Last Saturday morning at Berkshire Hathaway’s annual meeting, CEO Warren Buffett and vice chairman Charlie Munger answered questions from the Berkshire shareholders. Here are some of their comments.
On Future Returns
Buffett: We would be very happy if we earned 10%, pre-tax. Anyone that expects us to come close to replicating the past should sell their stock; it isn’t going to happen. We’ll get decent results over time, but not indecent results.
Munger: You can take what Warren said to the bank. We are very happy at making money at a rate in the future that’s much less than the past… and I suggest that you adopt the same attitude.
Buffett: We think Berkshire is an attractive investment. We don’t think it’s the most attractive in the world.
On Future Investments
Buffett: We are happy to invest in businesses that earn their money in euros in France or Italy or sterling in the UK, because I don’t have a feeling that those currencies are likely to depreciate against the dollar. Overall I think that the U.S. continues to follow policies that will make the dollar weaken against other major currencies…. I feel no need to hedge purchases of companies that earn profits in other currencies.
On the Economy
Buffett: I haven’t the faintest idea. We never talk about it, it never comes up in our board meetings or other discussions. We’re not in that business, we don’t know how to be in that business. If we knew where the economy was going, we’d do nothing but play the S&P futures market.
On the Single Best Investment Idea for an Individual in His 30s
Buffett: I would just have it all in a very low-cost index fund from a reputable firm, maybe Vanguard. Unless I bought during a strong bull market, I would feel confident that I would outperform…and I could just go back and get on with my work.
How Berkshire Would Invest if it Had Only a Few Million Dollars
Buffett: That would open up thousands of opportunities. There were very mispriced bonds that we could buy nowhere near enough of to make a difference to Berkshire. Most of the opportunities would probably be in small stocks or in specialized bond situations.
Buffett: On the CEO front, we have three who could step in. The board is unanimous in knowing which one it would be, although the answer might change with time…. In terms of the investment officer, the board has four names, any one or all of whom would be good at my job. They all are happy where they are now [working outside of Berkshire], but any would be here tomorrow if I died tonight, they all are reasonably young, and compensation would not be a big factor…. There will be no gap after my death in terms of having someone manage the money. They’ll be much more energetic and may even have a better record.
Munger: We still have a rising young man here named Warren Buffett. And I think we want to encourage this rising young man to reach his full potential.
Buffett: At the average age of 80, we’re aging at the average rate of only 1 1/4% per year. That’s a lot better than younger people.
Whether Berkshire Would Buy Entire Private Companies in China or India
Buffett: We would like to. If we get lucky, we’ll buy one or two in the next three or four years. I don’t know if it will be in China, India, Germany, the U.K. or Japan — there’s a lot of luck in that in terms of families thinking of us specifically…. But you will see the day that BRK owns businesses in both countries.
On Dividend Payouts
Buffett: The test is whether you can continue to create more than $1 for every $1 you’re retaining. If we can turn $1 in dividends into $1.10 or $1.20 on a present-value basis, they’re better off if we don’t pay out. When the day comes, it should be paid out. But because we still have this ability to redistribute money in a tax-efficient way within the company, we can reallocate it, where it will earn a higher return than shareholders may be able to on their own.”