Berky Meeting Nuggets 2015

After a one-year absence due to a family wedding, I attended the Berkshire Hathaway annual meeting in Omaha last week.  So this year, I'm back to my own very limited summary of what Warren Buffett and Charlie Munger had to say.  And even though the former is now age 84 and the latter is age 91, it was another great time:

On current stock market valuation:
Buffett noted that any valuation measure of the stock market is skewed now by very low interest rates.  Corporate profits are worth a lot more if the government bond yield is 1% as opposed to 5%.  Is short, the market is undervalued if you assume interest rates will remain low, and slightly overvalued if you assume interest rates will return to something more historically normal.

On economists and forecasts:
Responding to a question about the direction of interest rates and the economy, Buffett used the opportunity to swipe at economists, suggesting that “any company that employs an economist has one employee too many.”  Munger noted that neither he nor Buffett predicted the current, prolonged low interest rate environment, and since they got that wrong, why anyone would want their opinion now?  Later, Munger added that the problem with [economist] pronouncements is that eventually they think they know something and “it would be better if they just said they were ignorant.”

On raising the minimum wage:
Buffett noted the problem of income inequality in the United States, but said that he didn’t see how raising the minimum wage cold make a big impact on it, because it would come at the cost of too many lost jobs.  He said increasing the earned income tax credit was a much better way.  Munger noted that he was a republican, but he agreed full with his democratic counterpart.  He considered raising the minimum wage to be counterproductive and “massively stupid.”   On the other hand, the earned income tax credit rewards and helps people who work.

On the behavior of activist investors:
Buffett said he didn’t see Berky ever being an activist investor target, even after he gave all of his shares to charity, because the whole would always be greater than the sum of its parts.  He went on to say some activism is stupid, particularly when activism results in stock repurchases.  That’s when things get silly, because often the buybacks occur when stocks are overpriced.  Munger was his typical blunt self, simply stating he couldn't think of any activist he’d want to marry into the family.

On making friends:
When asked about how to meet people and make a lot of friends, Munger unusually jumped in first and said that the only way he was able to get people to like him was to be very rich and very generous!  Buffett said to look at other people and determine why you admire them, and then reflect those qualities that you like.  He also noted that Munger often said the most important thing in finding a spouse is to “look for someone with low expectations!”