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The shareholders of Berkshire Hathaway gathered on Saturday at the companys annual general meeting, the "Woodstock for Capitalists”. Legendary investors Warren Buffett and Charlie Munger addressed 42,000-strong gathering at the Century Link Convention Centre in Omaha, Nebraska.

The meeting celebrates the successes of the empire that Buffett built with vice chairman Munger, while offering a chance to learn from the two icons.

Tanvir Gill of ETNow lists key takeaways from the biggest investing event of the year:

2018 earnings enhanced by lowering of income tax rate
Accounting norm changes will create big swings (couple of billions of dollars) in “reported” earnings due to MTM of investment portfolio.

Trading vs Investing
Buffett started with a personal anecdote and reminded of the bad start the US had to the World War II against Japan in the Asia-Pacific in March 1942, and how he took advantage of the resultant weak market to buy stocks. This purchase would have been a five-bagger eventually. But only if hadnt sold too early for a <5% gain.

This reminded us that you just had to make one smart investment decision based on a call on how American business would have done over your life and $10,000 would have compounded to $51 million in his lifetime against only $400,000 if one had bought gold instead (less than 1/100th the value created from buying stock) A dollar of value created in productive business against a penny in gold in the same time.

US vs China or US & China
Warren Buffett hinted jokingly that he might look to acquire something in China soon. Both superpowers to coexist in spite of differences (trade wars). US Exports and imports were both 5 per cent of GDP in 1971 and 11.5 per cent and 14.5 per cent now. He doesnt like the 3 per cent deficit to grow, as it results in more foreign rights on US assets. China growing higher off a low base fuelled by a higher saving rate. Both nations are smart enough to know how to handle the relationship, he said

Money for nothing?
Buffett said cheap money was fuelling mergers and acquisitions, and Berkshire has stayed away largely off late. Berkshire though remained a very good home for companies, and had the money to do the deals. Leveraged low cost money made the deal market pricey.

Tail risk from cyber attacks!
1-2 per cent chance of a $400 billion CAT risk event. Cyber is not well understood though. This risk is going to worsen and is very material now!

Mistakes
Expects Wells Fargo to come out stronger just like Amex and Geico in the past. Mistakes will continue to happen. What matters is what you do about them, he said.

Medical costs
They have gone up from 5 per cent of GDP to 18%. Highest globally now. Gone from $170 per capita in 1960 to $10,000 now. Its a tape worm eating into the competitiveness of American businesses! Need creative solutions. I think this could be a huge opportunity for Indians!
Munger reminded of Rockerfellers immense contribution to healthcare. Looking for an encore from Berkshire!

Trade Wars
Buffet thinks that it will be more of jockeying and back and forth negotiations. Should largely avoid any adverse consequences! Any chief needs to be a great educator. Trade is particularly difficult to explain the direct benefits of! Negatives tend to be very apparent, like job losses due to shift in trade! The political pay offs hence can be very skewed.

To dividend or not
A key question as cash balance is closing on $150 billion!! Thinks dividend is less likely than share buyback. Wont short-change continuing shareholders though. Hence will only buy below intrinsic value. Buffett said we wont always be in a market of low interest rates and high private market valuations. Will keep their options open. Munger said if facts change will have to change their opinion, although its difficult.

On emerging market investing
Buffett said there were far more opportunities to do with smaller amounts of money than we can do. Our problem is size not geography. But the first choice even with a smaller corpus would be to comb the US. Charlie added that he has meaningful investments in China.

Duracell getting Amazoned?
Duracell should and will make more money than its doing now!

On low interest rates
They unfairly benefit people like us by artificially inflating asset prices!

Do Moats still matter in a world of high paced evolution
Buffet was responding to Musks recent quote! Moats are still relevant like in Sees candies, he said. Being lowest cost producer selling essential commodities is still a great moat. Technology has not yet impacted Geicos cost advantages.

In fits and starts, but America always moves ahead
We tend to always think our current politicians are worse than the past and forget how bad the past politicians were!

Reinsurance biz
Ajit has made the reinsurance business more growth oriented. Unusual advantages due to our capital position and our talent.

Why Apple!
They have a great consumer product. Will be delighted if they return capital.

Question on allocation
Best performing 2 stocks have had low allocation. But they were owned by Todd Combs / Ted Weschler (two of Buffetts portfolio managers). Buffett missed out on them.

Phillips 66 stake
The firm has been good in operations and in capital allocation. Will continue to hold slightly less than 10 per cent of the company.

Corporate profit to GDP
gone up to 6-8% from 4-6% in the 20th century. Now huge money is in capital light and capital free businesses! The capital heavy businesses have not grown in profits much but a new set of very capital light businesses have moved in!

Views on Amazon/ Alphabet etc
Buffett said what Jeff Bezos has done was a miracle. He had underestimated him. “Dont think of businesses as Tech or not! I Am more interested in whether businesses are understandable to us, have durable competitive advantages or not and whether price is favourable,” Buffett said.
Munger quipped that Google campus looked like a giant Kinder Garden to him! Difficult to relate to what they do.

· American Express continues to be a good business. Buffett was concerned on the disruption risks to the payment businesses from several very smart players. Cited WeChat in China.

· Joked that he has owned businesses facing certain destruction like textiles, retail chains etc. in the past. Compared to that, the risks to current businesses were low, but definitely there.

· Have bought more capital intensive businesses as have found less opportunities in capital light businesses at the right prices , which btw remains our first priority. Returns in these capital intensive businesses will be acceptable, but not great!

· While newspapers have got disrupted a few like NYT and Washington Post have adapted well to the digital era and will flourish.

· Will stick to less than 10 per cent of market cap in our listed securities holdings. Amex is an exception.

· Crypto currencies (market cap higher than Berkshire and Apple combined): Anytime you are buying a non-productive asset you are basically hoping someone else in the future buys it an even more inflated price hoping to repeat the same. Its like buying a stamp collection hoping someone else buys it for a higher price. These asset classes also lend themselves to conmen (people of leas than stellar character) manipulating others greed.
Munger: I love them less than you do!

· Munger talks about how to leverage bicultural background with amazing clarity.
He says use your background to gain advantage in a profession which interfaces both cultures like raising money in US and investing in China or Import/ Exports. No use being a Chinese American if you are going to be a proctologist in Nebraska. Also remember that super-specialised people make more money usually.
Classic Munger: A great thinker! Probably the best we know.

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