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I got back last night from the AM and was too bushed to post. I got up at 4:30 am on Saturday so that a bunch of students and I could rush the stage at 7:00 am to get good seats. Either we're slowing down or the crowd is getting faster…

Anyway, here are my top ten takes from the meeting:

1. On an overall basis, I found Warren and Charlie to be upbeat and voluble. Personally, I don't see how Warren can be so patient and considerate with those questioners who incessantly focus on succession issues, and there were a lot of them. I scarcely worry about the imminent prospects of my own demise, and I wish other shareholder held a common view when it comes to Warren. If the peanut brittle doesn't get him, we'll be fine. BTW, it's the unforeseen risk that gets you. Anticipated risk is taken care of by the intelligent. I believe it is more than fair to assume that Warren, Charlie and the Board have addressed succession in the same intelligent manner that they address other important issues facing Berkshire.

2. Warren is still sensitive to the risk of a derivatives-led meltdown in financial markets. His discussion about LTCM in 1998 and Salomon in 1990—when they were on the verge of bankruptcy filing—was sobering. Both Warren and Charlie continue to believe the potential is there for a big hic-up.

3. Lots of discussion centered on momentum-strategy hedge funds and how their incentive structure led them to swinging for the fences. Warren kindly suggested that few hedge fund managers were worth their fees. Charlie was disdainful.

4. Warren spent a lot of time talking about macroeconomics. It sounded like he'd prepped a speech on the subject of trade deficits, and I'm sure he did. There was only one (unimportant) instance in which I caught him making an incorrect historical reference. I think all of the talk about succession has Warren acting a bit defensively in the sense of causing him to show off a with multitude of historical references replete with obscure facts and figures to back up his well-considered opinions. In this way Warren at the annual meeting reminds me of a very well prepared student committed to perfection on his PhD oral exam. (BTW, he'd earn a “high pass.”)

5. What makes Warren's macroeconomic discussion interesting is that he freely admits that is no way to make investment decisions. BERKSHIRE is, has been, and always will make investment decisions on the basis of sound microeconomic considerations (competitive advantage, economics of scale, barriers to entry, and so on).

6. Warren emphasized the importance of the “opportunity cost” concept. Once an attractive investment opportunity has been identified, that return becomes the hurdle for all other investment opportunities being considered. Once upon a time, Coca-Cola provided that hurdle rate, but Warren did not mention KO as the opportunity cost of present-day investment decisions.

7. Like lots of folks, I had never heard of Iscar Metalworking Cos., the Israeli family-run maker of metal-cutting tools that Berkshire Hathaway agreed to take 80% control for around $4 billion. The company looks very high tech to me, so it will be interesting to see how the “Warren does not understand high-tech” folks spin this one. Top management gave a short speech and showed a brief video concerning the company. Those guys are smooth--very, very smooth. A student of mine spoke with Iscar folks, and said they appeared much more relaxed when speaking Hebrew.

8. Warren and Charlie had very little to say about modern portfolio theory. Of course, everyone expected some caustic comments from Charlie about MPT (“asinine,” he said), and were not disappointed. A well-known author from Wharton got dinged, but that was balanced with Warren's kind comments about others.

9. Warren and Charlie took a shot at the “optimistic” projections contained in mergers and acquisitions documents. The corp fin guys from Wall Street that I was sitting with loudly agreed with Warren's skepticism. Like Warren, they'd like to take bets that such projections would prove overly optimistic.

10. Biggest takeaway: Both Warren and Charlie did their best to downplay the significance of Berkhire's absolutely stunning first-quarter results. I had to shake my head at how unusual such humility is on Wall Street. OTOH, I worry if the average “fool” (including me)is paying attention. The earnings, book value, and economic value of Berkshire has risen very strongly during the past few years whereas the stock price has been stagnant. My gosh, Berkshire's net earnings were $2.3 billion, or $1,501 per share, for the three months ended March 31, compared with last year's $1.4 billion, or $886 per share. Isn't Berkshire a table-pounding buy? What am I missing?

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