1 00:00:02,080 --> 00:00:05,439 Speaker 1: Global business news twenty four hours a day at Bloomberg 2 00:00:05,519 --> 00:00:08,600 Speaker 1: dot com, the radio, plus Lobo lap and on your radio. 3 00:00:08,880 --> 00:00:13,240 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters 4 00:00:13,240 --> 00:00:16,000 Speaker 1: on Katherine Cowdery. While stocks greeted them up of May 5 00:00:16,079 --> 00:00:18,799 Speaker 1: with the rally, the SMP five founder gained the most 6 00:00:18,800 --> 00:00:21,320 Speaker 1: in more than two weeks as banks rebounded and Amazon 7 00:00:21,440 --> 00:00:24,520 Speaker 1: jumped for a second day to boost consumer shares. All 8 00:00:24,560 --> 00:00:27,840 Speaker 1: ten industry groups in the SMP rose, with consumer discretionary 9 00:00:27,840 --> 00:00:30,480 Speaker 1: and financial shares up the most. We checked the markets 10 00:00:30,480 --> 00:00:33,599 Speaker 1: every fifteen minutes. Down Industrial average gained one hundred seventeen 11 00:00:33,600 --> 00:00:36,680 Speaker 1: points two thirds of a percent and close at seventeen thousand, 12 00:00:36,760 --> 00:00:40,280 Speaker 1: eight hundred ninety one. SMP five hundred up sixteen points 13 00:00:40,320 --> 00:00:42,640 Speaker 1: three quarters of a percent to two thousand eighty one. 14 00:00:43,040 --> 00:00:45,239 Speaker 1: The NASDAC up forty two point seven eighths of a 15 00:00:45,280 --> 00:00:48,760 Speaker 1: percent to close at forty eight seventeen less. Texas Intermediate 16 00:00:48,800 --> 00:00:51,159 Speaker 1: Cord Oil down a dollar a barrel two point two 17 00:00:51,159 --> 00:00:54,160 Speaker 1: percent to forty four ninety sparkled up a dollar eighty 18 00:00:54,160 --> 00:00:57,160 Speaker 1: announced to twelve ninety two. Thirty ten year Treasury down 19 00:00:57,200 --> 00:00:59,280 Speaker 1: nine thirty seconds with the yield of one point eight 20 00:00:59,320 --> 00:01:04,280 Speaker 1: six per set. And that's a Bloomberg business flash. You're 21 00:01:04,319 --> 00:01:07,679 Speaker 1: listening to taking Stock with Kathleen's and pim Box on 22 00:01:07,720 --> 00:01:12,400 Speaker 1: Bloomberg Radio. Shares of Berkshire Hathaway hire today by about 23 00:01:12,400 --> 00:01:17,640 Speaker 1: a half a percent following the weekend con fab in Omaha, Nebraska, 24 00:01:18,400 --> 00:01:22,160 Speaker 1: the Convention of Capitalism, and you call it the annual 25 00:01:22,200 --> 00:01:25,520 Speaker 1: Meeting of Berkshire Hathaway. Here to tell us more, Paul lawnces. 26 00:01:25,800 --> 00:01:29,119 Speaker 1: He is the founder of Lance's Asset Management. Paul, always 27 00:01:29,120 --> 00:01:31,759 Speaker 1: a pleasure, Thanks for being with us. Tell us about 28 00:01:31,760 --> 00:01:34,720 Speaker 1: the meeting and how many meetings have How many Berkshire 29 00:01:34,720 --> 00:01:39,399 Speaker 1: Hathaway annual meetings have you attended? Hive or so pim um, 30 00:01:39,440 --> 00:01:43,480 Speaker 1: And it's always it's always a wonderful opportunity to attend 31 00:01:43,520 --> 00:01:48,040 Speaker 1: the woodstock for capitalists and you feel rejuvenated every time 32 00:01:48,080 --> 00:01:50,240 Speaker 1: you go. All right, So to give us some of 33 00:01:50,320 --> 00:01:54,480 Speaker 1: the highlights, I know that Warren Buffett's comments about Valiant 34 00:01:54,480 --> 00:01:59,960 Speaker 1: Pharmaceuticals certainly made headlines. What else did you note about 35 00:02:00,040 --> 00:02:04,080 Speaker 1: the meeting? Well, he still feels really really strongly about 36 00:02:04,080 --> 00:02:07,240 Speaker 1: the future of America. Irregardless of who the president is. 37 00:02:07,800 --> 00:02:10,480 Speaker 1: He believes in the long term, you know, again, the 38 00:02:10,520 --> 00:02:14,200 Speaker 1: long term future of America, its prospects. Despite the many 39 00:02:14,320 --> 00:02:17,560 Speaker 1: challenges that we have, it's still the best system in 40 00:02:17,560 --> 00:02:20,760 Speaker 1: the world. People really want to come here as opposed 41 00:02:20,800 --> 00:02:25,639 Speaker 1: to going elsewhere. He still feels that Berkshire is reasonably 42 00:02:25,760 --> 00:02:27,680 Speaker 1: under value. To talk a little bit about the one 43 00:02:27,680 --> 00:02:31,680 Speaker 1: point two times Um stated book that he'll pay uh 44 00:02:31,720 --> 00:02:34,120 Speaker 1: for the stock, which kind of puts a floor on it. 45 00:02:34,400 --> 00:02:37,840 Speaker 1: He talked about the individual operating businesses. When he gave 46 00:02:37,880 --> 00:02:42,480 Speaker 1: the brief first quarter earnings, the after tax earnings, insurance 47 00:02:42,520 --> 00:02:46,519 Speaker 1: was down a bit him and the cold business has 48 00:02:46,600 --> 00:02:49,079 Speaker 1: really hurt the railroads as well as the low prices 49 00:02:49,080 --> 00:02:53,000 Speaker 1: for natural gas. But again, you know, it was always 50 00:02:53,000 --> 00:02:59,200 Speaker 1: he's always overwhelmingly positive despite the challenges, both regarding Berkshire 51 00:02:59,320 --> 00:03:02,560 Speaker 1: as well as our country. Well. One of the issues 52 00:03:02,600 --> 00:03:05,720 Speaker 1: that I believe was raised had to do with Berkshire 53 00:03:05,760 --> 00:03:10,440 Speaker 1: Hathaway in a sense changing its investment strategy. It used 54 00:03:10,480 --> 00:03:14,160 Speaker 1: to invest in companies with high returns on capital, no 55 00:03:14,520 --> 00:03:19,040 Speaker 1: or even low capital requirements. Now we're talking about massive 56 00:03:19,080 --> 00:03:23,160 Speaker 1: amounts of capital. As you described railroads Burlington, Northern Santa Fe, 57 00:03:23,160 --> 00:03:26,600 Speaker 1: as well as pipeline companies did did Warren Buffett address 58 00:03:26,639 --> 00:03:30,920 Speaker 1: that shift? He did, phim and he specifically stated that 59 00:03:31,000 --> 00:03:34,800 Speaker 1: it's one of the challenges and problems with prosperity. When 60 00:03:34,840 --> 00:03:37,440 Speaker 1: they were buying Sees candy in nineteen seventy two with 61 00:03:37,720 --> 00:03:44,520 Speaker 1: enormous returns on capital, very small business, small investment, there 62 00:03:44,680 --> 00:03:48,560 Speaker 1: simply aren't Sees candies, or if there are mars, let's 63 00:03:48,600 --> 00:03:52,280 Speaker 1: say there aren't that many. And so they've decided to 64 00:03:52,720 --> 00:03:55,560 Speaker 1: look for big businesses, many of which are capital intensive, 65 00:03:55,600 --> 00:03:58,520 Speaker 1: like Burlington Northern, and I wouldn't be surprised him to 66 00:03:58,560 --> 00:04:02,560 Speaker 1: see him do something else in the industrial space. Um, 67 00:04:02,600 --> 00:04:05,400 Speaker 1: it uses up some of their capital. It's a good 68 00:04:05,440 --> 00:04:08,280 Speaker 1: productive use of capital. But you're never going to get 69 00:04:08,320 --> 00:04:11,840 Speaker 1: the returns on equity in these much larger enterprises that 70 00:04:11,880 --> 00:04:14,160 Speaker 1: you're going to get in the small enterprises. So it's 71 00:04:14,160 --> 00:04:18,080 Speaker 1: a problem with the prosperity and the success that they've had. Now. 72 00:04:18,120 --> 00:04:21,400 Speaker 1: He also mentioned something to do with derivatives as a 73 00:04:21,720 --> 00:04:27,240 Speaker 1: potential time bomb sitting on the balance sheets of many banks. Uh. Now, 74 00:04:27,279 --> 00:04:29,800 Speaker 1: he believes that holding the shares of obviously a bank 75 00:04:29,880 --> 00:04:32,360 Speaker 1: such as Bank of America is a good thing, but um, 76 00:04:33,680 --> 00:04:36,520 Speaker 1: is there anything in your mind that caused him to 77 00:04:36,560 --> 00:04:40,440 Speaker 1: talk about derivatives. Complex derivatives. Well, that comes up a 78 00:04:40,480 --> 00:04:42,960 Speaker 1: lot to him because he he spoke about them years 79 00:04:42,960 --> 00:04:45,720 Speaker 1: ago as weapons of mass destruction. And I believe when 80 00:04:45,760 --> 00:04:49,719 Speaker 1: they had purchased jen Rey, they took I don't recall exactly, 81 00:04:49,760 --> 00:04:51,880 Speaker 1: but it might have been him four million plus in 82 00:04:52,000 --> 00:04:55,839 Speaker 1: losses as they were running off the derivatives, if you will, 83 00:04:55,880 --> 00:04:58,520 Speaker 1: of jen Ry. And so he's he's just concerned. He 84 00:04:58,560 --> 00:05:02,120 Speaker 1: talked about the collateral that to put up with the derivatives, 85 00:05:02,160 --> 00:05:05,279 Speaker 1: and I just think there's unknown there's things about the 86 00:05:05,320 --> 00:05:08,599 Speaker 1: derivatives and the contracts that are just unknown, and that 87 00:05:08,880 --> 00:05:11,400 Speaker 1: that's a cause for concern for him. But having said that, 88 00:05:11,800 --> 00:05:15,400 Speaker 1: he seemed to be fine with Bank of America UM, 89 00:05:15,520 --> 00:05:18,560 Speaker 1: which you know have some as well. Now Berkshire Hathaway. 90 00:05:18,560 --> 00:05:22,600 Speaker 1: It's a three day meeting in Omaha, tens of thousands 91 00:05:22,720 --> 00:05:26,120 Speaker 1: of shareholders and it was streamed on the internet for 92 00:05:26,160 --> 00:05:29,680 Speaker 1: the first for the first time. It also featured a 93 00:05:29,839 --> 00:05:35,200 Speaker 1: five kilometer invest in yourself run. What was that about? 94 00:05:36,200 --> 00:05:38,719 Speaker 1: But he um he started to run a couple of 95 00:05:38,760 --> 00:05:41,960 Speaker 1: years ago, several years ago, and theyon Brooks running shoes 96 00:05:42,000 --> 00:05:44,880 Speaker 1: and UM and so I think it's just a it's 97 00:05:44,920 --> 00:05:47,440 Speaker 1: just a fun time and a fun event. Unfortunately, pim 98 00:05:47,440 --> 00:05:50,440 Speaker 1: it rained and it was pretty cool and damp out there. 99 00:05:50,960 --> 00:05:53,440 Speaker 1: Um last year was terrific. That wasn't the case. But 100 00:05:54,000 --> 00:05:55,680 Speaker 1: he UM, you know, at the end of the day, 101 00:05:55,720 --> 00:05:58,240 Speaker 1: he tries to make it a really enjoyable time. And 102 00:05:58,320 --> 00:06:01,599 Speaker 1: part of the reason he dreamed it, um, you know, 103 00:06:01,640 --> 00:06:04,800 Speaker 1: he wanted it to be available, um for people that 104 00:06:04,960 --> 00:06:08,000 Speaker 1: can't make it, as opposed to those who can. But 105 00:06:08,200 --> 00:06:10,719 Speaker 1: most of the people who go, they go for the 106 00:06:10,800 --> 00:06:13,480 Speaker 1: annual and they go for his wisdom and Charlie's wisdom, 107 00:06:13,480 --> 00:06:16,000 Speaker 1: but they also go because of the friendships and the 108 00:06:16,080 --> 00:06:19,760 Speaker 1: relationships they've built over two and three and four decades. Well, 109 00:06:19,800 --> 00:06:23,080 Speaker 1: the five year old warm Buffett, he spoke about his 110 00:06:23,160 --> 00:06:28,640 Speaker 1: Coca Cola investment. He said he's about one quarter Coca Cola, 111 00:06:28,720 --> 00:06:32,560 Speaker 1: meaning his body. Yeah, he said he's twenty or so 112 00:06:32,720 --> 00:06:35,600 Speaker 1: exactly p him. I think he drinks five cokes a day. 113 00:06:35,839 --> 00:06:39,280 Speaker 1: Charlie prefers diet coke. And I think what I would 114 00:06:39,279 --> 00:06:42,480 Speaker 1: say him in my own words, just if you do 115 00:06:42,560 --> 00:06:46,000 Speaker 1: things in moderation, UM, I just don't think you really 116 00:06:46,000 --> 00:06:48,599 Speaker 1: have to worry about doing things in excess is really 117 00:06:48,640 --> 00:06:51,760 Speaker 1: the problem. Is there any thought in your mind that 118 00:06:51,839 --> 00:06:56,080 Speaker 1: there will be a dividend declared at Berkshire Hathaway. I 119 00:06:56,120 --> 00:07:00,839 Speaker 1: think that's highly, highly unlikely. UM as long as Mr 120 00:07:00,880 --> 00:07:04,279 Speaker 1: Buffett and Mr Munger are running Berkshire Hathaway, there's too 121 00:07:04,279 --> 00:07:08,159 Speaker 1: many opportunities that they're looking for. There's always the possibility, 122 00:07:08,200 --> 00:07:10,920 Speaker 1: tim you could have a decline in the stock market 123 00:07:11,000 --> 00:07:14,040 Speaker 1: or with geopit political issues, and they always want to 124 00:07:14,080 --> 00:07:16,200 Speaker 1: have a minimum of twenty billion in cash. They did 125 00:07:16,360 --> 00:07:19,440 Speaker 1: use up a bunch with Precision Cast Parts thirty two 126 00:07:19,440 --> 00:07:22,440 Speaker 1: billion that they spent in cash. Thank you very much. 127 00:07:22,480 --> 00:07:25,960 Speaker 1: Paul lawn says he's the founder of Launce's Asset Management. 128 00:07:26,240 --> 00:07:30,360 Speaker 1: Talking about Berkshire Hathaway and a note. American International group 129 00:07:30,440 --> 00:07:35,600 Speaker 1: The Ensure hosted first quarter net loss of sixteen cents 130 00:07:35,600 --> 00:07:43,360 Speaker 1: a share. You're listening to taking stock on Bloomberg Radio. Yeah. 131 00:07:46,560 --> 00:07:51,240 Speaker 1: Coming up on Bloomberg Radio, We've got Bloomberg Law, the 132 00:07:51,360 --> 00:07:54,760 Speaker 1: latest in legal issues. This is Bloomberg Radio.