The top 10 questions that Jeff Matthews readers would like to ask Buffett at the AGM.
#1 To what extent does Berkshire's reinsurance business rely on Ajit Jain and is there currently another individual in the division capable of replacing Mr. Jain?
#2 Why not either sell the Moody’s position entirely since the franchise value and moat are severely and possibly permanently impaired (redeploying capital into more attractive investments that no doubt exist); or buy Moody’s entirely and use the Buffett/Berkshire reputation to entirely revamp Moody’s into a highly valuable business again? Berkshire may be one of the only franchises that could install the integrity needed to turn around the ratings agencies.
#3 Washington Post went from being a local paper to a national paper to a learning company. Wells Fargo went from being a conservative bank to a highly leveraged mortgage lender. Moody's went from being a boring ratings agency to a co-conspirator in the mortgage bubble. How do you justify holding stocks “forever” when the original investment eventually becomes unrecognizable in most cases?
#4 You said in your letter the United States' best days lie ahead of it. Upon what do you base that statement: economic data, natural optimism, political pressure, or wishful thinking?
#5 Isn't there significantly more risk than what you are suggesting in your sale of long-dated index puts? If one had sold puts on the Dow from 1927 to 1929 (during the run up, a period similar to when Berkshire sold their options), 15 years later, the market was down from an average of say 300 on the DJIA to approximately 140 a loss of a little over 50%. And if one had reinvested the premium in the market, one would have lost 50% of that. So the cheap financing ( less than 1%) does not end up being cheap. Finally, isn't there a risk of doubling down on the stock market as most of Berkshire's business returns are tied to returns in the stock market?
#6 You’ve written See’s Candies’ beauty rests in the minimal incremental tangible capital required to grow profits. Recently, you’ve expressed excitement for Berkshire’s investments in utilities, insurance and railroads – capital intensive industries potentially facing massive inflation. Can you reconcile these contrasting viewpoints?
#7 What factors, if any, would cause you to change your favorite holding period from “forever” to “sometime in the future” when thinking about the challenges your businesses face?
#8 On Conoco, it seems Berkshire made the uncharacteristic move of buying an asset with a price chart that went straight up, rather straight down. Please explain the decision making process on Conoco and what you learned from this admitted mistake.
#9 Being a major shareholder in Moody's, why didn't Mr. Buffett play a more active role in urging Moody's to change its rating process and save it from disrepute?
#10 How do you sleep at night knowing you sacrificed Ron Furgeson [sic; it is spelled Ferguson] to avoid your own responsibility with the General Re/AIG crime?
Jeff Matthews
I Am Not Making This Up
http://jeffmatthewsisnotmakingthisup.blogspot.com/
Any questions from ASF members?