A new Bloomberg article takes a look at First Pacific Advisors’ Bob Rodriguez, offering some insights into the strategy of the fund manager whose 15% average annual return over the past 25 years ranks #1 among diversified U.S. equity funds (according to Morningstar).

Among the key parts of Rodriguez’s strategy, writes Bloomberg’s Charles Stein:

• He focuses on two or three industries at a given time;
• He looks for firms with market values between $1 billion and $4 billion;
• He makes sure those firms are trading at what he considers “bargain” prices;
• If he can’t find enough stocks that meet those criteria, he holds cash. (Since 1998, Rodriguez’s FPA Capital Fund has had an average cash position of 30%, far greater than the average mutual fund).

The conservative strategy and willingness to hold cash if he can’t find enough attractive stocks helped Rodriguez avoid much of the Internet bubble earlier this decade, and the credit crisis-related plunge more recently, Stein writes. (Rodriguez warned of both crises in advance.)

Rodriguez hasn’t bough any stock since March, “anticipating that equity markets may take as long as a decade to reach the previous highs,” and that economic growth will remain below average for the foreseeable future, Stein writes. His portfolio had about 40% of its assets in energy stocks at the end of September, Stein says, reflecting his belief in a concentrated approach. Rodriguez says that in college, he heard the great Charles Munger espouse such a belief: “He called diversification the hobgoblin of small minds with little confidence,” Rodriguez said.

In a wide-ranging interview, Charles Munger — Warren Buffett’s longtime partner at Berkshire Hathaway — tells the Stanford Lawyer why he and Buffett have been so successful, why economists so often fail, and why he thinks the federal government was right to let Lehman Brothers fail.

“Warren and I have skills that could easily be taught to other people,” Munger told Joseph A. Grundfest, the Stanford professor conducting the interview, in the publication’s spring issue. “One skill is knowing the edge of your own competency. It’s not a competency if you don’t know the edge of it. And Warren and I are better at tuning out the standard stupidities. We’ve left a lot of more talented and diligent people in the dust, just by working hard at eliminating standard error.” (A tip of the cap to The Ideas Report for highlighting the interview.)

Munger says that many of today’s CEOs suffer from “an extreme optimism based on an inflated self-appraisal”, and get carried away into folly. “They haven’t studied the past models of disaster enough and they’re not risk-averse enough,” Munger says. “One of the very interesting things about Berkshire Hathaway is how chicken it is, how cautious, how low is its leverage. But Warren and I would not have been comfortable with more risk, entrusted with other people’s net worths. There was no reason for our financial institutions to stretch as much as they did, with the leverage, the shady people and the compromises.”

Like Buffett, Munger is straightforward, witty, and insightful — and he pulls few punches. A couple other highlights from the interview:

On the government letting Lehman Brothers fail: “I don’t think that was a mistake. You can’t save everybody. That would have created unlimited revulsion in the body politic. I probably would have let Lehman go, too. … We needed a total correction to a system that was evil and stupid. You can’t have a rule that no matter how awful you are, you’re always going to be saved. You have to allow some failure. We don’t need all our bright engineers going into derivative trading and hedge funds and so on. We need some revulsion.”

On the problem with economists: “I would argue that the economists have not been all that good at working concepts of good and evil into their profession. Nor do they understand, at all well, the economic consequences of bad accounting. … They say it’s not economics if you think about the consequences of good and evil, and good and bad business accounting. I think what we’re learning is that when you don’t understand these consequences, you don’t have an adequately skilled profession. You have big gaps in what you need. You have a profession that’s like the man that Nietzsche ridiculed because he had a lame leg and was very proud of it. The economics profession has been proud of its lame leg. … If you totally divorce economics from psychology, you’ve gone a long way toward divorcing it from reality.”

On whether the financial world will shift back to more traditional models: “The culture of Goldman Sachs as a partnership was morally superior and better for the surrounding civilization than the culture that came after it went public. … A lot of [changing back to more traditional models] is going to be forced, so we’ll go some in that direction. However, there are powerful forces intrinsic to the system that resist reform. But I have lived in my own life with responsible investment banking. When I was young, First Boston Company was an honorable and constructive firm and very much served the surrounding civilization. Investment banking at the height of this last folly was a disgrace to the surrounding civilization.”

On perspective: “If you’re used to growing 3 to 4 percent per year and you go to no growth at all for 10 years, which is roughly what happened in Japan, then, as human tragedies go, that’s not major. That’s not the rise of Hitler. It’s painful, but it’s quite endurable.”

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“Woodstock for Capitalists” — the annual meeting of Warren Buffett’s Berkshire Hathaway — has been going on throughout the weekend in Nebraska, and Buffett’s comments have already made a lot of headlines. (More on those comments later today.) But Buffett isn’t the only one dishing out pearls of investment wisdom at the Omaha event.

In separate interviews with CNBC, Mario Gabelli and Berkshire Vice Chairman Charles Munger — two Buffett fans who have compiled tremendous track records of their own — offered interesting takes on the market and economy.

Gabelli said he thinks the government’s stimulus will work, and that, if that is the case, stocks are a good place to be. “If I have money in cash I obviously am earning 1%,” he said. “I know that … an unintended consequence of the stimulation is going to be an acceleration in inflation — if it works. If it doesn’t work then you’ve got to sit on cash. But I’m assuming it works. And I think there’s a lot of reasons why I think both fiscal and monetary policy are going to work on a global basis, with a lot of speed bumps.”

“You go back 10 years ago, the market’s down,” Gabelli added. “And if you look at the last hundred years in investing, there’s only bee one other decade in which the market was down, and that was in the ’30s. So I’m in a camp that says over the next ten years … the market will probably grow 7 to 9 percent. And that’s a very good place to [be].”

Gabelli stressed that it’s a stock picker’s market. “I’m not buying the market,” he said. “I’m not buying an ETF. I’m not buying what Bogle or Brennan came out with. … I’m picking specific companies, specific stocks — and there are bargains out there today. … Today, you still have a lot of companies selling well below cash values.”

Munger, meanwhile, had a lot to say about the economy and the government’s actions in trying to steady it. He thinks the U.S. is on the right path, and called some of the government’s policies — like those involving Fannie Mae and Freddie Mac — “stunningly correct and stunningly effective”.

But he also says the handling of the auto industry’s woes has been a different story. He thinks that plans that would work are too drastic to gain political traction, and that the plans proposed so far don’t do enough to rectify the situation. Munger also says that proposed “cap-and-trade” efforts would be “monstrously stupid” at this time. It would be a huge shock to the economy and wouldn’t accomplish much.

And, Munger says that the current crisis occurred as “evil and folly … crept into our system in steadily increasing amounts”. Removing that evil and folly will be hard, he says, because those who caused it have a lot of political power.

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Buffett Loves WFC and USB

Warren Buffett tells shareholders that “I would love to buy all of US Bancorp or I would love to buy all of Wells Fargo, if we were allowed to do it.” The problem, he says, is that Berkshire Hathaway would have to become a bank holding company.  Berkshire already owns substantial stakes in the two banks. Buffett’s bullish statement came in response to a question on whether shareholders should get wiped out when the government steps in. Buffett again singled out Wells Fargo for particular praise, calling it a “fabulous” bank that “will be a lot better off in a couple of years than if none of this had happened.” Recalling that Wells shares fell below $9 earlier in the year, he said at that price, “If I had put all my net worth in one stock, that would be the stock.”

BRK still “AAA rated” in Buffett’s Mind

Warren Buffett tells shareholders today that Berkshire Hathaway is “still triple-A” in his mind, but admits he’s irritated the company has lost its top credit rating from Fitch and Moody’s.He doesn’t, however, think the downgrades will materially hurt the company. Buffett says no matter how Berkshire is rated, there “can be no stronger credit” for any other company.

Buffett: Intrinsic Value for Most Newspapers Is Zero

Warren Buffett says Berkshire Hathaway would not buy most of the newspapers in the United States “at any price.” He says the changing media environment now means newspapers “have the possibility of unending losses” and he does not “see anything on the horizon that causes that erosion to end.” Buffett says the days when a newspaper could have a monopoly in a large city and make a lot of money are over. But he promises Berkshire will not sell the Buffalo News, even though it had opportunities to do so in the past at higher prices than it would bring now: “On an economic basis you should sell this business.  I agree 100 percent but I am not going to do it.”  Buffett says the union at the Buffalo newspaper has been cooperating on building a model that will generate “a little bit of money” for Berkshire.” Berkshire also has a stake in The Washington Post Company that it bought in the 1970s.

Moats Rare and Eroding

In response to a question, Munger warned that businesses with truly sustainable competitive advantages are increasingly rare and noted, “Unfortunately, a lot of moats are filling up with sand, such as daily newspapers and network television stations.”

Berkshire Purchased Cheap Corporate Bonds

Warren Buffett revealed the company had “got a chance to buy some corporate bonds very, very cheaply a few months back.” He also says he bought some bonds for his own personal account. Buffett’s partner Charlie Munger added that some of the corporate bonds purchased by Berkshire are already up between 20 and 25 percent.

No Buybacks for Now

Warren Buffett says there are no plans for a buyback of Berkshire Hathaway stock right now, although he did not rule out the possibility in the future. He did, however, set a very high bar.  The stock price would have to be “demonstrably below” a conservative estimate of the company’s intrinsic value. That implies Buffett does not think the stock is clearly undervalued at its current level of $92,511 a share.  It’s down about 30 percent over the last twelve months. He also said that shareholders would be informed in advance if the company did decide to go ahead with a buyback. Buffett says he think many companies make a mistake when they buy back shares, by paying too much.  He pledged that Berkshire would never make that particular mistake, although it might err by not buying when the price is low.

Berkshire Will Not Be Spinning Off Any Subsidiaries

Warren Buffett promises that Berkshire Hathaway won’t be “spinning off any companies” in the future.He joked that anytime someone suggests the company could get a short-term gain from a spin-off, he throws them out of the office. “We’ve listened to presentation after presentation” over the years from bankers proposing various deals, and “there’s always a fee” involved. Buffett says it’s important the companies bought by Berkshire can trust they will remain with Berkshire.

Berkshire Succession Plan

The four candidates to potentially succeed Buffett as chief investment officer did not “cover themselves in glory” last year, failing to outperform the benchmark S&P 500 stock index.  But Buffett remains confident in their long-term track records. As Munger said, “they got creamed”. But he adds, “I did not either.  I am very tolerant in that respect… But their average over 10 years has been modestly to significantly better than average, and I would say that would be the case over the next 10 years.” None of the four, some Berkshire insiders and some outsiders, beat the S&P 500 last year. The three CEO candidates previously identified, but not revealed publicly, are all Berkshire insiders.

Buffett says there are still three internal candidates to take over his CEO role, including one who would step in immediately if he died suddenly. “If I drop dead tonight … the board knows who … and they would feel very good about that (person). Not too good I hope.”

Buffett also praised Ajit Jain, chief of insurance operations. We think Ajin is a top contender to replace Buffett.

Buffett told shareholders today that “it would be impossible” to replace Ajit Jain as the chief of Berkshire Hathaway’s insurance operations. Buffett says he wouldn’t give the same latitude on risk to any other executive. “Ajit is needed, and we won’t find a substitute for him”, Buffett emphasized.

Why won’t Buffett or Berkshire disclose the candidates’ names?  Buffett cities General Electric’s experience, when Jeff Immelt was named the next CEO and the other two candidates left the company.  “I don’t see any advantage in having some crown prince around.”

Preview of Q1 Results

Warren Buffett started during the meeting’s question-and-answer session with shareholders by giving them a preview of next Friday’s earnings report for the first quarter.

Buffett says operating earnings will be about $1.7 billion, after taxes.  That compares to around $1.9 billion last year, and works out to a decline of almost 11 percent. He partially attributes the drop to losses in Berkshire’s investing portfolio and to losses on credit default swaps.Book value fell about six percent during the period. Berkshire’s float has increased by about $2 billion due to a Swiss Re transaction.

Utility earnings are “reported down” a bit, partially due to a prior benefit from Berkshire’s now discarded deal with Constellation Energy Group.  Buffett says he was disappointed that deal didn’t work out. He expects Berkshire’s utility and insurance businesses will do “quite well” unless there is some “huge natural catastrophe.” Aside from insurance and utilities, all of Berkshire’s other businesses “are basically down.”

Buffett reports that Berkshire ended the first quarter with about $22.7 billion in cash, but it spent $3 billion the very next day on its Dow Chemical transaction. Buffett also notes that Berkshire’s credit default swaps have gotten worse since he wrote his annual letter to shareholders earlier this year.

IQ is Irrelevant

Buffett commented that “Picking bottoms isn’t our game. Pricing is our game. It’s not so difficult, whereas picking bottoms is impossible.To be a successful investor, you don’t need to understand higher math or law. It’s simple, but not easy. You do have to have an emotional stability that will take you through almost anything. If you have 150 IQ, sell 30 points to someone else. You need to be smart, but not a genius. What’s most important is inner peace; you have to be able to think for yourself. It’s not a complicated game.”

Munger added: “There is so much that is false and nutty in modern investment practice. If you just reduce the nonsense, you’ll do well. If you think your IQ is 160 but it’s 150, you’re a disaster. It’s much better to have a 130 IQ and think it’s 120.”

Friday Events

3:30 p.m. to 5 p.m.: Free panel discussion on Value Investing.

Location: Creighton University’s Harper Center, 620 N. 20th St.

Panelists are:

John Maginn, former chief investment officer of Mutual of Omaha

Charles Heider, president, of Charles Heider Co.

Bruce Greenwald, Columbia School of Business

Frank Reilly, Notre Dame University

Thomas Russo, Semper Vic Partners

James Crichton, Scout Capital Management

Ryan Sailer, Union Investment Management Group

Mark Wynegar, First National Bank of Omaha.

6 p.m. to 10 p.m.: Shareholder cocktail reception at Borsheims in Regency Court.

8:30 p.m. to 10 p.m.: Free ice cream cone to those presenting credentials at Dairy Queen, 404 N. 114th St. Authors of books on Warren Buffett and Charlie Munger will be on hand.

Saturday Events

7 a.m. – Doors open at the Qwest Center in downtown Omaha.

8:30 a.m. - Movie begins.

9:30 a.m. to 3 p.m. – Question-and-answer session with Warren Buffett and Charlie Munger. Questions had to be submitted in advance. Lunch break at 12:45 p.m.

3:15 p.m. to 3:30 p.m. – Shareholder meeting.

9 a.m. to 4 p.m.: Borsheims Regency Court brunch at 9 a.m. Entertainment will include two-time U.S. chess champion Patrick Wolff, playing blindfolded against all comers; magician Norman Beck of Dallas; and top bridge players Bob Hamman and Sharon Osberg.

3:15 p.m. to 3:30 p.m.: International Meet & Greet.

5:30 p.m. to 8:00 p.m.: Warren’s Western Cookout at Nebraska Furniture Mart.

7:30 pm to 9:00 p.m.: Peter Buffett concert and conversation at the Rose Theater.

Sunday Events

9:30 a.m. to 4:00 p.m.: Borsheims shopping day.

1 p.m. to 10 p.m. – Shareholders evening at Gorat’s Steak House. Reservations required.

(WSJ, May 1, 2009)

By Scott Patterson

On Saturday, the partners will take their decades-old act back to the stage in Omaha, Neb., telling thousands of loyal shareholders that they see huge opportunities amid the financial crisis that drove Berkshire to its worst performance since Mr. Buffett took it over 44 years ago.Warren Buffett is synonymous with Berkshire Hathaway Inc., getting credit for billions of dollars in big deals that have made him an icon to investors around the world. But on the one day a year when he faces his shareholders, at his side will be his longtime partner, Vice Chairman Charles Munger.

The two men, Mr. Munger, 85 years old, and Mr. Buffett, 78, speak frequently and confer about most deals, but there are differences. Mr. Munger is laconic; Mr. Buffett loquacious. Mr. Munger leans Republican; Mr. Buffett tilts Democratic. Mr. Munger will pay hefty price tags for businesses; Mr. Buffett likes safe, dirt-cheap stocks.

Mr. Munger’s views have pushed Berkshire into some surprising directions. Several years ago, Mr. Munger learned of an obscure Chinese maker of batteries and automobiles called BYD Inc., which hopes to create a cheap, functional electric car.

A Chinese tech company is nothing like the shoe and underwear makers Berkshire had been buying. But Mr. Munger was enthusiastic, less about the technology than about Wang Chuanfu, who runs BYD. Mr. Wang, Mr. Munger says, is “likely to be one of the most important business people who ever lived.”

Mr. Buffett was skeptical at first. But Mr. Munger persisted. David Sokol, chairman of Berkshire utility MidAmerican Energy Holdings Co., paid a visit to BYD’s factory in China and agreed with Mr. Munger’s assessment. Last year, MidAmerican paid $230 million for a 10% stake in BYD.

“BYD was Charlie’s idea,” Mr. Buffett said. “When he encounters genius and sees it operating in a practical way, he gets blown away.”

Mr. Munger also was an advocate of Berkshire’s $4 billion investment in Iscar Metalworking Cos., an Israeli maker of metal-cutting tools, in 2006. The investment was relatively pricey, especially given Mr. Buffett’s preference for cheap companies. But Mr. Munger convinced his longtime partner that Iscar was worth the cost.

The deal helped pave the way for other large investments by Berkshire in companies outside the U.S. Results on the two investments haven’t been reported.

The men share a view that the U.S. financial system will change, and criticize past excesses. “People were horribly overpaid for just pouring on leverage,” Mr. Munger said. The two investors have repeatedly warned about the systemic risks posed by the abuse of leverage and derivatives.

Mr. Munger thinks regulators may significantly curb the amount of leverage, or borrowed money, that banks can use. That will drive down pay at Wall Street firms, since traders won’t be able to make as many big, leveraged bets. This could benefit Berkshire, with its cash hoard of $24.3 billion at the end of 2008. “There’s going to be new rules in the game,” he said. “For someone like us, that’s going to be very interesting.”

Saturday’s meeting comes after the worst year in Berkshire’s history, when it lost 9.6% in book value per share, a common metric it uses to track its performance. It marked the biggest decline since Mr. Buffett took over the company in 1965, when it was an East Coast textile maker, and turned it into an investing powerhouse. Berkshire’s shares have fallen 36% since September.

The two investors say they expect Berkshire to return to form in the near future, and they continue to collaborate. They speak on the phone at least once or twice a week from their respective offices — Mr. Buffett in Omaha, Mr. Munger in Pasadena, Calif.

“Charlie understands the essence of a lot of businesses probably better than people in those industries do,” Mr. Buffett said. “He gets right to the point of it quicker than anyone I’ve seen.

Mr. Munger grew up in Omaha and joined the U.S. Army during World War II, serving as a meteorologist in Alaska. After the war, he earned a degree from Harvard Law School and became an attorney at a California firm.

He also became a serious investor. He met Mr. Buffett in an Omaha restaurant in 1959. After working together on a number of investments for many years, the two joined forces full time at Berkshire in 1978, when Mr. Munger became vice chairman.

One of their early deals is one of Berkshire’s best-known brands. In 1972, Mr. Munger helped persuade Mr. Buffett to participate in a joint purchase of See’s Candies, a California boxed-chocolate maker, for $25 million. While the price seemed steep by some measures, the deal was wildly successful, producing more than $1 billion in pretax earnings.

Without such investments, it isn’t likely that Berkshire could have grown as large as it has, says Whitney Tilson, manager of T2 Partners LLC, a New York money manager that owns Berkshire stock. He says: “Munger helped Buffett appreciate some of the higher-quality investments that lead to multibillion-dollar outcomes several decades later.”

Financially, Mr. Buffett has done better. He boasts a net worth of $37 billion in 2008, according to Forbes magazine’s list of the world’s wealthiest people, putting him at No. 2 in the world behind Microsoft Corp. founder Bill Gates. Mr. Munger placed 522 on the list, with a net worth of $1.4 billion.

Mr. Munger has won the respect of Mr. Gates, who sits on the company’s board. When the Justice Department accused Microsoft of abusing monopoly power with its Windows operating system in the late 1990s, Mr. Gates says he sought out Mr. Munger for legal advice. He also consulted Mr. Munger when considering how to set up his charity, the Bill & Melinda Gates Foundation.

“Warren wouldn’t have done nearly as well without his help,” Mr. Gates said in an interview.

Charles Munger, Warren Buffett’s long-time sidekick at Berkshire Hathaway, offers some tough medicine for the U.S. in an editorial written for today’s Washington Post.

Calling the current situation “dire”, Munger says that the current bust goes well beyond the normal boom & bust cycle, and measures should thus be taken to keep it from occurring again. “Should we opt for even more pain now to gain a better future?” he asks. “For instance, should we create new controls to stamp out much sin and folly and thus dampen future booms? The answer is yes.”

Without saying specifically how to do so, Munger talks about the need for greater moral controls in the market. He says that opposition to reform won’t just come from big money — it will also come from academics who think that traditional economic policies simply can’t be mixed with moral and accounting concepts. But Munger essentially says that, while they make things messier, those moral and accounting concepts are a part of the financial world, for better or for worse. “Those who resist the wider thinking are acting as engineers would if they rounded pi from 3.14 to an even 3 to simplify their calculations,” he writes. “The result is a kind of willful ignorance that fails to understand much that is important.”

The most significant change Munger (a Republican) suggests in his editorial involves taxes. “The United States may now have a duty similar to the one that, in the danger that followed World War II, caused the Marshall Plan to be approved in a bipartisan consensus and rebuild a devastated Europe,” he writes. “The consensus was grounded in Secretary of State George Marshall’s concept of moral duty, supplemented by prudential considerations. The modern form of this duty would demand at least some increase in conventional taxes or the imposition of some new consumption taxes. In so doing, the needed and cheering economic message, ‘We will do what it takes,’ would get a corollary: ‘and without unacceptably devaluing our money.’”

Changes like that would be hard, but now is the time for them, Munger says: “Sensible reform cannot avoid causing significant pain, which is worth enduring to gain extra safety and more exemplary conduct. And only when there is strong public revulsion, such as exists today, can legislators minimize the influence of powerful special interests enough to bring about needed revisions in law.”

Munger says that if reform is imposed in a bipartisan manner, it could reduce the country’s pain rather than add to it. His suggestion: Use the deliberative rules of the Constitutional Convention of 1787. These “worked wonders in fruitful compromise and eventually produced the U.S. Constitution,” he says. “With no Marshall figure, trusted by all, amid today’s legislators, perhaps the Founding Fathers can once more serve us.”

Marc Andreessen starts another series of commentary, always through an entrepreneur’s eye, this time on Warren Buffet’s co-billionaire Berkshire Hathaway partner Charles Munger’s The Psychology of Entrepreneural Misjudgment.

This part covers 6 of 25 biases namely

1. Reward and Punishment Superresponse Tendency. “Human response to incentives is indeed a huge behavioral motivator, and I think Mr. Munger is right that once you think you realize how big it is, you need to assume it’s even bigger. This is why stock options work so well in startups — and the fewer people in a startup, the better stock options work, since when there are only a few people in a company, it’s usually crystal clear to each person how her work will impact the value of the company.”
2. Liking/ Loving Tendency. “The application of this principle to entrepreneurs is obvious: entrepreneurs want to be liked just like everyone else, and wanting to be liked can be a major impediment to entrepreneurial success due to at least two major reasons. First, an entrepreneur, like any CEO, has to make tough decisions about what her company will do, and those decisions will often run counter to the preferences of her employees. Second, an entrepreneur, like any manager, has to fire people who aren’t great or who aren’t right for the tasks at hand.”
3. Disliking/ Hating Tendency. “I think this dynamic kicks in for a startup when thinking about competitors. I see two destructive consequences of this bias in startups with competitors: First, I believe startups often overfocus on their competitors. Second, when you are in a truly competitive situation, this bias can easily lead you to underestimate your competitor by, as Mr. Munger says, “ignoring virtues in the object of dislike.”
4. Doubt-Avoidance Tendency. “This is probably a good one for entrepreneurs. You’d better not have a lot of doubts about what you are doing because everyone else will, and if you do too, you’ll probably give up. Of course, an entrepreneur’s doubt avoidance is only a plus right up to the point where it becomes pigheaded stubbornness that interferes with her ability to see reality, particularly when a strategy is not working.”
5. Inconsistency-Avoidance Tendency. “This goes hand-in-hand with doubt-avoidance, and again is usually a plus for a startup, since it leads to greater commitment on the part of the entrepreneur and the team. (And yes, I am in favor of blood oaths for startups.) Perhaps this bias is most relevant to how new markets develop. Sometimes you get lucky — you bring a new product to market, and the target customers all go, great, we’ll take it!”
6. Curiosity Tendency. “This is, frankly, an odd one for Mr. Munger to include, since it’s primarily a plus, and he doesn’t really identify a downside. The only important thing I can think to add is that lack of curiosity can be a huge danger to a startup in the following way: often, your initial strategy won’t quite work, but you can learn as you go based on other things that happen in the market and eventually iterate into a strategy that does work.”

Read the entire piece here.

Being a first time attendee, this was a most epic journey.Waiting outside at 5:30 am. Saturday morning, in the rain, when doors open at 7:00 could be called crazy, is this some sort of revival concert? That’s a big negative. Thousands of us, all eager to grab good floor seats from which we will proceed to sit for the better part of nine hours listening to the wit and wisdom of one Warren Buffett (76) and Charles Munger (83). Opening the day was about a 40-minute video, in detail here, which stared a competition between Lebron James and Warren, brought on by a disagreement over ones favorite drink, Lebron for PowerAde and Warren for Cherry Coke. Warren states: “Lets settle in in the courts.” Lebron: “In Court?” with a worried look on his face. Warren: “The basketball court.” Warren wins at horse, Lebron at 1-on-1, which leads to an all or nothing, make or brake final hook shot from the half court sideline, which Warren swooshes after a Lebron miss, break to ESPN where Stuart Scott proclaims this is the largest upset in the history of sports. Proceeded by a plug for the Buffet vs. Ariel Hsing (11-year old U.S. table tennis champion) “Rumble in the Mall” taking place the next day outside of subsidiary Borsheims.

After the video an announcement proclaims, please welcome the brilliantly gifted, intelligent, honest, (insert 10 more positive adjectives) and handsome Mr. Buffett. Which is then preceded by an entrance by none other then… Jimmy Buffett. Jimmy states, “Who were you expecting? … I’ve never performed this early in the morning and your not paying so bear with me.” Jimmy delivered a remake written that morning he proclaimed, overtop Margaritaville with the hook as “Wastin’ away again in Berkshire-Hathaway-ville.”

Then strolls in the Buffett everyone has been waiting on, accompanied by Mr.Munger. Without getting into a lot of detail about the Q&A, which you can read here, lets just say these two men are on the ball. People of all ages, from all over, asking just about anything for a total of 6 hours, with only a short 40 minute break for lunch. Usually Warren proceeds to answer and then says “Charlie?” Who may just remain silent, slide in a “nothing further to add” or have an utmost wise remark. When Charlie speaks, no words are wasted. In response to someone’s question on ethanol, Charlie remarked something along the lines of, “Utilizing food for fuel, has got to be one of the dumbest ideas I’ve ever heard.” Followed by Warren “Were now going to be sleeping outside the state of Nebraska tonight.” (Being that NE is a big endorser of Corn based ethanol.) One of the most graphic remarks by Charlie followed a general thought on opportunity cost and went something along the lines of “It would be like someone offering you a mail order Bride with AIDS.” Did he really just say that? Hey, he’s 83.

Check out an interview with Buffett in the exhibition hall here. The exhibition hall consisted of booths populated by Berkshire subsidiaries. The booth’s displays ranged from RV’s to Bulls. All were offering information on exactly what they do and most gave shareholders an opportunity to purchase.

The closing of the meeting was mainly a 45 minutes discussion about Berkshire’s holdings of PetroChina and the genocide currently taking place in Darfur, Sudan. You can read about Berkshire’s position on the matter here. The outcome was an overwhelming majority of shareholders voting against the resolution detailed here.

After the meeting it was off to subsidiary Nebraska Furniture Mart for some Mexican fanfare, live band under the tent, and oh yeah…shareholder discounts. Nebraska Furniture Mart is situated on a massive 77-acre spread comprised of the a store which sells over 50,000 items, – guaranteed in stock, at guaranteed lowest prices – a massive customer pick-up drive through attached to a warehouse and a flooring warehouse.

The following day was shopping day at Borsheims and Buffet Vs. Hsing. Bill Gates appeared before Warren Buffett and had a few volleys with someone unnamed. Then Ariel Hsing entered the ring and then came Warren who proceeded to do a few pushups. The match seemed rather short and not possessing a great view the outcome of the match remains uncertain, if anyone has details please add in the comments, thanks. Afterwards Bodyguards escorted Gates and Buffett to a Bridge table with Bob Hamman (world champion Bridge player). They played for a bit and then Buffett disappeared and Gates remained for another 20 minutes before departing.

820 words cannot truly express the mystique that encompasses the Berkshire weekend. It’s a one of a kind event that will always hold a special place in ones heart, and mind.