Berkshire's Annual Meeting: Buffett Talks Cancer, Politics, Cheap Stocks and Gold

Warren Buffett Talks Cancer, Politics, Cheap Stocks and Gold at Berkshire's Annual MeetingNo cameras are permitted. No transcripts are available. Only shareholders are even allowed to attend. But we have a ringside seat at the Berkshire Hathaway (BRK-A)(BRK-B) annual meeting in Omaha, Neb., where Tim Beyers and other Motley Fool analysts are live-blogging from the event of the year. (Join the chat here.)

For more than four decades, Warren Buffett and Charlie Munger have held court during these famously witty and insightful Q&A sessions. (The pair has commented on almost everything -- from sex and markets, to China, to Google's (GOOG) competitive advantage, to nuclear disarmament.) Here's a closer look at what they talked about in today's meeting.

1. On his health. Buffett says he loves what he does and still loves coming to work. His energy and enthusiasm during the Q&A seems to corroborate his claim. Nevertheless, he's suffering from a form of prostate cancer, which makes some investors nervous.

Buffett sees four doctors for this condition. Less than a month ago, he and his family visited them, and none of the treatment recommendations that came back were all that troubling.

Says Buffett: "The ones they recommend do not require a day of hospitalization. They don't require a day off work, and there's a 99% survival rate. Maybe I'll get shot by a jealous husband. In all seriousness, it is a non-event. The med center is about two minutes from the office. For two months, I'll walk over there."

Munger adds: "As a matter of fact, I rather resent the attention he [Buffett] is getting. ... I don't know [if I have prostate cancer] because I don't let them test for it."

2. On taxes, the economy, and his role as a political figure. Buffett says that if you look at the most recent year, aggregate both payroll and income taxes, and then take the people with the 400 highest incomes in the U.S., they average $270 million each -- and of those, about 140 pay tax rates less than 15%, and about 30 pay less than 10%.

"I would say when we're asking for shared sacrifice, and we're making promises on Social Security ... I'd make sure we [are] taxed in a way that's commensurate with how we earned," he says.

Buffett recognizes this isn't a popular view in some corners. A later questioner, who has an 84-year-old relative who won't invest in Berkshire because of Buffett's tax-related activism, asked whether Berkshire's stock would rise more if he were a less political figure. Buffett dismissed the impact of his politics on the company's share prices.

"It's fine if people disagree with us," Buffett says. "It sounds to me that if that 84-year-old man is making a decision on his investment based upon his politics, he belongs on Fox."

As for the economy, Buffett says we've seen worse times: "I bought my first stock in June of 1942. We were losing the war, and stocks were cheap." The message? Macroeconomic factors shouldn't replace sound thinking about value, competition, and so forth when it comes to the business of investing.

3. On stock buybacks, dividends, and whether Berkshire is undervalued. Buffett says his aim is not to advertise the attractiveness of his company's stock. Nevertheless, he and Munger both see it as worth "significantly" more than it is trading for right now.

So why haven't they repurchased more stock recently? There's no reason to act quickly, Buffett says. What's more, he notes, it's easy to be dumb about repurchasing shares. Too often, CEOs choose to pursue buybacks for reasons other than price.
Buffett says he won't do that.

Moreover, he views himself as a fiduciary for thousands of investors, and in that role, he believes paying dividends isn't the best use of Berkshire's cash: "I do not think a dividend would be a plus in terms of getting the share price up to [fair] value -- in fact, it might be quite the opposite."

4. On the market and stocks versus gold. Buffett says his teacher, the legendary value investor Benjamin Graham, created the simplest formula for obtaining wealth. All anyone has to do is read chapters 8 and 20 of The Intelligent Investor, in which Graham likens investing in stocks to bargaining with a crazy person -- or, to use Buffett's particular parlance, "a psychotic drunk."

"The beauty of stocks is they do sell at silly prices sometimes," Buffett says. "That's how Charlie and I got rich." But he's being modest. Buffett isn't just rich; he's Scrooge McDuck rich.

According to Forbes, at a net worth of $44 billion, he's the world's third wealthiest person. Carlos Slim Helu, the man behind Latin American telecom America Movil (AMOV), ranks first with a $69 billion fortune, while Microsoft's (MSFT) Bill Gates, a Berkshire director (and in attendance at the annual meeting) is second with $61 billion.

And what of gold, which has become a popular alternative to investing in stocks? "When we took over Berkshire, gold was at $20, and Berkshire was at $15," Buffett says. "Gold is now at $1,600 and Berkshire is $120,000." He went on to say he would "bet his life" that Berkshire shares will outperform gold over the long run, and he says the same about stocks generally.

Do you own shares of Berkshire Hathaway? What's the most interesting thing you've heard Buffett and Munger say today or during earlier meetings? Let us know in the comments section.



Fool contributor Tim Beyers owned shares of Berkshire Hathaway and Google at the time of publication. The Motley Fool owns shares of Microsoft, Google, and Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway, Google, and Microsoft, and creating a bull call spread position in Microsoft.


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Serenity Stocks

Ben Graham was Warren Buffett's mentor and the founder of value investing.
Buffett even named his son after Graham and calls Graham, his second greatest influence after his own father.
Anahin (www.anahin.net) gives a comprehensive analysis of the stock market - all 4000 stocks listed on the NYSE and more - using all of Ben Graham's principles.

May 12 2012 at 12:32 PM Report abuse +1 rate up rate down Reply
Gumby

You buy 100 shares of yxf stock, your broker give 83 shares of your yxf stock to Berkshire to do as they please but keep only 17 shares in street name for you. You watch and stratch your head why your xyf stock is going nowhere or down.. if you pick a right stock on the right time, your broker swallow the loss as he has to come up with whatever lucky capital gain you make.. The odds are greatly against you.. Most of your brokers give your hard earned capital to the "Herd Mentality" stocks... except only 17% of that in your rightful stocks that you picked .. The SEC like FDIC mandate that money changers whether it is banks, brokers or whatever keep 17% of all your pickings in books .. 83% become theirs to do as they please.. If your pick wrong stocks , you either sell at loss or wait for the old proverbial " wait for the old televisoin set to be thrown in the air and shoot (sell) it fast before it falls down again. many stocks do jump for brief times even only hours or a few days befroe falling back to its old levels or worse.. This is why Warren Buffet preach patience which can mean years and years of pateince before you finally get ahead or possibly miss the old televison shot in the ari when you should have shot (sell quickly ). If you are asleep , then wait for more years before another opporunity arises . Herd mentality stocks behaves liek escalator stocks always on the up and up or stay the same , hardly fall more than 10% at all. most stocks often fall 50% or even 80% from old highs and stuckl there for years . you have to cross figners and hope that it doesnt go bankrupt.. More often is that yoru stock get diluted with more shares flooding which mean even harder to return to old highs.. you are resigned to sell at the next new high often lowr than previously. due to dilution. many companeis are acting as supporting roles for herd mentality stocks that buy products and servcies from them. Take an example,, Why should Alcoa pay can recyclers $2 a pound then turn around and remelt it to make new can sheets to sell to coca Cola for less than $2 a pound.. Coca Cola get ahead whiel Alcoa get behind. Coca cola can tell Alcoa to get lost if asked to pay more for aluminium .. Warren Buffet owns Coca cola right? who is right ?? you ask yourself..

May 08 2012 at 10:45 AM Report abuse -1 rate up rate down Reply
Wwhatever747

He's gonna be ok as the medical center is about two minutes from his office. For two months, he'll walk over there."

May 08 2012 at 1:05 AM Report abuse -1 rate up rate down Reply
Wwhatever747

http://www.fool.com/investing/general/2012/05/06/berkshire-2012-prostates-gold-and-jealousy.aspx

May 08 2012 at 1:02 AM Report abuse rate up rate down Reply
Devadas Krishnadas

"It's fine if people disagree with us," Buffett says. "It sounds to me that if that 84-year-old man is making a decision on his investment based upon his politics, he belongs on Fox."

As for the economy, Buffett says we've seen worse times: "I bought my first stock in June of 1942. We were losing the war, and stocks were cheap." The message? Macroeconomic factors shouldn't replace sound thinking about value, competition, and so forth when it comes to the business of investing.

May 08 2012 at 12:54 AM Report abuse -1 rate up rate down Reply
Gumby

If everyone thinks alike Warern Buffet, nobody will be making money at all. Warren B has to steal from someone who thought that any good stock will go up ,,NOT!!!!!!!!!!!!

May 08 2012 at 12:00 AM Report abuse +1 rate up rate down Reply
Gumby

If everyone thinks alike Warern Buffet, nobody will be making money at all. Warren B has to steal from someone who thought that any good stock will go up ,,NOT!!!!!!!!!!!!

May 08 2012 at 12:00 AM Report abuse -1 rate up rate down Reply
Gumby

If everyone thinks alike Warern Buffet, nobody will be making money at all. Warren B has to steal from someone who thought that any good stock will go up ,,NOT!!!!!!!!!!!!

May 08 2012 at 12:00 AM Report abuse -1 rate up rate down Reply
Gumby

If everyone thinks alike Warern Buffet, nobody will be making money at all. Warren B has to steal from someone who thought that any good stock will go up ,,NOT!!!!!!!!!!!!

May 08 2012 at 12:00 AM Report abuse -1 rate up rate down Reply
Gumby

Warren Buffet is just a drag queen of herd mentality!! Shmoozers!

May 07 2012 at 11:59 PM Report abuse +2 rate up rate down Reply