Berkshire Hathaway Annual Meeting Extensive Notes

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new unit volume with stock market in 2007-2008. There were may customers like hf managers who caused a boom then. A lot did not renew when their contracts ran out. It is not a huge growth business in the US. Netjets has large market share at >60pct. I don’t see the market 2x or 3x its current size. They are going to China but this is a very LT play. They are in Europe but this is still declining a bit.


How large of a deal is Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) comfortable doing today? To what extent are KO/WFC/IBM/AXP potential sources of funds for a deal?

WB: They COULD be a source of funds but it is unlikely. If the oppty was large enough and we had to raise money, we could dip into a huge reservoir of securities. It hasn’t come to that so far. We have 40bn of cash and I’m willing to take it to 20bn. If I need much more, I would be willing to sell securities.

CM: Our M&A will be irregular. I think the regulated ute and the rail will give us better automatic capital deployment. I think this is good.

WB: We would probably sell other names in the portfolio before these names


Why not go out and raise very LT low cost debt for Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) and then use it?

WB: This makes great sense. 40 years ago, if we were looking at 2014 interest rates, I think we would have gone out and borrowed a ton of money for the LT. But we have several reasons for not doing this. 1) We have float. 2) We don’t like the idea of changing the strategy to get much more aggressive if bondholders thought they bought a conservative company.

We don’t have a problem levering up the ute or the railroad. Both could withstand more debt. For BNSF, we borrowed money and we used some equity. I think using equity was dumb but it helped us get the deal done. I could have subsequently bought back that equity in the market and I probably should have.

I get your point. Borrowing 30-40bn extra low cost debt at Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) is “nothing”. If we see a very good 50bn deal, we would figure out a way to do it.

CM: I think we welcome more debt if we need it but we probably would not do it in advance


BRK’s views on climate change?

Our rail carries a lot of coal. Short term changes in climate change do not impact our pricing in reinsurance at all. We will keep using coal in our utes until we are regulated to change that.

In making an investment decision on BRK stock, I don’t think climate change should be much of a factor

CM: I think people who are making claims on how weather will change are overclaiming. I think Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) will adapt and find ways to make money as trends like renewable energy pick up


Todd/Ted have grown their portfolios to 7bn each. How much is each running and how much will this grow to over the next 5 years? How will their roles expand?

WB: They manage about 7bn each now. They will manage more money in the future. It gets more difficult.


We have been in near zero rates for years. This historically has led to bubbles. What would you do if you were the Fed chair?

WB: Who would have guessed 5 years ago we would have had rates this low for this long. I am surprised at how well things are going. I don’t think I would do things too differently because things are working pretty well. As I said in 2013, this is an interesting movie because we don’t know how it ends. I think Bernanke was a hero at the time of the crash and after as well. When 2007-08 Fed minutes came out, I was surprised that so many Fed members didn’t really get how serious things were then. I give him particular credit given he was not getting a unanimous view from those around him. He still moved forward with the extraordinary actions.

I do not know how this movie plays out. We’ve tapered but we’re still buying

CM: No one in Japan thought rates could go down and stay down for 20 years, or that stocks would decline for years. Things are confusing. If you’re not confused, you probably don’t understand it very well.

WB: ZIRP has had a huge effect both on rejuvenating the economy and on raising asset prices. I don’t think we live in a bubble situation but I think it is unusual.


You’ve been looking for a credentialed bear. In the LT, Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) owns over 70 unrelated businesses. This has almost never worked well in the history of American business. The probabilities don’t see favorable that your successors will be able to handle these so well

WB: It has worked well for American business over time. Owning a group of good businesses is not a bad plan. Many of the historical conglomerates were put together to make financial magic: LTV, Gulf/Western, Litton. They serially acquired stock and acquired lower p/e businesses. BRK is not like that. We own a group of high quality, diversified, well managed, and conservatively capitalized companies. Capitalism is about the allocation of capital. We can allocate capital between businesses without tax consequences. We can move money out of See’s into wind farms as opportunity dictates. We think we must have businesslike principles rather than stock promotion principles.

CM: There’s a few differences between Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) and the failed examples of conglomerates. They were hell bent to buy something or other. We are more willing to sit. We are more like the Mellon brothers than Gulf and Western. Mellons were willing to own minority interests, whole companies etc, similar to BRK. They did well for 50 years.


Forest River is one of Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s better acquisitions. What is FR doing differently from Thor?

WB: Pete Legal built up a successful RV business and sold it to a PE firm in the 1990s. They told him how to run it and he left,

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