May 2, 2008 7:00

Welcome to Omaha! A Berkshire Hathaway weekend preview

Berkshire Hathaway is expecting a record turn-out for tomorrow’s annual meeting. The crowd-control paraphernalia—what do you call those metal divider things?—is all set up in front of the Qwest Center and ready to go.

There’s plenty for shareholders to ask the Oracle—how his new bond insurance business is going, the deal for Wrigley, those rumors about buying American Express, when he thinks all this credit craziness will end, details on who is going to take over Berkshire after he’s gone. Tune in tomorrow for a play-by-play as he and Charlie Munger field five hours of questions.

To tide you over, here’s a little video previewing the weekend and talking to some of the people showing up about why they’re here. We’ve got shareholders, yes, but also the CEO of a Berkshire subsidiary—who will be among the Berkshire executives pushing his wares in 200,000 square-feet of exhibition space—and a member of the Karuk Tribe of California who has come to protest how the dams of one of Berkshire’s energy subsidiaries are ruining the Klamath River and its salmon population.

(Thanks to Caitlin for the editing and to Danny for finding an Internet connection.)

If you want to hear what Warren Buffett has to say about the booming size of the annual meeting and how you can’t get a hotel room in Omaha, check out this interview from CNBC. For the record, I asked to talk to Buffett, but was told no. I hate how bloggers get no respect. Someday, MSM. Someday.

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May 2, 2008 3:07

The Kiviat konspiracy

As you have probably noticed, I'm back from vacation, and Barbara Kiviat is still writing posts. That was partly already in the works because she's going to the Berkshire Hathaway annual meeting this weekend, but I've also asked her to keep on writing here whenever the mood strikes her, and she has agreed. I haven't actually gotten around to asking anyone else at Time if that's okay, but I figured we'd abide by the glorious tradition established by Lisa Takeuchi Cullen: Announce online first, ask questions later.

Oh, and that guy Bill Saporito who was supposed to blog during my absence but didn't? He was really busy. Plus, his back hurts. A lot.

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May 2, 2008 12:26

So just what kind of 'recession-like episode' are we in?

The phrase is Brad DeLong's, and I like it. The latest indicators, out this morning, are the April payroll employment (down 20,000, after seasonal adjustments) and unemployment rate (5%, down from 5.1% in March). That's better than most economic forecasters expected, but it's entirely possible the payroll number will be revised to -100,000 (or even plus 50,000) a month or two from now. (That happens a lot.)

As has been said here and elsewhere again and again, the proximate cause of our current recession-like episode was the unprecedented buildup in U.S. consumer indebtedness in the first part of this decade (household debt rose from $7 trillion in 2000 to $13 trillion by the end of 2006). That's what's behind the mortgage mess, it's why consumer spending has turned anemic, etc. Personal consumption expenditures account for about two-thirds of economic activity in the U.S., so this is a really big deal. But even people with big loans to pay down still need to spend, so consumer spending is generally prone more to slowdowns than to the kind of sharp drops you'll see in, say, corporate investment spending.

Meanwhile, Corporate America, outside of the financial and housing sectors and a few old-line manufacturers, is in pretty good financial shape. It already had its big meltdown for the decade, back in 2001 and 2002. That doesn't mean companies won't tighten their belts if consumer spending stays weak. It does mean most of them probably won't be falling off any cliffs.

Then there's the rest of the world, which so far is chugging along reasonably well as the U.S. sputters. This has been a boon to U.S. exporters. Exports only make up 12.7% of GDP, but they're up almost 10% in inflation-adjusted terms over the past year, so that certainly helps. The economic strength elsewhere is also helping keep oil prices high, which isn't so great.

Put at all together and you get a mostly weak picture, but a muddled one. Which is pretty much what today's jobs report delivered.

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May 2, 2008 10:07

It's raining in Omaha

Got in last night for the big Berkshire Hathaway Annual Meeting. They're expecting more than 30,000 people this year, up from about 27,000 last, and way up from the 450 who showed up in 1986 or the 7,500 who came in 1996.

Even though it's raining,there's that Warren Buffett/Charlie Munger excitement in the air. Last night, the Avis (Avis!) car rental counter was hopping with shareholders--twice as many clerks on duty as usual.

Also, a little excitement on the plane: there were about 15 agricultural students from Denmark heading to Nebraska to visit farms. Oh, yeah, that other thing they have here... I very proudly told them "Hej!" Then one of them explained that it's actually pronounced "hi"-- which makes me call into question this whole notion of learning other languages. We really are more the same than we are different.

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May 2, 2008 9:15

The good times are still rolling in Asia

So maybe the Great Decoupling thesis wasn't nonsense. Reports Time's Michael Schuman from Hong Kong:

Finding an empty table at a Starbucks in Hong Kong on a Sunday afternoon these days feels like winning the lottery. So does getting a reservation at a good dim sum restaurant or renting an affordable apartment. While the U.S. suffers the convulsions of an impending recession and massive wealth destruction, here the malls are stuffed full and the streets bumper-to-bumper with BMWs. The good times keep rolling, and not just in Hong Kong, but across much of emerging Asia, from Shanghai to Mumbai. Sure, the U.S. turmoil has had some impact — jittery investors have knocked back stock markets from last year's lofty heights — but in general, the story of America's economic woes has been confined to the morning newspapers. ....

It's not that the U.S. and Asia are somehow more loosely linked. With increasingly interconnected global manufacturing and financial systems, the influence of the U.S. isn't going to just vanish. However, Asia's developing economies are becoming so advanced that they can generate their own growth. It is domestic demand and investment that are protecting Asia's economies from the U.S. recession. Asians simply have more money to buy the TVs, cars and houses to keep their own economies roaring on. Wages in China's urban areas, for example, jumped nearly 19% in 2007. "It is the internal dynamics that are giving Asia its dynamism," says Ifzal Ali, chief economist at the ADB [Asian Development Bank] in Manila.

This is a good thing. Eventually, consumers in China and India will begin to compete with those in America for the title of engine of world growth. This might mean that the U.S. economy doesn't play the dominant role it has in the world over the past six decades, but it does mean a healthier global economy. With more sources of growth, a sick America can no longer send the rest of the world into the hospital ward.

I hope that's right. But I also wonder if it's just that Asia only beginning to feel the impact of the U.S. slowdown.

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