide suffered more than $1 trillion in losses. The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the recession.

“We need to remove from the investment banking and the commercial banking industries a lot of the practices and prerogatives that they have so lovingly possessed,” Munger said. “If they are too big to fail, they are too big to be allowed to be as gamey and venal as they’ve been — and as stupid as they’ve been.”
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Munger said the financial companies spent $500 million on political contributions and lobbying efforts over the last decade. They have a “vested interest” in protecting the system as it exists because of the high levels of pay they were earning, he said. The five biggest U.S. securities firms, only two of which still exist as independent companies, paid their employees about $39 billion in bonuses in 2007.

“They would like to get back as closely as possible to business as usual, and they have enormous political power,” he said.

2:58 pm: Buffett says his hope for Berkshire Hathaway 20 years from now is that its culture will be maintained, that it will be seen as a place where good managers want to work for the rest of their lives. That and to have the world’s “oldest living managers.” The audeince rises for a standing ovation. That concludes the Q&A session.

3:10 pm: After taking a break, Buffett is now conducting the formal business session of the annual meeting. It is totally routine.

3:15: Buffett, Munger and the other directors have been re-elected to the Board and the meeting has been adjourned.

“If I were the governor of the world, I would eliminate it entirely — 100 percent,”
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“The national policy that allowed the derivative markets to develop as they did was a stupid policy and we think the derivative markets as they evolved have done more public damage than public benefit,” Munger said. “That said, if they exist and they are legal and some opportunity therein is presented to us that we think makes sense to the shareholders of Berkshire, we would seize that opportunity.”

How would you invest your first million if you were just starting out and were not a full-time investor? Buffett’s answer: a low-cost stock index fund with a company like Vanguard. Charlie says if you don’t have any prospects of being a very skilled investor, you should go with an index fund. he and Buffett warn against listening to people who make money by telling you what to do with your money