Warren Buffett Talks About the Market, Housing and Investing

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 |  Includes: BRK.A, BRK.B
by: FP Trading Desk

Here are some comments that Warren Buffett made at Berkshire Hathaway's Annual General Meeting last weekend in Omaha:

The Market

When asked where the stock market was headed, Warren Buffett responded: “I could expand, but I couldn’t answer.”

Health

Mr. Buffett told a teacher in attendance at the AGM to

ask students to imagine they could have the car of their choice, but that the car would have to last the rest of their lives. They would read the car’s manual, keep it washed and keep it garaged. You get only one body and one mind, so you better treat them right.

Mr. Buffett says he stays healthy thanks to “a healthy diet” as the perpetual promoter chews on a See’s candy. He noted that he does work out for 45 minutes, three days a week with a personal trainer, but otherwise he does what he wants. He likes Mars bars, See’s Candies and Cherry Coke.

The most important factor he highlighted was that he works at a job he loves with people he loves to work with.

How can you be sour about life when being blessed in so many ways. Associating with wonderful people is about as good as it gets … We think we live in the best country in the world.

The Housing Bubble

He said he does not remember another such bubble spreading to other areas of the economy the way this one has.

The U.S. Election

He thinks that all three candidates are strong and that any of them would do good in the White House.

The U.S. political process seems to invite some degree of pandering as each candidate seeks votes.

Advice for China

Mr. Buffett expanded on earlier comments how

U.S. companies may have a lot to learn from China, which is just realizing its potential. As far as China learning from U.S. companies, the Chinese should take what is good and leave the rest behind.

The Pharmaceutical Industry

He said that investing in this area is difficult because there will be a different drug pipeline in five years for pharma companies, so he doesn’t know whether Pfizer (NYSE:PFE), Merck (NYSE:MRK) or Johnson & Johnson (NYSE:JNJ) will be best. He says he would try to access it as a group and that over time an investor can do well.

Education

He said that much of the complex financial matters taught in business schools are unnecessary, but professors feel they must impart that knowledge to their students.

It really has nothing to do with investment success.

Investor Education

An investor needs to know only two things: how to value a business and how to think about the stock market fluctuations. It’s like teaching theology. The book has many examples, but it all comes down to the Ten Commandments.

Diversification

Mr. Buffett and vice chairman Charlie Munger agreed that expert investors should not diversify if they know what they are doing, but rather should “load up” when they get the chance. Diversifying is best for amateurs.

Parenting

Most important job you have is being the teacher for your children. You have to do the best you can. There is no rewind, you only get to do this once. Teach by what you do, not what you tell them.

Sin

Mr. Buffett stated that envy strikes him as the most useless of the seven deadly sins – you feel worse, and the other party doesn’t. It is a counter-productive kind of thing.

We rule out envy as our thing. Gluttony has some upside at least. I let Charlie speak on lust.

The Nuclear Threat

He said that more and more people will know how to do enormous damage. People tend to associate weapons of mass destruction with just terrorists, Mr. Buffett noted, adding that we need to reduce access to materials.

In 1945 Einstein said 'the atomic bomb changed everything in the world except for how men think.' We live in a very dangerous world and [it is] getting more dangerous. There are people who wish this harm on their neighbor.

Berkshire’s Unique Corporate Culture

You have about a strong a culture as you can find in the U.S.

Mr. Munger on Investing in Start-Up Companies:

We don’t do start ups – they don’t exist.

[Jeff Hull, a financial and investment advisor with Berkshire Securities Inc. (a subsidiary of Manulife Financial) is the Financial Post’s insider to Warren Buffett and his company’s AGM.]