May 3, 2008 9:40

Liveblogging the Berkshire Hathaway annual meeting

8:42 a.m. (all times Central): It's begun! They're playing the movie. Starts out with a musical montage with scenes from Berkshire subsidiaries. Makes me wonder if "It's a Beautiful Day" is, in fact, the most-played song at annual meetings. Then goes to a cartoon in which Warren and Bill Gates (Berkshire director and Buffett bridge buddy) talk Charlie Munger (Berkshire vice chairman and Buffett's Cali-based BFF) into running for President. He wins and quickly gets going on the nation's problems. If everyone eats a Dairy Queen Blizzard each day we'll all cool off, taking care of this whole global warming thing. For the nation's healthcare issues, everyone should switch to See's Candies: Munger has been eating them his whole life, and he's healthy at age 84. Experts at the Nebraska Furniture Mart pick the Cabinet. You get the idea.

9:12 a.m.: If I had to sum up this movie in a phrase, it would be “sketch comedy." Warren and Charlie have a nice little bit: Buffett discovers something called the Internet and calls up Munger to suggest they invest in Web stocks. The answer is no—until Warren phones Jamie Lee Curtis, who answers lying in bed, and then calls up Munger to suggest “maybe we could all buy them together.” Interspersed are commercials for Berkshire products, including a touching story about a man who writes his wife a heartfelt letter. The narrator intones: “If you’re not that guy,” there are some Berkshire-owned jewelery stores that can help out. They’re also showing clips from that fantastic John Bird/John Fortune subprime mortgage market meltdown video.

9:32 a.m. Last video bit was about Warren and Susan Lucci swapping jobs. Now Lucci is on stage with Munger. When he asks where Warren is, she says he got hung up at the studio, shooting All My Children. That's okay, he says, since she has "some important qualities Warren lacks." Now she's saying she wants to make some changes, like paying shareholders a dividend. This is a popular idea with the crowd.

9:36 a.m. Warren is back! He's sending Lucci off to Borsheim's.

9:38 a.m. Introduction of the directors, including Warren's son Howard Buffett, Bill Gates, Yahoo's Susan Decker, etc.

9:40 a.m. First question from a shareholder, who's come all the way from Bombay: How can people learn to invest smartly (aside from reading Berkshire's annual letter to shareholders). Warren's answer is to read Ben Graham's The Intelligent Investor. "If you read it, you will not behave like a lemming."

9:44 a.m. Next question: How is the operational integration of Cologne RE progressing? I'm going to take this as an opportunity for a bathroom break.

9:51 a.m. Where's the market going to head next? Buffett: "Charlie and I don't have the faintest idea of where the stock market is going to go next week, next month, next year. We're not in that business, we don't know how to be in that business. It's just not our game." It's all about buying good companies on the cheap then hanging on to them for a long, long time, folks.

9:54 a.m. A question about who to hire as managers. Whomever is passionate, says Buffett. Mrs. B worked at the Nebraska Furniture Mart until she was 103 and a year after she retired, she died. “That is a lesson to our managers.” If you listen to Buffett enough, you realize that he tells the same stories in the same ways over and over again... but they’re such good stories.

Click on "read full entry" below to, you know, read the full entry.

Sphere Related Blogs & Articles

|

May 3, 2008 9:12

How Warren Buffett spent his morning

First event of the Berkshire Hathway annual meeting: Warren Buffett gets his portrait painted by performance artist Michael Israel. It takes 8 minutes. Afterwards, Buffett goes to shake Israel's hand... and then thinks twice.

Then Warren did some TV interviews and walked around the exhibition space, visiting the booths and displays of Berkshire's subsidiary companies, like Dairy Queen, GEICO and Clayton Homes, which has a whole house here in the Qwest Center -- with a price tag of $69,500 on it.

At the Justin Brands display, which includes two Texas longhorns, Buffett asked how much the cattle sleep. Did I mention this all started at 6 a.m.?

Sphere Related Blogs & Articles

|

May 3, 2008 5:18

The business of boxed chocolate

One thing I meant to tell you about yesterday—before I got seduced by the blueberry martinis and diamond necklaces at Borsheim’s—was my conversation with Brad Kinstler, the CEO of See’s Candies.

In this year’s annual report, Warren Buffett bragged about See’s. Per-capita consumption of boxed chocolates might not exactly be a growth industry, Buffett wrote, but boy does it throw off cash, which can then be invested and used to buy other businesses. When a Berkshire predecessor company bought See’s in 1972, the chocolatier required $8 million of capital to pull in $30 million in sales and $5 million in pre-tax earnings. Today, See’s sells $383 million a year, with pre-tax profits of $82 million—and $40 million of capital required to run the business. Buffett glows that only $32 million has had to be invested since 1972 in order to reach a total of $1.35 billion in pre-tax earnings.

See’s, which has stores in 10 Western states but opens up temporary outposts in more then 30 states between Thanksgiving and Christmas (when the company does half its sales), raised prices on January 1. That’s pretty much a January 1 tradition at See’s. This year, the cost of a pound of chocolates went from $14.50 to $15.00. Yet even while consistently exercising its pricing power, See’s still generally sells chocolates for at least $5 per pound less than the quality-chocolate companies it considers to be its competitors.

Why? Kinstler says they simply make good chocolate less expensively. Part of that comes from vertical integration; by directly controlling production at its three California factories, See’s can more acutely react to changes in demand. See’s also doesn’t spend a whole lot of money on product development or marketing. The product line doesn’t vary much from year to year—“We don’t feel the need to re-invent ourselves,” says Kinstler—and the design of the black-and-white boxes that traditional See’s assortments come in hasn’t changed, or even really been talked about, in a long, long time. “We’re not selling the packaging,” says Kinstler, “we’re selling the chocolate.”

That if-it-ain’t-broke attitude also permeates the company’s growth strategy. See’s will open eight stores this year, a modest increase over its current base of 200. At Christmas, it will open 120 gift centers—those temporary, mall-based outposts—instead of 110 like last year. Kinstler calls this approach “conservative,” but in a retail landscape littered with companies that had a good idea then ruined it by getting as big as they could as fast as they could, you might more simply call it “smart.” It’s also, as I found out, tasty:

Sphere Related Blogs & Articles

|