Shareholder Meeting Has Taken on Bubble Qualities
Just when you think it can't get any bigger, it does.
Bigger is not necessarily better: this column is very straightforward in saying that the meetings had better content a few years ago. For proof, get your hands on some back issues of Outstanding Investor Digest. Which I recommend you do anyway. Great stuff in there. No time spent explaining why Berkshire bought derivatives, lobbied against financial regulation or admires Goldman Sachs. You will find ample coverage of investment mistakes, such as the investment in US Air, which is material worth reading.
Bonus: OID contains many interviews with Charlie Munger, some of today's other most famous value investors, and some important figures who are no longer among us, such as George Michaelis and Bill Ruane.
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Price gouging
I mentioned the cost of attending in this piece. Last year the airlines took advantage of shareholders with much higher prices than a trip during other times of the year. This weekend I heard about another example. You will enjoy this one. The Marriott Regency (by Borsheim's) gave guests a form upon checkout to reserve their rooms for the following year. New terms. Deposit one year in advance. Only 25% refundable if canceled more than six months prior to meeting (I was told).
The exact details may differ but if anything resembling this happened it is outrageous, even if the cancellation terms are less severe. These rooms sell out every year. The hotel can resell in the event of a cancellation on a moment's notice = Carol Pederson at Amex has a waiting list. There is no need to compensate the hotel for any "lost"revenue in the event of a cancellation, especially six months prior to the event. The hotel obviously has learned the value of "float," however. Rooms also run $300 a night, which is awfully steep for an older suburban Marriott that lacks a few of the amenities expected in a modern hotel.
Carol Loomis was witnessed at the hotel's front desk, yelling (supposedly) or at least having a very heated conversation as follows. "I am going to tell Warren and he will put a stop to this." It is so egregious I will bet he intervenes.
This is yet another example of the bubble and why the meeting should be webcast. The free market is saying that the meeting is too big for Omaha. There are not enough hotel rooms or airline flights, which has created profiteering opportunities. Even without that, it is a system that imposes a sort of tax on those who want to hear the chairman and vice chairman by requiring them to travel, which treats some shareholders as second class. That was fine in the early days of B shares when they really were second class. With the stock split, more reasonable treatment of shareholders is called for. This is not a normal shareholder meeting held in Wilmington Delaware. That is especially true now that the "market price" of attending is rising because of scarcity.
No longer insightful meetings
I think those of us with some history of Berkshire following no longer think of the meetings as insightful we listen to see how genuine Buffett is willing to be. Not very.
I too have decided that Alice is right on the money rather than overly critical.
Why would Buffett say this?
During the 2006 or 2007 meeting (can't remember which), Buffett mentioned that he sold one of his homes in Laguna Beach, CA because it was excessively valued. He went on to say that if you wanted to build a similar home it would cost $500,000 and therefore, given the small plot of land it was on, the land was being valued at something like $25 million an acre. (The numbers I sight are in the ballpark of what he said but aren't exact because I don't recall them). A look into OID or another source with meeting notes should clear this up.
Anyway, a few days ago he gets on CNBC (I think it was CNBC), and says that we all thought during the boom that houses could only go up in price, including himself. This was in defense of Goldman and/or the rating agencies. I don't see how he can assert this--with honesty--given his comments and actions of a few years ago.
I don't disagree...but the
I don't disagree...but the little gems never make the headlines.
The references to brk corporate culture are below the radar, but very important IMO.
Meanwhile, regardless of the value judgments regarding GS, a specific example of a bid request from LEH on $8B in munis was incredibly effective in demonstrating GS's POV.
This was powerful stuff. If nothing else, it introduced more than reasonable doubt. This is more than a technical point...it illustrates the disconnect between the public, that is desperate for a hanging and anyone that has been paying attention to the financial crisis and has long been aware of the excesses of structured finance.
The adults (those with money) are always going to see bad deals. It is there job to say no....or to insist on a price that reflects the risk. In this case, brk asked for 200bp. This stuff was selling for 1/10 that a year prior.
you are right Alice - I
you are right Alice - I changed my mind. You are not bitter. Just insightful and bright and so so happy. You are not chasing this tiger for as long as you can, juicing every last ounce out of buffett's name. Just the truth from you. Good reporting from a trustworthy journalist. thanks!
BRK meeting bubble
Alice nailed it with her Bloomberg article on the Berkshire meeting being a bubble. Especially the part mentioning a permanent mark on Buffett's record. Buffett should think about what he has stated repeatedly: it takes a lifetime to build a reputation and about 5 minutes to ruin it.
Buffett is a great investor and super smart. Nobody can doubt this. And he is a much more complex human being than he is widely given credit for or leads on. Lately, some of his stripes have been more manifest as he has shown that he will put ethics aside to promote or support his position. Does anyone think that if he did not have a Goldman position he would have said the same things in support of that firm?? Most likely, he would have repeated his past statements blasting the ethics of investment bankers and banks, including Goldman. The irony...
Back to meeting. Alice describes the meeting as a "circus" which is quite apt. More troubling, is that is has attracted fraudsters/shamsters and the like. They have memorized some Buffett and Munger quotes, and with that armor, prey on the unsuspecting. There are many of the latter because they think of this event as a wholesome Midwestern affair run by two old Grandpas. This attracts fraudsters like bees to honey. I'm not saying that everyone who goes there to sell their product or service--or holds their annual meeting--is a fraud. It's just that I noticed a lot of that even a few years ago and I have since have not gone. That is not the only reason though. I last attended in 2007 and the questions during the meeting were either from folks who didn't understand any part of the business or were from promoters who would speak for 10 or 15 minutes before getting to their question (which usually wasn't a good one at that). They essentially used it as their platform to get an audience they could get nowhere else. I guess one could say that was an intelligent arbitrage by them. In any case, it made for a waste of time for those who wanted to get as much value out of the meeting as possible. Buffett, after some time passed, wisened up to this and changed the question format. I applaud him for that. But it's still a circus with unsavory people trolling around looking for suckers.
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