At Buffett gala, all that glitters is not Goldman
Almost two decades ago, as interim chairman of Salomon Inc, Warren Buffett worked to restore order at the Wall Street firm after a Treasury auction scandal. Integrity mattered more to him than a few dollars lost.
Lose money for the firm, and I will be understanding, Buffett testified before a congressional subcommittee on September 4, 1991. Lose a shred of reputation for the firm, and I will be ruthless.
Those words cemented for himself and his company, Berkshire Hathaway Inc , a reputation for propriety that persists to this day. A Harris Interactive Inc poll this month called Berkshire the most admired big U.S. company.
And it is that reputation that makes Buffett's seeming support for Goldman Sachs Group Inc -- recipient of $5 billion of Berkshire money and the target of much political and popular anger, plus a U.S. Securities and Exchange Commission fraud lawsuit -- seem so incongruous.
Berkshire shareholders plan to descend on Omaha, Nebraska, this weekend. The company expects attendance at its annual meeting on Saturday to top last year's record of 35,000, Buffett's assistant Carrie Kizer said.
Buffett will bask in the goodwill he has engendered in 45 years at the helm of Berkshire, where he has created one of corporate America's most respected companies and successful stocks.
But the world's third-richest person always gets questions about things he could do differently. And this year, that Goldman investment, plus the issue of Berkshire's billions of dollars of derivatives contracts, could be in the spotlight.
Warren Buffett has a degree of moral authority he can borrow against, said Eric Dezenhall, a crisis management expert at Dezenhall Resources Ltd in Washington, D.C.
I would expect him to issue a broad-based pledge to get to the bottom of this in the most ethical way possible but stop short of drawing legal and rhetorical conclusions, he added.
PEANUT BRITTLE AND FUDGE
Saturday's annual meeting is the centerpiece of more than two days of private and Berkshire-organized events in Omaha, in what has become known as Woodstock for Capitalists.
Buffett and Berkshire Vice Chairman Charlie Munger will spend more than five hours at the Qwest Center Omaha fielding shareholder questions.
I am interested in learning how he came to a valuation for Goldman, whose business can seem harder to understand for value investors, said Thomas Kamei, a University of Southern California student who said he is attending his 13th meeting.
He might say, 'I would put it into the big bucket of things I don't get,' Kamei, 20, added.
While on stage, Buffett and Munger will munch peanut brittle and fudge from See's Candies, which like other Berkshire units will sell its wares in a nearby exhibit hall.
We think we'll sell $220,000 of candy, up from $180,000 a year ago, said Brad Kinstler, See's chief executive.
The expected top seller: eight ounces of chocolate with Buffett's and Munger's image on the box. Price: $9. See's is supplying 9,000 boxes for the meeting.
COMPANY REBOUND
Last year's meeting had a decidedly serious tone, following what was perhaps Berkshire's worst year under Buffett.
The company rebounded in 2009. Profit rose 61 percent and book value per share rose 20 percent. The stock price is up about one-fourth from a year ago, mirroring the broader market. http://link.reuters.com/jat79j
A shareholder need own just one Berkshire share to attend the meeting, and many of this year's attendees will be new.
Berkshire added some 65,000 shareholders in February when it bought railroad company Burlington Northern Santa Fe Corp.
It likely also added thousands of investors when it conducted a 50-for-1 split of its Class B shares, reducing its share price to well below $100.
Berkshire units sell products such as bricks, ice cream, jewelry and underwear, though close to half its business comes from insurance and reinsurance.
Many of its businesses were hit hard by the recession, and Buffett may address prospects for a turnaround.
Kinstler said See's revenue is up 5 percent to 10 percent this year because more people are shopping in malls.
Insurance, meanwhile, had a good year in 2009 because of a lack of major catastrophes such as hurricanes, and Buffett may caution investors not to expect a repeat.
Buffett is certain to offer opinions about regulatory and fiscal reform. He will not answer questions about what Berkshire is buying and selling, though he will be asked.
It is also unclear how he might address the usual shareholder uncertainty about Berkshire's succession plans.
Buffett is 79 and Munger is 86. The growing prominence of David Sokol, chairman of Berkshire's MidAmerican Energy unit and head of its NetJets business, has led to speculation that he is the top candidate to replace Buffett as Berkshire chief executive.
SWEEEEET DEAL!
The weekend, of course, is also an opportunity for fun.
Some shareholders will attend the traditional Sunday steak dinner, expanded this year to Piccolo Pete's restaurant as well as Buffett favorite Gorat's to accommodate the extra crowds.
And shoppers can head to Berkshire-owned stores in Omaha.
Borsheim's Fine Jewelry saw year-over-year sales fall 21 percent in the two weeks surrounding last year's meeting.
Chief Executive Susan Jacques expects improvement this year, saying a stronger economy and higher Berkshire stock price can make shareholders feel wealthier.
Among its wares is Warren & Charlie's Magic Answer Ball, similar to Mattel Inc's Magic 8 Ball, offering answers to shareholder questions. Among them: Diversify, Buy a CD Instead, and SWEEEEET DEAL! Price: $14.02.
Kamei said returning to Omaha year after year centers you as an investor. But he said the timing is imperfect for a sophomore preparing for his end-of-the-semester exams.
We're cutting it pretty close on finals, he said.
(Reporting by Jonathan Stempel; Editing by Steve Orlofsky)
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