The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [482]
It was a remarkable moment. For the first time, he had to defend in public the way he ran his company. Afterward, however, nobody else asked anything related to this topic. The shareholders of Berkshire Hathaway were content with things as they were. Buffett had earned the license to run his company any way he damn well pleased, as far as they were concerned; they were a happy lot. How was the investing climate? they asked. Our capital is underutilized now, he said. It’s a painful condition to be in, but not as painful as doing something stupid.
Somebody asked Buffett about ISS recommending a vote against him on the Coca-Cola board. The issue still lingered. “I think it was Bertrand Russell,” he said, “who said that most men would rather die than think. Many do.”
“The cause of reform is hurt, not helped,” Munger added in a tart voice, “when an activist makes an idiotic suggestion like the one that having Warren on the board of the Coca-Cola Company is counter to the interest of the Coca-Cola Company. Nutty activities do not help the cause for which the person speaks.”8
As happened every year, someone asked what Buffett was doing with all those warehouses of silver he had bought a few years ago. He paused for a minute, then said he couldn’t comment. Munger made some unintelligible noises in the background and the shareholder sat down, unenlightened. In fact, the silver had been sold.
Buffett and Munger started eating peanut brittle, and people went downstairs to the basement exhibition hall, where thirty-seven Berkshire Hathaway subsidiaries were selling products, and bought out all the peanut brittle in the See’s Candies shop. When Buffett and Munger started eating Dairy Queen Dilly Bars, the Dilly Bars sold out. Many people bought boxes of candy and took them back to the meeting upstairs, where they sat listening to Buffett and bingeing on sweets.
In the course of answering the many repetitious questions he was asked in between the new and insightful ones, Buffett managed to work many of the items he wanted to discuss into his responses. This year he used the meeting to expound on his “Why I’m Down on the Dollar” theme. The U.S., he said, was like a family that spent more than it earned. Americans were buying huge amounts of products from other countries and didn’t have the income to pay for them, because we weren’t selling as much to other countries as they were selling to us. To make up the difference, we were borrowing money. Those who were lending it to us might be less willing to do so in the future.
Now, Buffett said, we were spending more than two percent of all our income just to pay the interest on our national debt, and that meant the situation would be hard to turn around. Most likely, he thought, at some point foreign investors would decide they liked our real estate and businesses and other “real assets” better than our paper bonds. We would start selling off pieces of America, like office buildings and companies.
“We think that over time the U.S. dollar is likely to decline in value against some of the major currencies,” he said. Therefore, the economy—which had been pretty wonderful over the past twenty years, with both low interest rates and low inflation—could at some point reverse. Interest rates probably would be higher, as would inflation, which would be an unhappy situation. As always when he made predictions, he couldn’t say when. In the meantime, however, he had bought $12 billion of foreign currency to hedge Berkshire’s dollar risks.
While Buffett and Munger were talking about the perils of debt, people rolled down the ramps and escalators to the shoe department and waited in lines to pull out their credit cards. Fitters from Tony Lama and Justin sold a pair of boots a minute: workaday plain Westerns to fancy lizard models. Over at Borsheim