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Friday, April 30, 2010

NIGHTLY BUSINESS REPORT: Susie Gharib with Burlington Northern CEO Matthew Rose

Thursday, April 29, 2010
Susie  Gharib, NBR Anchor/Senior Strategic Advisor

SUSIE GHARIB: Investors from around the world will head to Omaha this weekend to see Warren Buffett. The billionaire CEO of Berkshire Hathaway will headline its annual meeting answering questions on everything from the economy to Berkshire's businesses. I'll also be asking him questions as well, when I interview him on Saturday. Also on hand, Matthew Rose. He heads Burlington Northern Santa Fe. That's the giant railroad Buffett bought this year for $44 billion, the biggest deal in his career of big deals. So, why is Buffett betting on of all things, a railroad? The CEO of Burlington Northern has the answer.

Matthew Rose says it took only a 15 minute meeting with Warren Buffett to seal the deal. Rose gave Buffett a big train set, more than 6,000 locomotives and hundreds of thousands of freight cars. It's the nation's biggest hauler of coal and it's the largest transporter of freight containers. Burlington Northern got its start as the Aurora Branch railroad in Chicago in 1850. Over the next two centuries, Aurora merged with hundreds of rail lines and became known as Burlington Northern. In 1995 in a massive rail merger, it linked up with Santa Fe Pacific. Today Burlington Northern, Santa Fe railway headquartered in Fort Worth, Texas stretches into the Rockies, to California, to Seattle across to Chicago and to the Gulf of Mexico. And it could keep on growing now that Buffett is on board. Rose is also ready to go full steam ahead. At 50 he's the youngest CEO of a major railroad. And he has a reputation for bringing change to the stodgy industry. Matt, when Warren Buffett announced that he was buying Burlington Northern he said that this is an all in bet on America's economic future. Most people think of railroads as being kind of old-fashioned, not exactly a growth engine. So give us your case why railroads are the future.

MATTHEW ROSE, CHAIRMAN & CEO, BURLINGTON NORTHERN SANTA FE: The future part of it is really, when we think about the challenges facing our country, we think of as a three-legged stool. Reduce our dependency on foreign oil, reducing our carbon footprint and improving America's highways for commuters and highway transportation. And the railroads, quite frankly, are the future to be able to do that.

GHARIB: So did Warren Buffett buy at the right time? Is the economy picking up enough to give a boost to the rails?

ROSE: Well, you have to remember Warren was a shareholder for a number of years. And so he had different entry prices. He was a holder of 22 percent of the company for a number of years. But certainly if you think about Warren's view of a long-term value, he will do very well with this investment.

GHARIB: As you know, there is talk in Congress to re-regulate the industry. If that happens, how does that change the growth outlook for the railroad industry?

ROSE: Sure it possibly could. And we'll just have to see the devil in the detail of that. But certainly we believe that a free market approach to transportation has served this country very well. And you can still have partial changes to the regulatory environment and allow the railroads to do what they need to do. And that is to add more capacity to the industry.

GHARIB: Now that Burlington is part of Berkshire Hathaway, do you feel that you have more freedom to invest and expand? ROSE: We're in about month three now. And this month we're here today is typically our annual meeting month. It's typically our quarterly release month. Two things that I'm not doing. So it is a little different. And when we think about how that will translate into how we run this company again, I think all that will be very positive that we will be focused over a little bit longer term horizon than perhaps what is going on in a given quarter.

GHARIB: So do you have a wish list of projects that you just couldn't do as a public company but now seem possible.

ROSE: There is no doubt that Warren has been very clear he wants to us reinvest in the railroad. And if you think about, if you are a public company, in terms of generating free cash flow, you really have three different alternatives. Buy back your stock. Dividend out to your shareholders or reinvest in your company either your own company or through a strategic acquisition. We no longer can buy back our own stock because we don't have any so we're down to dividending (ph) up to Berkshire as the parent or reinvesting in our company. And I think Warren's made it clear that he wants to see us reinvest back in the railroad.

GHARIB: What is the key advantage of having Warren Buffett on your side?

ROSE: Well, first off he is a great thought leader. When we are looking for debate, discussion on how to finance our debt or just issues around strategic acquisitions, certainly being able to pick up the phone and call Warren Buffett is a tremendous advantage.

GHARIB: And what do you have to do in return? Does he expect you to deliver certain earnings and certain returns?

ROSE: No. He has an incredible belief that well run businesses will produce above-average returns over the long term. And that's what he -- I mean without a doubt, that's implied of what he expects from us.

GHARIB: You're going to be going to Omaha --

ROSE: Right.

GHARIB: . this week and for your first shareholders' meeting. What are you expecting?

ROSE: I have no idea. I have never been to a shareholder meeting in Omaha, one of his. Typically our annual meets were lasting a half an hour to 45 minutes. There was really not a lot of substance. And so I am going in to this hearing and reading about almost a Woodstock of the music industry. And listening to Warren and Charlie talk for hours, which I think will be fascinating. So I'm all in. I will be there for three days. I'm looking forward to it.

GHARIB: Tomorrow, we continue our conversation with Matt Rose. He tells me what it's like to have Warren Buffett as his boss.

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FOX BUSINESS: Liz Claman and Warren Buffett 29 April 2010








Interview transcript: FOX Business Network anchor Liz Claman and Warren Buffett--4.29.10


CLAMAN: Most people, if they had 40,000 people dropping in to see
them the next day would be nervous and their office is preparing. What
do you do to prepare for this big event?

BUFFETT: I do nothing and Charlie does nothing. I mean, we see
each other as we -- we'll have lunch tomorrow for all the managers, but
we do no preparation. No, a lot of work is done, obviously,
logistically, but we don't do anything.

CLAMAN: In fact, you're here playing bridge.

BUFFETT: Yeah, I'm going to play bridge for the next three hours,
maybe three and a half hours.

CLAMAN: You're not stressed out--

BUFFETT: No.

CLAMAN: -- that this could be a record-breaking crowd this time
starting tomorrow?

BUFFETT: I'd be stressed out if it wasn't a record-breaking crowd.
No, this is fun. I mean, these are people in the meeting, they are our
partners, they come from all over the world and I love it.

CLAMAN: What is the latest RSVP tally for the numbers?

BUFFETT: Well, we received a request for 116,000 tickets, but there
is a lot of people that get it just to shop and they don't come from
(inaudible). So my guess is we'll have close to 40,000.

CLAMAN: Not 40,000?

BUFFETT: Well, I don't know. And the truth is, we'll never know in
the end because they come and go. It's real hard to keep track.

CLAMAN: But a record crowd?

BUFFETT: Oh, no question about that. There were 12 people here in
1981.

(LAUGHTER)

CLAMAN: Yes, you've grown.

BUFFETT: Yes.

CLAMAN: A lot of businesses would love to see that. Tell us,
though, what you're looking at as far as the locations, the corners of
the world from where they come?

BUFFETT: Well, we've got -- we've got 80 or 90 from Sweden. We've
got 28 from Turkey. We have 60 or 70 from Singapore. They are from all
over the world. I mean, I don't know whether there's 40 countries or
50. And the people that send in for tickets from outside the United
States, they all show up.

CLAMAN: And they come to shop, and you're giving a lot of discounts
from Omaha-based businesses as well. Nebraska Furniture Mart,
Borsheim's. How obsessively do you check the sales numbers throughout
the week (ph)?

BUFFETT: Every night. On Tuesday night, I can tell you, at the
Furniture Mart on Tuesday, we did 5.2 million of business. Now, on a
normal Tuesday, we do 700,000. So it was 5.2 million, which was up 54
percent from a year ago. We will break all the records this year. If
you talk to anybody who's in the furniture business, 5 million is a big
month. And we did it on Tuesday.

CLAMAN: And you did it in one day.

BUFFETT: Yes, absolutely.

CLAMAN: That's exactly what we were hearing, that the Furniture
Mart was doing well. What a difference a year makes. That certainly
feels like a different tone in this market.

BUFFETT: What a difference a year makes, yes. And we have seen in
all our businesses a big upswing starting in March. It was creeping up
a little until then, but in March, around the world, we saw real -- a
real change. Mostly in the United States and Asia Pacific, but Europe
not as much, but in our Iscar business, for example, every day we're
getting orders in terms of small tools that are getting used (ph) -- I
mean, nobody is buying those for speculation or anything. So we really
have our finger on what's going on firmly.

CLAMAN: Now, people will be asking you questions. You never know
the questions in advance at the meeting. Is it fair to say that you'll
be asked quite a bit about the economy?

BUFFETT: Well, I expect it, but I really don't know the questions.
And half of them are sent to the journalists ahead of time, half of them
come from the audience. We let them draw things out of a hat or
something to see who's on there. So we can get asked anything, and
believe it, that makes it more fun.

CLAMAN: Yes, I would think so. So you're ready for questions about
Goldman Sachs, about derivatives?

BUFFETT: Right. You name it. Anything except my diet. I refuse
to talk about that.

(LAUGHTER)


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FOX BUSINESS VIDEO: Are Shareholders Happy with Buffett’s Investments?

April 30, 2010

Are Shareholders Happy with Buffett’s Investments?

Carol Loomis, editor of Berkshire Hathaway’s annual shareholder letter, on what investors want Warren Buffett to address.

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CNBC: Warren Buffett Goes Live on CNBC Monday Morning After Shareholders Meeting

Published: Thursday, 29 Apr 2010 | 7:13 AM ET

By: Alex Crippen

Warren Buffett sat down with CNBC's Becky Quick for a live Squawk Box interview after last year's annual shareholders meeting.

Warren Buffett will appear live on CNBC's Squawk Box Monday morning for his first interview after meeting with over 40,000 shareholders at this weekend's Berkshire Hathaway annual meeting.

Buffett is scheduled to join co-anchor Becky Quick in Omaha for one hour starting at 8 AM ET on May 3.

When he sat down with Becky on the Monday morning after last year's 'Woodstock for Capitalists,' he told us the U.S. economy was "very slow" and "getting slower." (Read the transcript and watch the video clips.)

This year, we'll be listening to hear if his Berkshire Hathaway subsidiaries are giving him any evidence the recession is really over and a recovery is underway, as the latest economic numbers from the government seem to suggest.

You will find full coverage of the interview and more here at Everything Warren Buffett.

Current Berkshire stock prices:

Berkshire Portfolio

Class B: [BRK.B 77.96 0.79 (+1.02%) ]

Class A: [BRK.A 117004.0 1379.00 (+1.19%) ]


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Thursday, April 29, 2010

KETV.COM: Buffett Apologizes For 'Big Mama' Overlook

Owner Says Diner Should Have Made Berkshire Visitor Guide

POSTED: 10:46 am CDT April 29, 2010
UPDATED: 11:26 am CDT April 29, 2010


Billionaire investor Warren Buffett and a local diner owner talked over the phone Thursday, with Buffett saying it was a mistake that the diner was left out of a guide for visiting shareholders.

Nearly 40,000 Berkshire Hatahway shareholders are expected to descend on Omaha for the company's annual meeting this weekend.The guide suggests places to eat in the city, and Big Mama's Kitchen didn't make the cut, as well as other north Omaha spots.

Big Mama's Kitchen owner Patricia Barron said north Omaha should have been on the guide.She said she opened up her own restaurant in an old school two years ago, which has gained national notoriety and has led to appearances on cable's Food Network.Buffett apologized to Barron and said additional signage will be made to point people to her restaurant.

He said Bill Gates had dined at Big Mama's and raved about the place.Barron said the restaurant will extend its hours this weekend to accommodate the traffic.

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CNBC: Warren Buffett's 'Steakhouse' Argument Against Retroactive Rules on Derivatives

Published: Wednesday, 28 Apr 2010 | 10:39 PM ET

By: Alex Crippen

For Warren Buffett, it's a matter of simple fairness: "If the restaurant only gets paid for an 8-ounce steak, they don't want to give you the 12-ounce one."

Warren Buffett
Getty Images
Warren Buffett

It's a concept at the core of his argument against allowing the government to require collateral on existing derivatives contracts.

He tells the Omaha World-Herald that Berkshire Hathaway would have been able to get hundreds of millions of dollars more for the contracts it has written in the past, if it had put up collateral as part of the original deal.

As an example, Buffett says a big Wall Street firm recently offered Berkshire $7.5 million for a deal without collateral, and $11 million for the same deal if it posted collateral.

"There's two different markets for these contracts. To change one contract into another contract ... retroactively would be just the same as changing the price on the contract."

Or making a restaurant serve a bigger steak to a diner who had already paid for, and been served, a less expensive piece of meat.

Berkshire has been arguing on Capitol Hill that financial regulation legislation should explicitly exempt existing contracts from any new collateral requirements.

Senate Democrats, however, aren't going along, despite the efforts of Nebraska Democrat Ben Nelson. The finreg bill now being considered in the Senate does not include the exemption sought by Berkshire and some other companies. That could change as the debate continues.

The stakes are high. Berkshire has roughly $63 billion tied to derivatives contracts. Putting up collateral would be very expensive.

Buffett tells the World-Herald he's confident any attempt to require collateral on existing contracts would be rejected by the courts as unconstitutional. Still, he'd like to avoid any litigation.

While Buffett says Berkshire doesn't have a position on whether collateral requirements should be placed on future contracts, he does think the government needs to do something about derivatives. "They are dangerous to the system. That's why I have no objections to the idea that regulation is coming on them."

Current Berkshire stock prices:

Berkshire Portfolio

Class B: [BRK.B 77.17 --- UNCH (0) ]

Class A: [BRK.A 115625.0 --- UNCH (0) ]


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ASSOC PRESS: Buffett's animated money lessons to premiere

OMAHA, Neb. — The long-delayed cartoon featuring financial lessons from billionaire Warren Buffett will finally debut this weekend at Berkshire Hathaway's annual meeting and online.

Buffett said he hopes the series will teach kids good financial habits early on, so they won't have to learn the lessons later through expensive experiences.

"I just hope that they become more financially savvy and start thinking about certain principles of saving and learning and that sort of thing at an earlier age than perhaps they would otherwise," Buffett said to The Associated Press Wednesday.

The "Secret Millionaire's Club" cartoon is designed to teach kids about key financial principles such as avoiding debt, supply and demand, and the importance of pursuing your dreams. Some of the messages are similar to the advice Buffett gave the 44 groups of college students he met with over the past school year, but they've been reworked for a younger audience.

"They're fairly simple lessons, but sometimes simple is best," he said.

The series focuses on four kids who find some baseball memorabilia worth millions that they sell to save their community center. Buffett helps the kids manage the money they have left after saving the center.

Buffett said he knows the series won't reach every kid, but he hopes some significant percentage of kids learn from it. The success of the animated project will depend on how well it can entertain and educate at the same time.

"If it's successful, it could be more important than the Berkshire Hathaway annual reports," Buffett said.

Millions of people have already read Buffett's annual reports over the years, but he said the cartoons may have a greater effect if it helps kids form good habits early. Buffett said most of the people who read his shareholder letters already have their financial habits well established.

"If you've got the right habits earlier on, it makes a big difference," Buffett said.

The first airing of "Secret Millionaire's Club" will be before more than 35,000 people at Berkshire's annual meeting on Saturday as part of the humorous movie that opens the event. Then Buffett and Berkshire' Vice Chairman Charlie Munger will spend more than five hours answering questions.

Cartoon creator Andy Heyward has been creating humorous cartoons for Berkshire's annual meetings since the 1980s, and his previous company also made well-known cartoons such as "Inspector Gadget" and "Strawberry Shortcake."

Originally, the cartoon was supposed to be released on DVD in the fall of 2006. But the sale in 2008 of the company that originally developed the series, DIC Entertainment, delayed the release.

Heyward's new company, A Squared Entertainment, is working with AOL to promote the 26 episodes of the "Secret Millionaire's Club" online. Online games and a cell phone application are planned.

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BUSINESSWEEK: Goldman Sachs Champion Buffett Draws on 69-Year Past With Firm

By Andrew Frye

April 29 (Bloomberg) -- Warren Buffett, who called Goldman Sachs Group Inc. an “exceptional institution” when he invested $5 billion in the firm, will have his biggest platform to discuss the bank after it was sued for fraud by regulators and pilloried in Congress.

Buffett, who will host shareholders of his Berkshire Hathaway Inc. at the May 1 annual meeting, was a satisfied Goldman Sachs client when he extended capital and credibility to the firm during the credit crisis in 2008. Buffett has since defended the bank amid public outrage about its pay and conduct, drawing on a relationship that dates to a visit with a Goldman Sachs executive in New York at the age of 10.

“That’s more than 60 years of experience with Goldman Sachs that’s talking,” said Jeff Matthews, author of “Pilgrimage to Warren Buffett’s Omaha” and founder of the hedge fund Ram Partners LP. “Buffett is not going to be turning around selling his Goldman Sachs.”

Buffett said people who feel cheated by the recession have unfairly lashed out at Wall Street when regulators, mortgage lenders and politicians should share the blame.

“They’re going to rewrite Genesis and have Goldman Sachs offering the apple,” Buffett said in a March 1 interview with CNBC.

The billionaire has “great confidence” in his investment, according Berkshire Director Thomas Murphy, who told Bloomberg Television that he spoke with Buffett after the Securities and Exchange Commission sued Goldman Sachs on April 16. Goldman Sachs Chief Executive Officer Lloyd Blankfein said he also spoke privately with Buffett after the lawsuit.

Shareholder Questions

Buffett will take about five hours of shareholder questions at the meeting and, according to Murphy, should expect inquiries about Goldman Sachs, which was accused of misleading clients on the sale of mortgage-related investments. About 35,000 people attended last year’s meeting at Omaha’s Qwest Center arena. Buffett’s comments from the gathering and subsequent press conference are read throughout the world.

Buffett, a critic of Wall Street greed and corruption, has supported a firm that’s been a lightning rod for criticism. Public regard for Goldman Sachs plunged in the year and a half since Buffett, Berkshire’s chairman and chief executive officer, bought preferred securities paying 10 percent interest.

Berkshire makes $500 million a year in interest on the Goldman Sachs perpetual preferred stock, which the bank may call at any time by paying a 10 percent premium. The warrants Buffett negotiated as part of the deal give Berkshire the option to buy $5 billion of common stock for $115 a share. Berkshire’s paper profit on the warrants was about $1.8 billion as of yesterday, down from $3 billion before the SEC lawsuit was announced.

Goldman Shares

Goldman Sachs advanced $3.97, or 2.6 percent, to $157.01 yesterday in New York trading. The bank closed at $184.27 on April 15. Berkshire rose $675 to $115,625.

The transaction is reminiscent of a 1987 deal with Salomon Inc. in which Buffett invested $700 million.

Buffett was named interim chairman of Salomon in 1991 after the firm was accused of misconduct in the Treasury debt auction market, and he worked with regulators to restore the company’s credibility. In testimony to Congress, he summarized his message for Salomon employees:

“Lose money for the firm, and I will be understanding,” Buffett said. “Lose a shred of reputation for the firm, and I will be ruthless.”

Senate Hearing

Goldman Sachs executives endured more than 10 hours of grilling before the Senate’s Permanent Subcommittee on Investigations on April 27 about their duty to clients and the ethics of betting against the housing market as the bank sold mortgage-linked securities. Michigan Democrat Carl Levin said he was “troubled” that the company doesn’t seem to understand conflicts of interest.

Goldman Sachs has said the SEC suit is unfounded.

“What clients or customers are buying is they are buying an exposure,” Blankfein told the committee. “The thing we are selling to them is supposed to give them the risk they want. They are not coming to us to represent what our views are.”

Goldman Sachs posted a record $13.4 billion profit in 2009, a year after receiving $10 billion in a taxpayer bailout. It repaid the funds with interest in June.

Buffett told television interviewer Charlie Rose in November that the bank didn’t need the bailout. As politicians railed about bonuses, Buffett, the world’s third-richest person, praised Blankfein and said, “I don’t mind paying for performance.”

Finding a Target

“You’ve got to expect vilification of banks,” Buffett said in a January interview. “If I lost my job I’d be mad at somebody, I’d probably be mad at everybody. And that’s human nature. And it sometimes gets fanned by people to whom it’s to their advantage to have a target.”

The Goldman Sachs case is the SEC’s first contested lawsuit against a major investment bank in more than a decade, and comes as the regulator seeks to restore a reputation tarnished by its failure to detect Bernard Madoff’s Ponzi scheme.

Buffett, who has ridiculed investment bankers for the size of their fees, relied on Goldman Sachs for some of his biggest deals, including the $4.5 billion acquisition of Marmon Holdings Inc. in 2008 and the $1.45 billion takeover of McLane Co. Those deals were facilitated by Byron Trott, the former Goldman Sachs managing director of whom Buffett said “I trust him completely.”

An Investing Icon

At last year’s meeting, Buffett praised Wells Fargo & Co. and dismissed the importance of government analysts who were reviewing banks in an industrywide stress test. The San Francisco-based bank jumped 44 percent the following week.

“Warren Buffett is certainly an icon in terms of picking the right companies and investing with a long-term strategy,” said Jeff Resnick of Opinion Research Corp., a specialist in brand and reputation consulting. A good reputation “will give you a reservoir of goodwill among your most important stakeholders.”

Berkshire rose to first place this month in Harris Interactive’s annual survey of corporate reputations. Goldman Sachs came in 56th out of 60.

“He’s an important client as well as an investor,” Blankfein said of Buffett in the April 27 Bloomberg Television interview. “I can’t speak for Warren.”

Buffett said last year in Omaha that almost everyone associated with finance, from bankers to regulators to insurers, contributed to the crisis.

“Some of it stemmed from greed, some from stupidity, some from people saying the other guy was doing it,” Buffett said.

--Editors: Dan Kraut, Dan Reichl


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REUTERS: Goldman puts Buffett ethical values in spotlight

(Reuters) - Warren Buffett's reputation as a stickler for good business ethics has put the billionaire in an awkward spot because of an investment in Goldman Sachs Group Inc (

In Sept 2008, at the height of the financial crisis, Berkshire Hathaway Inc (BRKa.N)(BRKb.N) acquired $5 billion of Goldman preferred shares and warrants to purchase an equal amount of common stock. The investment throws off a fat $500 million of dividends a year.

Speaking on CNBC television, Buffett said on March 1 that he would buy the securities again under the same circumstances.

He also praised Goldman chief executive Lloyd Blankfein.

"It's a very, very strong, well-run business," Buffett said. "Goldman Sachs has a very strong market position. Lloyd Blankfein, you cannot find a better manager."

But that was before the U.S. Securities and Exchange Commission's April 16 lawsuit accusing Goldman of civil fraud. Goldman officials told U.S. senators on Tuesday they did not mislead clients.

"Buffett is in a tough spot," said Tim Calkins, a marketing professor at Northwestern University's Kellogg School of Management. "If you really feel something was done wrong and your investment reflects your values, then you have to think about reducing it."

Berkshire declined to comment.

At the company's annual meeting in Omaha, Nebraska on May 1, Buffett will field more than five hours of shareholder questions. Goldman is all but certain to come up.

"Buffett is savvy enough to know the environment can change in two seconds and that he need not make sudden, radical decisions," said Eric Dezenhall, a crisis management expert at Dezenhall Resources Ltd in Washington, D.C.

"I WILL BE RUTHLESS"

Even before the SEC lawsuit, Goldman was among the least admired U.S. companies amid a perception its business practices contributed to the financial crisis and that it is tone-deaf to calls for change, and that it pay bankers and traders less.

In a Harris Interactive Inc (HPOL.O) poll released on April 5, Goldman was the 56th most admired of 60 well-known large U.S. companies. Behind it: Citigroup Inc (C.N), Fannie Mae (FNM.N), American International Group Inc (AIG.N) and Freddie Mac (FRE.N). Ranked first: Berkshire.

"Berkshire Hathaway is a powerhouse because it is associated with some great brands such as Coca-Cola (KO.N), Geico and Procter & Gamble (PG.N)," Calkins said. "The question is, does Goldman fit?"

Buffett has forayed into Wall Street before. In 1987, Berkshire bought $700 million of convertible preferred stock in Salomon Inc. Four years later, Buffett became interim chairman to restore order after a Treasury auction bidding scandal.

On September 4, 1991, Buffett testified before a subcommittee of the House Committee on Energy and Commerce about Salomon. Excerpts got into a movie created by Buffett's daughter Susie and shown to Berkshire shareholders at each annual meeting.

In part, Buffett said the following: "In the end, the spirit about compliance is as important, or more so, than words about compliance.

"I want the right words and I want the full range of internal controls. But I also have asked every Salomon employee to be his or her own compliance officer.

"After they first obey all rules, I then want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper, to be read by their spouses, children and friends, with the reporting done by an informed and critical reporter.

"If they follow this test, they need not fear my other message to them: Lose money for the firm and I will be understanding. Lose a shred of reputation for the firm and I will be ruthless."

(Reporting by Jonathan Stempel; editing by Andre Grenon)


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REUTERS: PREVIEW-At Buffett gala, all that glitters is not Goldman

By Jonathan Stempel

NEW YORK, April 28 (Reuters) - 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 Sept. 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 (BRKa.N) (BRKb.N), a reputation for propriety that persists to this day. A Harris Interactive Inc (HPOL.O) 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 (GS.N) -- 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. 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 (MAT.O) 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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Wednesday, April 28, 2010

CHICAGO TRIBUNE: A smorgasbord of reasons to line up for Warren Buffett speech

CHICAGO CONFIDENTIAL

Many from Chicago's business elite will be at Berkshire Hathaway's annual shareholder meeting in Omaha, Neb., this weekend absorbing Warren Buffett's wisdom.

To name a few: Morningstar CEO Joe Mansueto; Ariel Investments CEO John Rogers; Byron Trott, founder of BDT Capital Partners; The Pampered Chef CEO Marla Gottschalk and founder Doris Christopher, who sold the company to Berkshire in 2002; and John Freund of Citigroup's Chicago office.

Freund executes Buffett's trades: buy this, sell that. They talk frequently, even on holidays, "depending on what markets we're dealing in around the world," Freund said in a rare interview. If he is executing a trade for Buffett in London, they're on the phone at 7 a.m. If it's in Asia, they're on the phone at 9 p.m., a call that often interrupts Buffett's online bridge games.

Freund grew up in St. Louis and moved to Chicago in 1974 to work for Salomon Brothers. Three years later, when Salomon shut down its St. Louis office, where Freund once worked, the Chicago office absorbed the firm's Nebraska-based clients. A friend of Freund's from graduate school at Columbia University, which Buffett also attended, reintroduced the two in the mid-1980s, Freund said.

That's when Freund picked up Buffett's business. And as Buffett's profile has grown, so has his need for secrecy when trading. Salomon is now part of Citigroup, which masks Freund's trading so not even his colleagues can see what The Oracle is buying, information that would run up prices and kill Buffett's chances to further acquire stock at a value.

Freund has brought his wife, Penny, with him to Berkshire Hathaway's annual meeting for 21 out of 22 years. He recalls attendance at his first meeting numbering about 350. This year, it's expected to be 40,000.

"It's like meeting family every year," he said. "We sit in the same area with the same people who save the same seats."

For years, Rogers passed on going to meetings, until Freund, his neighbor, convinced him to make the trip about five years ago.

"As much as I have read everything on Warren Buffett, and all of my career viewed him as sort of my role model and embodying what I think a successful investor is all about, I didn't go to the meetings," Rogers said. "I am now kicking myself I didn't go in the early years."

Rogers adopted Buffett's value investing strategy and named one of Ariel's conference rooms after him. Joining Rogers will be Mellody Hobson, chairman of Ariel's mutual fund board of trustees, as well as investment committee Senior Vice Presidents John Miller, Timothy Fidler and Matthew Sauer and committee Vice President Kenneth Kuhrt.

"I think the No. 1 reason to go is to sit and listen to Warren and (partner) Charlie (Munger) talk about their views on the markets and the economy," Rogers said. "The No. 2 reason is that a core group of investment managers believe in Warren so much, they come to the conference. It's an opportunity to rub shoulders with people I have enormous respect for, find ways to have a drink with them and catch up."

Mansueto also started his career idolizing Buffett and credits him with sparking his interest in securities analysis.

"The single-most profound effect on my business thinking over the past 20 years has been the investment philosophy of Warren Buffett," Mansueto told Inc. magazine in 1999.

At that time, Mansueto had only met Buffett once. He told Inc.: "It wasn't so much a meeting as a brief audience. The day before the big meeting, Buffett held a series of small interviews with select media, of which Morningstar was one. Four of us from Morningstar trooped in together, and we got to spend 15 minutes with Buffett and his partner, Charlie Munger."

Mansueto said he also is bringing a team with him this year, including Pat Dorsey, Morningstar's director of equity research, and Paul Larson, editor of the StockInvestor newsletter.

"As for Warren, I've gotten to know him a little better," Mansueto said this week. "I've talked to him a few times over the past year or so and exchanged letters."

Trott probably wishes Buffett would quit mentioning him in his annual letter to shareholders, as the former Goldman Sachs investment banker eschews media attention more than most.

Known as the only investment banker Buffett likes, Trott previously led Goldman Sachs' Chicago office. He helped Buffett put at least three deals together before earning kudos in an annual letter to shareholders. Trott "understands Berkshire far better than any investment banker with whom we have talked and — it hurts me to say this — earns his fee," Buffett wrote in 2003.

In 2008, Trott helped Buffett with Mars' purchase of the William Wrigley Jr. Co. and his $5 billion injection of capital into Goldman Sachs. Now with BDT, Trott has sought funding from some of the Midwest's wealthiest families and, according to the Financial Times, has raised more than $2 billion in capital as of June 2009. The Financial Times also reported last year that Berkshire Hathaway's investment in BDT is less than $250 million.

Trott declined to comment for this article. However, a BDT spokeswoman confirmed Trott would attend the meeting.

Gottschalk's experiences at the meeting are different from the rest of this group. For one, as CEO of a Berkshire Hathaway subsidiary, she gets a reserved seat and doesn't have to wait in line.

"If not, I wouldn't get a seat," she joked.

And The Pampered Chef booth sells out of kitchenware every year.

"I get there very early before the doors open and see that the booth and products are all set up and ready to go," she said. "We bring a sampling of products, and every year we wish we would have taken more. We can't take the whole warehouse because there's not enough room.''

As for Buffett, Gottschalk said it's true that he takes a hands-off approach to managing Berkshire Hathaway companies.

"But I will tell you he certainly is always available if ever I have anything I want to ask him about," she said.

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The Essays of Warren Buffett: Lessons for Corporate America, Second     EditionThe Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
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The Intelligent Investor: The Definitive Book on Value Investing. A     Book of Practical Counsel (Revised Edition)The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
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