Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. We just wrapped up the 2012 Berkshire Hathaway Annual Meeting. I'm here with Berkshire analyst, Gregg Warren and Morningstar's chief equity strategist, Paul Larson, to discuss what they thought about the meeting. Gentlemen, thanks for joining me.
Paul Larson: Thanks, for having us again.
Glaser: So the first question I want to ask really has to do with politics. It came up a lot during the meeting, discussion about the Buffett Rule, discussion of all sort of political questions about the United States. What did you take away from that? Did it change your opinion of Warren Buffett as he kind of waded into the political arena a little bit more?
Larson: Well, when the question first came up from [TV journalist] Becky Quick, there was actually applause regarding whether Buffett should be engaging in the political arena or not. That indicated that at least part of the audience thought that he should not be wading into those waters, but then when he gave his response that no CEO should rescind their citizenship when they become CEO, that got even louder applause. But still you still had this split in the audience. So it does tell me that as with anything in politics, you can't win them all.
Gregg Warren: Well, I think Buffett even hit on it himself. He was basically saying that 50% of the audience is going to agree with one point of view while 50% is going to agree with another point of view, and that's sort of the makeup of our politic right now. Just back to your earlier point though, I was a bit more surprised with the amount of time that was spent on taxation, on the Buffett Rule, and on the political environment overall. Even to the point where that one woman was asking a question in which she was going after Fannie Mae and Freddie Mac and was going on and on and on to the point that people started booing her. So I think there was only a certain amount of taste for it within the audience, and it really showed up in the answers and responses that Buffett gave.
Glaser: We've talked about succession seemingly ad nauseum. We've certainly talked about it a lot. Did we learn anything about succession from this meeting or not?
Larson: I don't think we learned a whole lot new. I was actually a little bit surprised that there was not more discussion about this issue. We thought that with the recent cancer diagnosis with Buffett that there would be lot more discussion about succession, and there was a little bit but not to the magnitude that we expected.
Warren: Yeah, I certainly would have expected more questions on that regard because last year, if you remember, we had a lot more questions directed at [the David Sokol affair] and succession planning based on what had happened last year. And I thought that we'd have just as many questions this year on the succession planning. I guess, maybe in some senses people felt that Berkshire is going to veil this in secrecy and will not let us know who [Buffett's successor] is.
That said, I'm walking away from this meeting a lot more convinced that Ajit Jain is the guy who is going to replace Buffett because Buffett talked about the notion of having a chief risk officer. What Jain does with Berkshire Reinsurance, it's always been sort of my feeling that he was the perfect guy to step in because he understood the risks overall of lot of these businesses. So, I'm walking away with a better feeling there.
Glaser: Certainly, one of the big changes this year was that there was a panel of financial analysts who were asking questions along with journalists and members of the audience. What impact do you think that had on the meeting, and what was your take on that?
Warren: I think it sort of flattened things out a little bit. My feeling overall was that they went into those thinking that we could have some analysts on the panel, they could ask some more detailed questions about the business, and it could add value to the shareholders. And I believe that. I really truly understand that that was the intent and that's what should have happened. I think what we saw was a lot more detail-oriented questions about little pieces of the business, especially on the insurance side, which for me from an analyst perspective are fantastic for modeling and understanding how to really look at the business. For basic shareholders, I don't think it really sort of hit the groove that the meeting really sort of sets for everybody.
Larson: One thing that we've seen differ from years past is that we saw fewer general interest questions and fewer questions coming from children about what they should study in school. Also, I didn't recall a single what you might call "protest question" other than one question about Fannie and Freddie. Whereas in years past, we've had several questions of each of those kinds at every single meeting and those have been greatly filtered out.
Glaser: So overall, given some of these changes, and given everything that was talked about, what was your take on the meeting? What are going to be your big takeaways as you leave from here?
Warren: I think this year's meeting was not really quite as vibrant as last year's. I think there was a bit more of an edge to last year's meeting. This year I think we got doled out a little bit by some of the questions that were actually coming from the analysts surprisingly and from the journalists, too. But I think overall the meeting was a success from the point where Buffett was talking a lot more about the business. But it was kind of overshadowed at the same time by a lot of these political questions and lot of other issues. So, it's sort of a mixed result, but overall, I think, when you look at the [Berkshire's quarterly] results and when you look at how the company continues to perform, it is still in solid shape here.
Larson: I was also glad to see that Charlie Munger had a whole lot of energy, especially in the afternoon because last year he appeared a little bit more fatigued than he had been in years prior. So the fact that he is back and he was in rare form today I think is a good sign.
Glaser: Paul and Gregg, thanks so much for your thoughts today.