Seven stories from over the past day (updated to reflect a newer version of the "Los Angeles Times" story on the source page):
(See also Friday's preview batch.)
From the "Los Angeles Times"...
Shareholders of Berkshire Hathaway Inc. decisively rejected a proposal [on] Saturday that would have required the company to sell its $3.3-billion stake in PetroChina Co., a subsidiary of a Chinese government firm that is the largest player in Sudan's oil industry.
Berkshire Chairman Warren E. Buffett, who owns about one-third of his company's shares, advised against the proposal, which received less than 2% of votes cast here [Omaha] at Berkshire's annual meeting.
The proposal was part of a divestment effort aimed at hastening the end of the Darfur conflict — in which the Sudanese military has engaged in genocide, according to the U.S. government — by pressuring investors to sell holdings in companies whose activities support the war.
Berkshire is the largest independent shareholder in PetroChina, whose parent company, China National Petroleum Corp., drills and exports much of Sudan's oil, providing funds for the Sudanese government and its military.
Judith Porter, an investor from Ardmore, Pa., who holds about $36,000 in Berkshire stock, proposed the measure after reflecting on the killing of her grandparents in 1941 by the Nazis.
"Now there is the first genocide of the 21st century in Darfur," she told Buffett at the meeting. "Your support will send a signal to China and to the Sudan that there are costs for continuing this destruction."
Afterward, Porter said that the outcome was expected, but that the vote was useful to educate shareholders.
Before the meeting, Buffett had called the Darfur violence "deplorable," but rejected divestment as misguided.
"I see no effect whatsoever in Berkshire Hathaway trying to tell the Chinese government how to conduct their business," he said Saturday.
Berkshire's vice chairman, Charles Munger, objected to any "vigilante" action in a matter of foreign policy that he said was best left up to the U.S. government.
The argument provided a rare, somber moment for the 27,000 shareholders in attendance at "the Woodstock of capitalism" — so named for its festival-like ambience.
Buffett's investing success, reputation for integrity and folksy style have endeared him to Berkshire shareholders.
A San Jose shareholder who identified himself as Walter Chang said [that] he and his wife planned to name their baby Warren, after Buffett.
"I want to applaud you for setting another great example, for donating most of your wealth to charity," another shareholder said, referring to Buffett's pledge to donate $31 billion to the Bill & Melinda Gates Foundation.
The way in which some of Buffett's investment choices contradict Gates Foundation goals was the subject of a Times investigation published [on] Friday.
Also at the shareholder meeting, representatives of California fishermen and Indian tribes asked Buffett to intervene in a controversy involving dams operated along the Klamath River by Berkshire subsidiary PacifiCorp. The dams have reduced salmon populations and have affected water quality, threatening many livelihoods.
"Our people are river people; our entire culture and subsistence is centered around the river," said a woman who represented the tribes, her voice breaking with emotion. She requested a meeting with Buffett to explain the issues.
Buffett said [that] the concerns were countered by the need for renewable hydropower provided by the dams.
"The world does want electricity," he said, adding that PacifiCorp would abide by regulators' rulings in the case.
Berkshire Hathaway Inc. shareholders voted by a 53-to-1 margin against an investor proposal calling on the firm to divest a $3.3 billion stake in PetroChina Co. because it's controlled by a company that does business in Sudan.
China National Petroleum Corp., PetroChina's parent, holds oil reserves and pipelines in Sudan, where the government has been accused of supporting genocide. At final count, 830,598 votes were cast against the resolution and 15,740 for it, the company said today [Saturday] at Berkshire's annual meeting in Omaha [...].
``We have no disagreement with what PetroChina is doing,'' said Berkshire Chairman and Chief Executive Officer Warren Buffett. ``If there was a disagreement, it would be with what the Chinese government is doing.''
China, which controls China National, joined with Russia, Qatar and South Africa to block a U.S. effort at the United Nations to increase pressure on Sudan to accept more than 20,000 peacekeeping troops in Darfur. Sudan has accepted about 3,000 UN soldiers and police to support the 7,000 African Union troops trying to protect civilians in Darfur.
Buffett said he agrees ``100 percent'' that Darfur violence is wrong. He has said [that] PetroChina has no influence over China National. Divestment would only help the Sudanese government get control of the Chinese assets inexpensively, Berkshire says on its website.
Buffett's decision hasn't swayed activists who say [that] putting the world's third-richest man on the spot will draw attention to their campaign to cut the flow of oil revenue to Sudan's government. Buffett, 76, often scolds corporate America for putting profits ahead of ethics. The billionaire in June pledged the bulk of his fortune to the Bill and Melinda Gates Foundation, a gift valued at the time at about $37 billion.
`An Extremely Ethical Man'
``As an exemplar of business ethics and integrity, your divestiture would send a message to China,'' said Judith Porter, a semi-retired college professor, who introduced the resolution.
Conflict broke out in 2003 when rebels seeking a larger share of Sudan's political power and oil wealth attacked the government. At least 200,000 civilians have since died in Darfur, in the western region of Sudan, according to the United Nations and Human Rights Watch.
The government, dominated by Muslim Arabs, has been accused by the UN and the U.S. of supplying money, weapons and vehicles to mainly Arab militias known as the Janjaweed that have targeted African villages in rebel held areas. The U.S. Congress said the killings amounted to genocide.
`Never Again'
``Genocide should never again happen,'' said Judith Porter. ``The world was silent when my grandparents were murdered by the Nazis,'' then during genocide in Cambodia, Bosnia, Rwanda, she said. ``How many times must we say `never again?'''
Buffett said [that] he sees ``no effect whatsoever in Berkshire Hathaway trying to tell the Chinese government how to conduct business.'' It's ``understandable'' [that] China is looking worldwide for energy, said Buffett. The U.S. Congress ``snubbed'' the Chinese in 2005, when it opposed an attempt by Chinese company Cnooc Ltd. to acquire U.S. oil producer Unocal Corp, Buffett said. Chevron Corp., based in San Ramon, California, later acquired Unocal.
Berkshire owns 1.3 percent of PetroChina and is the largest shareholder after China National, which owns 90 percent of the stock. China National Petroleum led development of the first oil field in Sudan and is the largest foreign oil company operating in the country.
Supporters of the resolution say [that] PetroChina and China National have some of the top managers.
``They look different, but they are actually two sides of the same corporation,'' said Gerald Porter, Judith's husband.
Lopsided Vote
The lopsided vote margin reflects votes by large shareholders, including Buffett, who owns about a third of Berkshire's stock, Porter said. The tally includes both Class B shares and more highly valued Class A shares, which carry larger voting weight. Buffett said that without his votes, the ratio would have been 25-to-1.
``I think [that] if you look at the number of people who voted for the resolution, it'd be a much-higher percentage,'' Gerald Porter said.
Berkshire paid $488 million for its PetroChina stake, according to regulatory filings. It soared sevenfold in value through Dec. 31.
Buffett has built Berkshire over the past four decades from a failing textile-maker into a holding company with businesses ranging from ice cream to utilities to insurance and a market value of $168 billion.
Insurance Earnings
He told shareholders not to expect a repeat of the earnings [that] Berkshire's insurance units had last year or in the first quarter. Profit from underwriting climbed 82 percent to $601 million in the first quarter, as its catastrophe-reinsurance business benefited from higher prices and mild weather, Berkshire said yesterday [Friday]. That contributed to a 12-percent increase in net income, to $2.6 billion, or $1,682 a share.
``The insurance earnings are going to go down, there's no question about that. It's up to Mother Nature how much,'' Buffett told shareholders at a gathering at Omaha's Qwest Center, attended by 27,000. ``What we really hope over time is more or less to break even on underwriting of insurance.''
Hurricane Katrina, which caused $40.7 billion in insured losses along the U.S. Gulf Coast in 2005, isn't ``anywhere near a worst-case scenario,'' Buffett said. It would be ``crazy'' to sell insurance at the rates that existed before Katrina, he said.
Buffett uses insurance premiums and cash from the company's other operations to invest in stocks and buy companies.
Looking for a Deal
``We have 10 billion or more dollars a year coming in that's free to go into almost anything,'' Buffett said in an interview. ``And that's always a challenge.''
Berkshire had more than $40 billion in cash as of March 31, and the company would even sell some of its holdings to raise more money, if it were needed for the right acquisition, Buffett told shareholders. Berkshire's utility unit last year purchased PacifiCorp from Scottish Power Plc for $5.1 billion in the company's biggest deal since Berkshire bought insurer General Re Corp. in 1998 for $17.6 billion.
``We're as prepared as we've ever been to buy a big business outright,'' said Buffett.
Berkshire businesses related to residential construction have been hurt by a housing slump in the U.S. economy that is likely to continue for ``quite a while,'' Buffett said. Sales of previously owned homes in the U.S. declined more than forecast in March, falling to the lowest level in almost four years, the National Association of Realtors said.
Berkshire owns building-products manufacturer Johns Manville Corp. and paint maker Benjamin Moore & Co.
Berkshire shares rose $650, or .6 percent, yesterday to $109,250 in regular trading on the New York Stock Exchange. They have dropped .7 percent this year.
Shares of Berkshire are up about 3,600 percent since 1987, six times more than the New York Stock Exchange Composite Index, which measures the performance of all the companies listed on the Big Board.
From the AP...
Shareholders in Berkshire Hathaway, billionaire investor Warren Buffett's holding company, have rejected a proposal to sell its 2.3 billion shares of PetroChina over concerns about its connection to Sudan.
The proposal rejected [on] Saturday would have prohibited Berkshire from investing in foreign companies that engage in activities that U.S. corporations must avoid because of presidential executive orders.
A 1997 order by then-President Bill Clinton, later expanded upon by President George W. Bush, limits such investments in Sudan, which the U.S. has said is using its oil wealth to wage genocide against the people in the Darfur region.
PetroChina's government-owned parent company does business in Sudan.
In the end, just 15,740 votes were cast in favor of the resolution and 830,598 were cast against it. But its advocates said [that] they were glad they had a chance to raise concerns about the genocide and PetroChina's links to Sudan, said Allyn Brooks-LaSure, a spokesman for the Save Darfur Coalition.
"We see this weekend as one phase of a dialogue with Berkshire Hathaway, and it's one that we plan to continue," Brooks-LaSure said.
Most of Saturday's meeting was devoted to a question-and-answer period where shareholders had the chance to pick the brains of Buffett and vice chairman Charlie Munger about who will lead the company when they're gone, investment decisions and other topics.
Buffett and Berkshire's board of directors, which includes the world's richest man Bill Gates, opposed the resolution, and Berkshire officials defended the company's investment again [on] Saturday because they said [that] PetroChina can't tell China what to do.
"I see no effect whatsoever in Berkshire Hathaway trying to tell the Chinese government how to conduct their business," Buffett said.
Both Buffett and Munger said [that] they agree that the genocide in Sudan should not be happening, but didn't see it as their company's role to intervene in foreign policy.
"Nobody is in favor of cruelty, but there's a limit on what you can fix," Munger said.
Berkshire owns insurance, clothing, furniture, jewelry and candy companies, restaurants, [and] natural-gas and corporate-jet firms, and has major investments in such companies as Coca-Cola Co., Anheuser-Busch Cos. and Wells Fargo & Co.
Its shareholders do not like to think about the prospect of replacing legendary investor Buffett at the helm of the company.
The 76-year-old Buffett told shareholders [that] he has no plans to leave the holding company [that] he built because he enjoys his work so much, but he might have lined up a new gig [on] Saturday morning before the annual Berkshire meeting.
Buffett grabbed his ukulele and joined the Quebe Sisters Band for a performance in the Qwest Center exhibition hall where some of Berkshire's more than 60 companies showcased their products to 27,000 visitors.
Buffett has previously told shareholders that he has made arrangements for one of Berkshire's managers to succeed him, and he is in the midst of sorting through 600-700 applications for a new chief investment officer to manage the company's investments.
So when he sat down on a stool between three fiddle players, he joked: "I may well be looking for another job soon. This is my first audition."
Most shareholders would like Buffett to keep running the firm for many more years. They also feel [that] Buffett has done a good job planning for his eventual successor.
"I think [that] he will have people groomed to come up behind him and finish it off," said shareholder David Miller.
The search for Berkshire's next chief investment officer, which Buffett announced in his annual letter, will pick up speed after the annual meeting.
Buffett said [that] he expects to hire three or four people as candidates for CIO. He said [that] each of the investment managers he hires will be given a chunk of money — between $2 billion and $5 billion (€1.5 billion and €3.7 billion) — to manage.
Buffet also told shareholders that he thinks [that] the sub-prime mortgage meltdown is a problem for the companies involved, but is unlikely to spill into the overall economy.
"I think [that] that's dumb lending and it's dumb borrowing," he said.
But he said [that] as long as unemployment and interest rates don't rise considerably, it should not cause widespread problems.
From Reuters...
Shareholders of Warren Buffett's Berkshire Hathaway Inc. <BRKa.N> <BRKb.N> on Saturday overwhelmingly defeated a proposal to divest a $3.31 billion stake in PetroChina Co. <0857.HK> because of its parent's ties to Sudan.
Less than 2 percent of votes were cast in favor of the proposal by Berkshire shareholder Judith Porter, which Buffett opposed. Berkshire ended 2006 with a 1.3 percent PetroChina stake, making it the company's largest foreign shareholder.
In a separate protest, two speakers allowed into the meeting called on a Berkshire utility unit to destroy two dams they say harm the environment.
The criticisms marked rare calls for Buffett, lauded for his charitable giving and vigorous advocacy of good corporate governance, to do more to push for societal and environmental change.
Calling Darfur "the first genocide in the 21st century," Porter told Buffett at the meeting that "your support of divestment will send a signal to China and Sudan that there are costs to continuing this destruction."
Critics say PetroChina, through its government-owned parent China National Petroleum Corp. (CNPC), is too closely linked to Sudan, whose government has been blamed for what the White House calls genocide in the Darfur region.
They say [that] CNPC supports the Sudan government through its 41-percent stake in Petrodar Operating Co., an oil and gas company whose main office is in Khartoum.
Buffett acknowledged the conditions in Darfur, but said [that] PetroChina does not control CNPC, and that Sudan's government might even benefit if CNPC quit the country, likely entailing a sale of its Petrodar stake to the government.
"We have no disagreement with what PetroChina is doing," Buffett said. "There may be disagreement about what the Chinese government is doing.... I see no effect whatsoever in Berkshire Hathaway trying to tell the Chinese government how to conduct their business."
The United Nations estimates that 200,000 people have died in the Darfur region since 2003 as a result of the conflict.
Separately, Buffett said [that] it was beyond his power to compel Berkshire's PacifiCorp utility unit to demolish two Klamath River dams in northern California.
Some American Indians, commercial fishermen and environmentalists filed a federal lawsuit on Wednesday calling for a clean-up of toxic algae blooms in reservoirs behind the Iron Gate and Copco dams.
"We will not make the determination in the end," Buffett said. "That is entirely a question for FERC (Federal Energy Regulatory Commission) and the state commissions.... PacifiCorp will do exactly what they say."
From the "Omaha World-Herald"...
Rejecting a proposal aimed at selling off an investment in a Chinese oil company, Berkshire Hathaway shareholders carried out their usual celebration of capitalism [on] Saturday despite rainy, windy weather.
An estimated 27,000 shareholders - the seventh consecutive attendance record - learned that Berkshire Chairman Warren Buffett is working to find one or more people to try out as his successor in deciding where the Omaha investment company puts its money.
They heard his views on global warming (it would be foolish to act as if it's not happening, he said), the housing market (Buffett doubts [that] problems in subprime lending will spread to the economy) and state-authorized gambling ("It's socially revolting when a government preys on the weaknesses of its citizens").
Buffett said [that] 98.2 percent of the company's shares, including his 33 percent, voted against a resolution by shareholder Judith Porter of Ardmore, Pa. She wanted to prevent Berkshire from investing in securities of foreign corporations or subsidiaries that engage in activities that would be prohibited for U.S. corporations.
Groups supporting the resolution want Berkshire, which owns part of a Chinese oil company, to influence China's support of the Sudanese government's reported genocide in the Darfur region.
Buffett spent five hours answering shareholders' questions and said [that] he is sorting through 600 or 700 applications from people wanting to be Berkshire's future chief investment officer.
He said [that] he has found such people before, including Lou Simpson, who invests for Berkshire's Geico subsidiary, but that he is seeking younger people to audition by letting them manage several billion of Berkshire's dollars.
"We'll not blow it," he said of the search for a successor. "It can be done."
Buffett said [that] he and Berkshire Vice Chairman Charlie Munger don't plan to try to teach the new person or people how to do the job. A key skill, Buffett said, is a near-genetic predisposition to avoid risks that could cause huge losses, including possible catastrophes that have never happened before.
But Buffett brushed aside one questioner who suggested that he had become so risk-adverse that he would avoid investment possibilities that carried risk. Buffett said [that] he continues to use the same criteria, seeking businesses with high returns, long-lasting advantages and excellent management.
But, Buffett said, a person investing a small amount of money can do much better than he can, percentagewise. That's partly because there are so few profitable multibillion-dollar investments available.
Buffett said [that] he would invest in stocks if he were running a $10 million portfolio and said [that] there are plenty of choices that would yield good returns with little chance of failure.
Asked about his recent investments in Burlington Northern Santa Fe and other railroads, Buffett said [that] returns in railroads will not be exciting but are better than they were 30 years ago, when railroads operated under government regulation.
High oil prices hit the trucking industry harder than the rail industry, which makes railroads more competitive, Buffett said.
But railroads also have to invest a lot of money in capital improvements, which dampens their returns, he said. "It will never be a sensational business."
Besides the China-Sudan issue, this year's annual meeting included questions about other social issues.
One woman said [that] her husband is a commercial fisherman who relies on salmon in the Klamath River of northern California. His livelihood has been hurt by four dams owned by PacificCorp, a subsidiary of Berkshire Hathaway, she said. She asked Buffett where he stood on removing the dams rather than seeking new licenses to operate them.
A group of American Indians and others held demonstrations in Omaha during the week on the dam-removal issue.
Buffett said [that] federal regulators are studying the issue and will take all arguments into account as they decide whether to re-license the dams. PacificCorp will abide by whatever regulators tell it to do, he said.
"We are a public utility responding to public policy," he said. "We will do exactly what they say. We are responsive to the people who regulate us."
Another shareholder asked Buffett to defend his charitable support for Planned Parenthood and other abortion-rights groups.
Planned Parenthood is a terrific organization, Buffett said, adding that women have had the bearing of babies forced upon them for years, usually by rules set by men. It's wonderful that women can now make reproductive choices, he said.
"I hope [that] you'll respect my opinion as I respect yours," he added.
Among other comments by Buffett and Munger:
• The struggling housing sector should have a limited impact on the wider economy as long as unemployment and interest rates remain low.
• While Buffett said [that] he takes global warming seriously, Munger was more comedic, noting that carbon dioxide helps plants grow and that most people would rather be warm than cold. He said [that] those most upset about global warming appear to be "pot-smoking journalism students."
• Munger said [that] the financial returns for Berkshire have been extremely good, probably the best of any company in history. Munger credited Buffett for reading and learning as a youngster and getting an early start. Munger, who is 83, said [that] the 76-year-old Buffett has improved at his job since he reached retirement age.
• Buffett said [that] the growing number of private-equity deals, by firms that gather large sums of money to invest, don't amount to a bubble that will burst, but they may slow if returns stop attracting investors. He said [that] it's difficult for Berkshire, which has $40.5 billion in cash, to compete for such investments because fund managers are compelled to invest quickly to earn fees.
• A big introduction for "Mr. Buffett" at the start of the meeting yielded singer Jimmy Buffett, wearing a Hawaiian shirt, shorts and no shoes. Buffett, who claims to be a distant cousin of Warren, kidded the shareholders by saying [that] genetic testing determined he would inherit Berkshire. "Since blood is thicker than water, I'm your new chairman."
Buffett performed a reworked version of "Margaritaville" that began, "Living on sponge cake, and Omaha beef steak, watching the shareholders running around." The chorus was "wasting away in Berkshire Hathaway-a-ville."
• Shareholders elected Susan L. Decker, 44, as a new director, succeeding Malcolm C. Chace, a director since 1992 and a member of the family that owned Berkshire before Buffett. Decker is executive vice president of Yahoo! Inc., and a director of Costco Wholesale Corp. and Intel Corp.
• Berkshire's profits in 2006 and the first quarter of 2007 were unusually high, but won't continue this year, because premiums being charged by insurance companies are declining, Buffett said.
From the "Wall Street Journal"...
Billionaire Warren Buffett said [that] a unit of his Berkshire Hathaway Inc. holding company would abide by the orders of public-policy decision-makers regarding the environmental and economic impact of several of the unit's hydroelectric dams along the California and Oregon border.
Members of native American tribes and residents along the Klamath River coast protested outside of the Berkshire annual meeting on Saturday in Omaha. During the six-hour question-and-answer session inside the Qwest Center, one of the 27,000 people in attendance asked Mr. Buffett if he would consider removing the dams, which she said had destroyed the salmon-fishing industry and impoverished her family. The dams are operated by PacifiCorp, a utility owned by MidAmerican Energy Holdings, a Berkshire subsidiary.
"We want the dams removed, so that Indian people along the river and we in the coastal communities can continue our proud heritage," said the attendee, who said her husband had lost his livelihood in the local fishing industry because of the environmental damage caused by the dams.
Choking back tears, another woman representing an Indian tribe living along the Klamath River appeared, with three other members, in her tribe's ceremonial dress and appealed to Mr. Buffett to remove PacifiCorp's hydroelectic dams.
Mr. Buffett said [that] the issue was "entirely a question for FERC and the state commissions," referrring to the Federal Energy Regulatory Commission and the California Energy Commission, which he said are considering proposals from various interest groups.
"In the end, we are a public utility responding to public policy. We are responsive to the people who regulate us," Mr. Buffett said.
During this year's annual meeting, special interest groups have appealed to Mr. Buffett and Berkshire to weigh in on social issues. Berkshire shareholders voted against a special resolution to divest the company's interest in PetroChina, a Chinese oil company, which some investors claim indirectly provides financial support to the genocide in Darfur. According to a preliminary count, only 1.8%, or 15,245 votes, decided in favor of the resolution versus 98.2%, or 811,479 votes. Mr. Buffett was against the resolution, but put it on the proxy.
"PetroChina in no way tells the Chinese government what to do," said Mr. Buffett. "We have no disagreement with what PetroChina is doing." He added that he sees "no effect whatsoever in Berkshire Hathaway trying to tell the Chinese government how to conduct their business," although he added that he is in full agreement over the significance of the problems in Darfur.
Dual-Class Share Structures for Newspapers Defended
Mr. Buffett blamed the decline of sales and circulation in the newspaper industry to technological and cultural changes, and not on the dual-class shareholder structure of some major media companies.
"The truth is, the world has changed in a significant way," Mr. Buffett told shareholders at the annual meeting. He said [that] early titans of the newspaper industry could not have changed the fundamental realities of the Internet age.
"I don't know that Joseph Pulitzer or William Randolph Hearst or E.W. Scripps could do much about that," he said.
Mr. Buffett is a director at the Washington Post Co., which has a dual-class share structure similar to the New York Times Co. and Dow Jones & Co. The dual-class structure concentrates voting power in one class of shares in those cases, with a majority of the voting shares held by families that have controlled the companies for decades.
Recently, the structure has come under pressure from shareholders of the New York Times. Last week, an offer from Rupert Murdoch's News Corp. to buy Dow Jones threw a spotlight on the structure at that company. "I don't blame the dual-class structure for anyone's losses at the New York Times," said Mr. Buffett, referring to the company's share price, which is down sharply over the past five years
Derivatives Cause 'Mass Destruction'
Earlier [on] Saturday, Mr. Buffet repeated his warning on the dangers of derivatives, saying that excessive borrowing by traders, investors and corporations will eventually lead to significant dislocation in the financial markets.
In fielding a question about derivatives, which he once referred to as "financial weapons of mass destruction," Mr. Buffett told shareholders that he expects derivatives and borrowing, or leverage, would inevitably end in huge losses for many financial participants.
"The introduction of derivatives has totally made any regulation of margin requirements a joke," said Mr. Buffett, referring to the U.S. government's rules limiting the amount of borrowed money [that] an investor can apply to each trade. "I believe [that] we may not know where exactly the danger begins and at what point it becomes a super danger. We don't know when it will end precisely, but...at some point some very unpleasant things will happen in markets."
Mr. Buffett has expressed similar bearish sentiments about derivatives in previous meetings, and in his widely read annual letters to shareholders. He had first-hand experience with the difficulties of derivatives after Berkshire acquired General Re, the reinsurance company, in the late 1990s, and spent several years unwinding its derivatives portfolio at a loss [in order] to reduce the subsidiary's exposure to risk. He noted, however, that Berkshire currently has several dozen derivatives positions -- such as futures and options contracts on stock indexes and foreign currencies -- and added that "derivatives aren't evil."
Charlie Munger, Berkshire's 83-year-old vice-chairman and Mr. Buffett's droll sidekick during the six-hour annual meeting, said that the accounting of derivatives contributed to the risks [that] they pose to the financial markets.
"The accounting being deficient enormously contributes to the risk," said Munger, lamenting that executives and shareholders were getting paid on "profits that don't exist."
Mr. Buffett noted that existing accounting conventions allow parties involved in derivative transactions to value the same contract differently, leading to an inadequate or incomplete picture of the contract's risk. "I will guarantee you, if you add up the marks on both side, they don't add up to zero," Mr. Buffett said, referring to the accounting of a single derivative contract.
Exacerbating the problem of derivatives and leverage is the short-term trading mentality and high turnover in the stock and bond markets, Mr. Buffett and Mr. Munger added. "There is an electronic herd of people around the world managing an amazing amount of money" who make decisions based on minute-by-minute stimuli, said Mr. Buffett, adding, "I think [that] it's a fool's game."
Buffett Fields Questions on Planned Parenthood
Mr. Buffett also defended his charitable contribution to organizations that support women's reproductive rights, such as Planned Parenthood.
A shareholder from St. James, N.Y., who said [that] he brought one of his five daughters to the meeting, asked Mr. Buffett to explain why he supports organizations such as Planned Parenthood. "It just doesn't seem to jibe with the hero that I studied," the shareholder told Mr. Buffett amid boos from the audience.
"Men set the rules for a lot of years, and I think [that] it's wonderful that women can make reproductive choices," Mr. Buffett replied, as shareholders applauded and cheered.
Mr. Buffett announced in June 2006 that he would pledge some 85% of his Berkshire stake, amounting to about $44 billion at the current stock price, to five charities, the largest of which is the Bill & Melinda Gates Foundation. His Buffett Foundation, which for decades was run by Mr. Buffett's late first wife, Susan, long supported projects that promoted women's right to birth control and abortion, as well as population control in developing countries.
"I think [that] it's a terrific organization," Mr. Buffett added, referring to Planned Parenthood. "I really think [that] it's too bad that for millenia, women not only in the U.S. but all over the world, have had involuntary bearing of babies."
Berkshire Hathaway shareholders voted against a resolution related to the Darfur crisis in Sudan, the company announced during its annual meeting on Saturday. A little over 98% of Berkshire investors voted against the resolution, according to a ballot of 70% of those eligible to vote that was organized ahead of the meeting, Berkshire said. Judith Porter, of Ardmore, Penn., who owns 10 Class B Berkshire shares, proposed a resolution barring the company from investing in securities such as PetroChina Ltd., which have ties to Sudan. Berkshire owns more than 1.3% of PetroChina, making the company the second-largest shareholder, behind the Chinese government. PetroChina, which is listed in Hong Kong and has American depositary shares traded in New York, doesn't own any assets in Sudan, but its parent has fields producing several-hundred-thousand barrels a day in Sudan with partners.
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