WEBVTT - Lountzis Says Buffett Remains Overwhelmingly Positive (Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Bloomberg Business Flash from Bloomberg World Headquarters

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<v Speaker 1>on Katherine Cowdery. While stocks greeted them up of May

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<v Speaker 1>with the rally, the SMP five founder gained the most

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<v Speaker 1>in more than two weeks as banks rebounded and Amazon

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<v Speaker 1>jumped for a second day to boost consumer shares. All

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<v Speaker 1>ten industry groups in the SMP rose, with consumer discretionary

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<v Speaker 1>and financial shares up the most. We checked the markets

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<v Speaker 1>every fifteen minutes. Down Industrial average gained one hundred seventeen

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<v Speaker 1>points two thirds of a percent and close at seventeen thousand,

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<v Speaker 1>eight hundred ninety one. SMP five hundred up sixteen points

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<v Speaker 1>three quarters of a percent to two thousand eighty one.

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<v Speaker 1>The NASDAC up forty two point seven eighths of a

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<v Speaker 1>percent to close at forty eight seventeen less. Texas Intermediate

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<v Speaker 1>Cord Oil down a dollar a barrel two point two

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<v Speaker 1>percent to forty four ninety sparkled up a dollar eighty

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<v Speaker 1>announced to twelve ninety two. Thirty ten year Treasury down

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<v Speaker 1>nine thirty seconds with the yield of one point eight

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<v Speaker 1>six per set. And that's a Bloomberg business flash. You're

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<v Speaker 1>listening to taking Stock with Kathleen's and pim Box on

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<v Speaker 1>Bloomberg Radio. Shares of Berkshire Hathaway hire today by about

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<v Speaker 1>a half a percent following the weekend con fab in Omaha, Nebraska,

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<v Speaker 1>the Convention of Capitalism, and you call it the annual

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<v Speaker 1>Meeting of Berkshire Hathaway. Here to tell us more, Paul lawnces.

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<v Speaker 1>He is the founder of Lance's Asset Management. Paul, always

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<v Speaker 1>a pleasure, Thanks for being with us. Tell us about

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<v Speaker 1>the meeting and how many meetings have How many Berkshire

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<v Speaker 1>Hathaway annual meetings have you attended? Hive or so pim um,

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<v Speaker 1>And it's always it's always a wonderful opportunity to attend

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<v Speaker 1>the woodstock for capitalists and you feel rejuvenated every time

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<v Speaker 1>you go. All right, So to give us some of

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<v Speaker 1>the highlights, I know that Warren Buffett's comments about Valiant

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<v Speaker 1>Pharmaceuticals certainly made headlines. What else did you note about

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<v Speaker 1>the meeting? Well, he still feels really really strongly about

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<v Speaker 1>the future of America. Irregardless of who the president is.

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<v Speaker 1>He believes in the long term, you know, again, the

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<v Speaker 1>long term future of America, its prospects. Despite the many

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<v Speaker 1>challenges that we have, it's still the best system in

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<v Speaker 1>the world. People really want to come here as opposed

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<v Speaker 1>to going elsewhere. He still feels that Berkshire is reasonably

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<v Speaker 1>under value. To talk a little bit about the one

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<v Speaker 1>point two times Um stated book that he'll pay uh

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<v Speaker 1>for the stock, which kind of puts a floor on it.

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<v Speaker 1>He talked about the individual operating businesses. When he gave

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<v Speaker 1>the brief first quarter earnings, the after tax earnings, insurance

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<v Speaker 1>was down a bit him and the cold business has

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<v Speaker 1>really hurt the railroads as well as the low prices

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<v Speaker 1>for natural gas. But again, you know, it was always

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<v Speaker 1>he's always overwhelmingly positive despite the challenges, both regarding Berkshire

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<v Speaker 1>as well as our country. Well. One of the issues

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<v Speaker 1>that I believe was raised had to do with Berkshire

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<v Speaker 1>Hathaway in a sense changing its investment strategy. It used

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<v Speaker 1>to invest in companies with high returns on capital, no

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<v Speaker 1>or even low capital requirements. Now we're talking about massive

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<v Speaker 1>amounts of capital. As you described railroads Burlington, Northern Santa Fe,

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<v Speaker 1>as well as pipeline companies did did Warren Buffett address

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<v Speaker 1>that shift? He did, phim and he specifically stated that

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<v Speaker 1>it's one of the challenges and problems with prosperity. When

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<v Speaker 1>they were buying Sees candy in nineteen seventy two with

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<v Speaker 1>enormous returns on capital, very small business, small investment, there

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<v Speaker 1>simply aren't Sees candies, or if there are mars, let's

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<v Speaker 1>say there aren't that many. And so they've decided to

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<v Speaker 1>look for big businesses, many of which are capital intensive,

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<v Speaker 1>like Burlington Northern, and I wouldn't be surprised him to

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<v Speaker 1>see him do something else in the industrial space. Um,

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<v Speaker 1>it uses up some of their capital. It's a good

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<v Speaker 1>productive use of capital. But you're never going to get

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<v Speaker 1>the returns on equity in these much larger enterprises that

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<v Speaker 1>you're going to get in the small enterprises. So it's

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<v Speaker 1>a problem with the prosperity and the success that they've had. Now.

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<v Speaker 1>He also mentioned something to do with derivatives as a

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<v Speaker 1>potential time bomb sitting on the balance sheets of many banks. Uh. Now,

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<v Speaker 1>he believes that holding the shares of obviously a bank

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<v Speaker 1>such as Bank of America is a good thing, but um,

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<v Speaker 1>is there anything in your mind that caused him to

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<v Speaker 1>talk about derivatives. Complex derivatives. Well, that comes up a

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<v Speaker 1>lot to him because he he spoke about them years

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<v Speaker 1>ago as weapons of mass destruction. And I believe when

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<v Speaker 1>they had purchased jen Rey, they took I don't recall exactly,

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<v Speaker 1>but it might have been him four million plus in

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<v Speaker 1>losses as they were running off the derivatives, if you will,

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<v Speaker 1>of jen Ry. And so he's he's just concerned. He

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<v Speaker 1>talked about the collateral that to put up with the derivatives,

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<v Speaker 1>and I just think there's unknown there's things about the

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<v Speaker 1>derivatives and the contracts that are just unknown, and that

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<v Speaker 1>that's a cause for concern for him. But having said that,

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<v Speaker 1>he seemed to be fine with Bank of America UM,

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<v Speaker 1>which you know have some as well. Now Berkshire Hathaway.

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<v Speaker 1>It's a three day meeting in Omaha, tens of thousands

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<v Speaker 1>of shareholders and it was streamed on the internet for

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<v Speaker 1>the first for the first time. It also featured a

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<v Speaker 1>five kilometer invest in yourself run. What was that about?

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<v Speaker 1>But he um he started to run a couple of

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<v Speaker 1>years ago, several years ago, and theyon Brooks running shoes

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<v Speaker 1>and UM and so I think it's just a it's

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<v Speaker 1>just a fun time and a fun event. Unfortunately, pim

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<v Speaker 1>it rained and it was pretty cool and damp out there.

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<v Speaker 1>Um last year was terrific. That wasn't the case. But

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<v Speaker 1>he UM, you know, at the end of the day,

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<v Speaker 1>he tries to make it a really enjoyable time. And

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<v Speaker 1>part of the reason he dreamed it, um, you know,

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<v Speaker 1>he wanted it to be available, um for people that

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<v Speaker 1>can't make it, as opposed to those who can. But

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<v Speaker 1>most of the people who go, they go for the

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<v Speaker 1>annual and they go for his wisdom and Charlie's wisdom,

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<v Speaker 1>but they also go because of the friendships and the

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<v Speaker 1>relationships they've built over two and three and four decades. Well,

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<v Speaker 1>the five year old warm Buffett, he spoke about his

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<v Speaker 1>Coca Cola investment. He said he's about one quarter Coca Cola,

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<v Speaker 1>meaning his body. Yeah, he said he's twenty or so

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<v Speaker 1>exactly p him. I think he drinks five cokes a day.

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<v Speaker 1>Charlie prefers diet coke. And I think what I would

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<v Speaker 1>say him in my own words, just if you do

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<v Speaker 1>things in moderation, UM, I just don't think you really

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<v Speaker 1>have to worry about doing things in excess is really

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<v Speaker 1>the problem. Is there any thought in your mind that

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<v Speaker 1>there will be a dividend declared at Berkshire Hathaway. I

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<v Speaker 1>think that's highly, highly unlikely. UM as long as Mr

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<v Speaker 1>Buffett and Mr Munger are running Berkshire Hathaway, there's too

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<v Speaker 1>many opportunities that they're looking for. There's always the possibility,

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<v Speaker 1>tim you could have a decline in the stock market

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<v Speaker 1>or with geopit political issues, and they always want to

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<v Speaker 1>have a minimum of twenty billion in cash. They did

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<v Speaker 1>use up a bunch with Precision Cast Parts thirty two

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<v Speaker 1>billion that they spent in cash. Thank you very much.

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<v Speaker 1>Paul lawn says he's the founder of Launce's Asset Management.

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<v Speaker 1>Talking about Berkshire Hathaway and a note. American International group

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<v Speaker 1>The Ensure hosted first quarter net loss of sixteen cents

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<v Speaker 1>a share. You're listening to taking stock on Bloomberg Radio. Yeah.

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<v Speaker 1>Coming up on Bloomberg Radio, We've got Bloomberg Law, the

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<v Speaker 1>latest in legal issues. This is Bloomberg Radio.