May 24, 2018 My Pilgrimage to Omaha – Matt Hargreaves

Two years ago, I read a book on the most famous investor in the world, Warren Buffett. It is called “The Snowball – Warren Buffett and the Business of Life”. It is an 830-page behemoth of a book that walks you through his childhood, the details of his investments and his personal life. The books title comes from a quote of his – “Life is like a snowball. The important thing is finding wet snow and a really long hill.” It was inspiring to read how one man turned less than $1 million into the billions of dollars he has today, and it was eye opening to read his hyper focused approach to investing, with little room for anything else, including family and friends.

The book led me down a path of reading all the annual letters he wrote to Berkshire Hathaway shareholders.  Although the letters contain investing concepts this article is not to be considered an investment recommendation for Berkshire Hathaway and you should consult with your advisor before making an investment decision.  Investing in stock has risk.  However; you can find the letters here if interested:  http://www.berkshirehathaway.com/letters/letters.html).

Berkshire Hathaway was a Massachusetts textile company that Buffett took control of in 1965. He thought it looked like a promising investment, but it lost him a lot of money and he eventually shut it down in 1985. By the time he shut it down it was a small part of his actual business, which was making investments. These letters then inspired me to become a shareholder in Berkshire Hathaway, so I could attend (along with 30,000 other shareholders) the annual shareholders meeting in Omaha, Nebraska where Buffett and his business partner, Charlie Munger, speak on investing, life and folksy wisdom. It’s been described as Woodstock for investing nerds. With a description like that, I had to check it out for myself.

I attended this year’s meeting on May 5th and I can positively say it was not Woodstock for investing nerds – at least not how I imagined Woodstock to be. The trek getting to Omaha from Yakima isn’t the easiest or shortest. I flew into Kansas City and drove 2.5 hours to Omaha, had to rent a hotel, 30 minutes outside Omaha (literally 30,000 people were in town for this “meeting”), drove another 2.5 hours back to Kansas City and took a flight with 3 connections back to Yakima. On second thought, maybe this is more similar to Woodstock than I previously thought.

The meeting isn’t as much of a meeting as it is a show. There is a giant expo showcasing the privately held brands that Berkshire Hathaway owns: Dairy Queen, Duracell, Fruit of the Loom, GEICO, BNSF Railway, Benjamin Moore Paints, NetJets, Clayton Homes, and See’s Candies to name a few. The actual meeting is held in a 17,500-capacity stadium, complete with concession stands, a jumbotron and ushers (ok, ok, I’ve come around to the idea that it is Woodstock for investing nerds). There wasn’t an empty seat in the place.

Buffett and Munger sat on stage and briefly talked about the state of the Berkshire Hathaway’s business. Berkshire Hathaway reported a net loss of $1.1 billion in the first quarter, the decline was due largely to a new rule that requires it to report unrealized gains or losses in stock investments as net income. However, the majority of the 8-hour meeting was answering questions from reporters and shareholders. All in all, it was a great experience and I’m glad I got to see Buffett in person. For those of you interested in next year’s meeting, the entire meeting is streamed live on the internet – you don’t even have to be a shareholder to view it.

I thought I’d share a few of the more notable quotes that he gave during the meeting.

“I’m bullish on the future of the United States, but I’m bullish on the future of China, and to a significant extent the rest of the world. People are going to be living better 10, 20, 50 years from now, and I don’t think that’s something that can be stopped, absent weapons of mass destruction.” (Even though he is the “Oracle of Omaha” Buffett does not see the future. This is his opinion and does not represent the opinions of Leonard Rickey Investment Advisors and is not a recommendation.)

“What we do is not a complicated business. It’s got to be a disciplined business, but it does not require a super high IQ or anything of the sort. And there are a few fundamentals that are incredibly important. And you do have to understand accounting, and it helps to get out and talk to consumers and start thinking like a consumer in many ways and all of that, but it just doesn’t require advanced learning.”

“I do not believe in imposing my political opinions on the activities of our business. And if you get to what companies are pure and which ones aren’t pure, I think it’s very difficult to make that call.”

“The United States and China are going to be the two superpowers of the world economically and in other ways for a long, long, long time. We have a lot of common interests and like any two big economic entities, there are times when there will be tensions, but it is a win-win situation when the world trades basically in China and the U.S”

“Multiple times in my life people have felt the country was more divided than ever, and I’ve gone through periods where people I knew and admired thought that because the other party was in power that there would never be another election….If you’d told me at the start you’d have a Cuban missile crisis, and you’d have nuclear weapons and you’d have a financial panic and you’d have many recessions and war in the streets in the late ’60s from a divided country, you’d say, ‘Why the hell are you buying stocks?’ And through it all, America—in fits and starts, but America really moves ahead.”

 

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Important Disclosures

Leonard Rickey Investment Advisors, PLLC (“LRIA”), is an SEC registered investment adviser located in the State of Washington. Registration does not imply a certain level of skill or training. For information pertaining to the registration status of LRIA, please contact LRIA or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov).

This is provided for general information only and contains information that is not suitable for everyone. As such, nothing herein should be construed as the provision of specific investment advice or recommendations for any individual. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. There is no guarantee that the views and opinions expressed herein will come to pass. This newsletter contains information derived from third party sources. Although we believe these third-party sources to be reliable, we make no representations as to the accuracy or completeness of any information prepared by any unaffiliated third party incorporated herein and take no responsibility therefore.

Any projections, forecasts and estimates, including without limitation any statement using “expect” or “believe” or any variation of either term or a similar term, contained here are forward-looking statements and are based upon certain current assumptions, beliefs and expectations that LRIA considers reasonable or that the applicable third parties have identified as such. Forward-looking statements are necessarily speculative in nature, and it can be expected that some or all of the assumptions or beliefs underlying the forward-looking statements will not materialize or will vary significantly from actual results or outcomes. Some important factors that could cause actual results or outcomes to differ materially from those in any forward-looking statements include, among others, changes in interest rates and general economic conditions in the U.S. and globally, changes in the liquidity available in the market, change and volatility in the value of the U.S. dollar, market volatility and distressed credit markets, and other market, financial or legal uncertainties. Consequently, the inclusion of forward-looking statements herein should not be regarded as a representation by LRIA or any other person or entity of the outcomes or results that will be achieved by following any recommendations contained herein. While the forward-looking statements here reflect estimates, expectations and beliefs, they are not guarantees of future performance or outcomes. LRIA has no obligation to update or otherwise revise any forward-looking statements, including any revisions to reflect changes in economic conditions or other circumstances arising after the date hereof or to reflect the occurrence of events (whether anticipated or unanticipated), even if the underlying assumptions do not come to fruition. Opinions expressed herein are subject to change without notice and do not necessarily take into account the particular investment objectives, financial situations, or particular needs of all investors.

For additional information about LRIA, including fees and services, please contact us for our Form ADV disclosure brochure using our contact information herein. Please read the disclosure brochure carefully before you invest or send money.