Berkshire Hathaway Sees Opportunity in Europe
Investors hang on every word uttered by Warren Buffett, but it was his partner Charlie Munger who offered the most pungent comments on the state of many things economic at Berkshire Hathaway’s annual shareholder meeting last weekend.
According to the Financial Times’ coverage of the event, Buffett said that many financial behemoths had grown “almost too big to manage effectively from a risk standpoint”.
Munger was a bit more direct:
It’s a crazy culture of greed and overreaching and overconfidence in trading algorithms. It’s quite counterproductive for the country. These institutions are too big to fail.
Buffett gave the Federal Reserve credit for its role in brokering the rescue of Bear Stearns. Defending the role of government intervention in times of crisis, Munger jabbed at Alan Greenspan, the former Fed chairman, who he said had “overdosed on Ayn Rand. If it happened on the free market, it had to be all right. The world would work better.”
Buffett did have a couple of zingers of his own, however:
“Capitalism without failure is like Christianity without hell,” (courtesy AP) and:
“Your children will live in a better country than you, even if a few idiots run it in the meantime,” (courtesy Dealbreaker.)
Buffett also praised the early successes of Berkshire’s fledgling bond insurer, which he said generated $400m in premiums during the first quarter, the FT reported. Many of the 278 contracts that the unit wrote were for clients who already had bond insurance from another triple A rated company.
“They’re paying us a [higher] fee to write insurance that will only be paid if the principle and insurer didn’t pay,” Buffett said.
“It tells you something about the meaning of triple A in the bond insurance field.”
And the Sage of Omaha, unlike President George Bush, isn’t waiting for the National Bureau of Economic Research to retroactively tell us we were officially in a recession:
I would say that we’re in a recession clearly.
That may be one reason why Buffett and Munger are looking to Europe for investments, especially Germany, MarketWatch reports.
“We would like more family owners of Germany businesses who, when they feel some need to monetize their business, to think of Berkshire Hathaway,” Buffett said. “If they care about their business we are their best call.”
Another factor is Berkshire’s view that the dollar is likely to continue to decline against European currencies, according to The Wall Street Journal’s Marketbeat blog:
We are happy to invest in businesses that earn their money in the euro, or in companies that derive their earnings in Germany, or from the sterling in the U.K. because I don’t have a feeling that those currencies are going to depreciate in a big way against the dollar.
Photo courtesy Reuters.
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May 9th, 2008 at 3:55 pm
[...] behavior was also a theme of another popular post, on Berkshire Hathaway’s annual shareholder meeting. In the words of Berkshire’s Charlie Munger, “It’s a crazy culture of greed and [...]