What were they doing in OMAHA!!

Christina and I recently went to Omaha for the Berkshire Hathaway Annual Meeting. This is the so-called "Woodstock for Capitalists" where Warren Buffett, the "Oracle of Omaha" and his sidekick "Charlie Munger" preside over a meeting with an attendance of over 24,000. On the day of the annual meeting itself, they take questions from the audience for almost 6 hours--no other company or CEO does anything even close to this.

The meeting lasts the entire weekend beginning with a cocktail party in a huge Berkshire-owned jewelry/gift shop and ends with brunch at the same store on Sunday. Stockholders are offered discounts of up to 30% on all the high-end brand name merchandise (Cartier, Baccarat, Lladro, etc.). Saturday is devoted to the formal meeting and Q&A session. It begins with a humorous movie poking fun at Buffett and Munger and introducing all the companies they own. The theme this year was Buffett's 75th birthday and featured appearances by a parade of stars and celebrities - including Jamie Lee Curtis, Bill Gates, and the whole cast from Desperate Housewives. The attendees include many families who have owned Berkshire stock for up to 50 years and attend as a sort of family outing. There are also students who have studied Buffett and Berkshire eagerly taking notes in the audience, as well as representatives from the traditional analyst community and journalists. The questions though mostly came from individuals and range from the Company's planned succession to what their thoughts are on the current boom/bust in real estate.

You may wonder why we would attend the annual meeting of a company that was in OMAHA! Well, this isn't just any meeting. Ever since we began reading the now famous "letters to the investors" that Warren Buffet sends to his shareholders every year, we've wondered what it would be like to attend one of these gatherings. Well, this past weekend we found out. This is the biggest event seen in the city and we discovered the importance of making hotel reservations EARLY. The downtown hotels are sold out often a year in advance. We managed to find rooms at Harrah's Casino in nearby Council Bluffs, Iowa--an experience in itself!

At times the weekend resembled a revival meeting with Buffett and his longtime partner (and Vice Chairman) Charlie Munger offering as much investment philosophy as specific answers. Some of the very candid responses included:

• Views on the role of traditional Wall Street deal makers - a total waste of time. Add no value, just make money for themselves. They'll never deal with them.
• Discussion of hedge funds - great at making money for their principals, not investors. But there are too many of them to continue to make money even for themselves.
• Thoughts about the housing bubble - they don't know when it will bust, or how, but it is very unlikely to have a good outcome. Reference to the "internet " and "tulip bulb" bubbles.
• Outlook for the dollar - unlikely that the huge trade deficit will not have some impact on dollar. They can't predict how much, or when; but the direction is clear. They have moved from currency hedging to investing in global companies. Announced the acquisition of an Israeli tool maker.
• An answer about investing in technology - they have a very simple philosophy about investing, there are good ideas, bad ideas and things that are just too hard. Technology is just too hard to figure out. They stick to what we understand
• Thoughts about Ethanol - stupid idea (this according to Munger), demented to think it's a solution for the energy needs. Must have meaningful efficiency improvements and conservation (this from two Nebraskan!).
• Rational for acquisitions - very interested in good businesses looking to monetize their net worth. Looking outside the US for the first time. Will not enter into an auction or buy from a "financial manager" - only someone looking to continue to manage the business. Criteria are outlined in the Annual Report. Buffett meets with 40 groups of students each year looking for ideas. Has offered a bonus of one Class B share (about $3,000) for each student if idea has been used (one was).
• What they thought about offering dividends - not in his lifetime.
• How they would deal with inheritance - all his Berkshire stock (about $35 billion) will go to charity on his death. He doesn't believe he can work to earn money and give it away at the same time (a la Bill Gates). Thinks it's schizophrenic.

Berkshire owns almost fifty companies, many of whom sell to the public. During the entire three days of the meeting they have sales/demonstration booths in an exhibition hall. As newcomers, we were fascinated by the variety of companies and products that are part of the 'Berkshire Family'.

Bottom line? We'll be back next year! But for one day less.