Warren Buffett faithful ready for big Weekend in Omaha

A big thanks to those of you who contacted me over a doco to be made of Warren Buffett by the BBC around Berkshire Hathaway shareholders and the Berkshire 2009 Annual Meeting in Omaha Nebraska that kicks off this weekend.

I have had many replies, and none more so than the following one encapsulates the deep feeling and respect this great investor and thoroughly interesting man seems to capture from his many millions of followers, including myself:

"I understand you are looking for Berkshire shareholders. I have been a Berkshire shareholder since 2001.

I can say with some confidence that Warren Buffett and Charlie Munger are more important in my life than God! I am a university graduate and a Chartered Accountant. I have worked in businesses for over 25 years but any knowledge I have acquired from these experiences is like a pebble in ocean in comparison to what I have learned from Warren and Charlie.

If you study Berkshire and the people behind it you are tapping into a rich reservoir of knowledge and wisdom that has proved incredibly useful in the real world of business over a long period of time. The Berkshire values are very old fashioned and very simple. It is about taking the long term view, common sense, humility, rationality, hard work and prudence.

Much of what goes on in the world of business and politics looks absurd and grotesque when viewed through the Warren Buffett lens. Why are people so loyal to Warren Buffett and Berkshire? It is just pure Disney. Failing textile mill, Berkshire Hathaway, taken over by young investor Warren Buffett. Investment is a terrible mistake. Buffett uses the company as his investment vehicle choosing not to take a management fee from his fellow shareholders. Over time the company evolves into one of the largest and most respected companies in the world. Warren Buffett turns out to be the greatest investor ever and becomes the richest man on the planet. In the end it’s not about the money and Warren gives the bulk of his fortune to the children of Africa. Who would not want to be part of this?

Good luck with your documentary. It will be easy to make the shareholders look like crazy America cult members. I know the BBC will go deeper than that." Gareth, Northern Ireland.

What Buffett has to say this weekend will be covered by media from around the world and more than 35,000 people will be attending in person to get his pearls of investing wisdom sieved through a down home style of old fashioned hokiness and a wonderful sense of black humour.

The world will be watching closely for some explanation of his frenzied buying activities over the last year and also his view of economic conditions over the following 12 months and of course the years to come.

I will be watching closely and you can keep up to date on what is more commonly known as the "Woodstock for Berkshire Hathaway Shareholders" at Everything Warren Buffett.

Until then I highly recommend reading his 2008 Annual letter to Berkshire Hathaway Shareholders published in February of this year. It will change your way of thinking about investing .

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Recommended Amazon Reading

Pilgrimage to Warren Buffett's Omaha: A Hedge Fund Manager's Dispatches from Inside the Berkshire Hathaway Annual Meeting by Jeff Matthews
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c Share Investor 2009

Kirin bid for Lion Nathan undervalues brewer

So Kirin is making an offer for the rest of Lion Nathan Ltd PDF [LNN.NZ] that they don't already own. They are offering A $12.22 per share therefore valuing the company at about $A6.5 billion.

The LNN board is recommending the offer but are shareholders getting a fair deal?

Lets do a comparison of the recent buyout last year of Anheuser Busch by InBev. In that deal InBev bought its target for close to US $50 billion with valued the company at approx 15X EBITDA according to website Blogging Stocks.

The Kirin/Lion deal values Lion at 12.5 X EBITDA according to Michael Feller from the Business Spectator

"The price Kirin is offering effectively values Lion at $6.5 billion on an equity basis and $8.2 billion on enterprise value, as well as an FY09 consensus forecast EBITDA multiple around 12.5 times".

The EBITDA comparison then between the two deals shows an enormous gap in the prices paid for the two targets, with Kirin shelling out 20% less to take control of Lion than what InBev paid for Anheuser Busch last year.

If a comparable 15 X EBITDA figure was offered by Kirin then the per share price should be closer to $14.66 per share.

Figures aside the iconic status of both target brewers is very strong and there should be a premium for that.

Also the tough economic times we are currently facing show fully the benefits and therefore the value of having brewing assets-they do well during booms and better in recessions!

The long-term benefits of good brands must also be accounted for in this takeover price.

Clearly then, Lion shareholders are being seriously under represented by Lion Nathan management as they have agreed the price to be paid is sufficient and another higher offer must be made for control of the company.

Lets hope the independent report into the offer turns out to be a definite no at the current Kirin offer price.

Shareholders should reject the bid.


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c Share Investor 2009

Cullen bows out leaving a bloody mess behind

One of New Zealand's most destructive politicians in our history has his final day in Parliament today.

Michael Cullen presided over an economic boom which had its genesis in the 1980s and had not been seen for generations. He then taxed and spent the economy into such a hemorrhaging economic state it will take another generation to get back to real economic growth.

His legacy is a massive crumbling State service, bloated with civil servants with nothing constructive to do and as a result middle income families with high debt taxed to the hilt to pay for the whole thing!

A venal, nasty, arrogant incompetent evil socialist prick who never had a real job in his whole life - is there any other kind of socialist?

The post office is the perfect place for him to go.

I should have tripped him when I had the chance. 

c Political Animal 2009

Bank Guarantees: The Return of Bryce

I mentioned to one of my email correspondents that I would return in a few months to see my bank manager, "Bryce" at the ASB Bank in Albany after having seen him first late one Thursday at the end of February to re-negotiate the terms of our rather large mortgage.

I did, sort of.

This time Bryce was unwilling to see me after my hard workday so we discussed the matter over the mobile.

I would have preferred to see him in person but he insisted I couldn't.

I pointed out to him, again, that the New Zealand taxpayer was guaranteeing banks in New Zealand so they could borrow cheaper money from abroad to lend to us.

Bryce pointed out to me that it wasn't the taxpayer that was going guarantor,it was in fact the Government.

After pointing Bryce to the error of his ways over the fact that Government and the taxpayer were one and the same (Bryce still doesn't think they are) I thought out loud that wasn't it funny that as a borrower from his bank, the ASB, that I was now a guarantor for my loan but also as a taxpayer I was going guarantor for his bank to borrow the same money to lend back to me.

This seem to confuse Bryce but it was very clear to me.

I added what I said at our Thursday evening meeting in February, that we are clearly living in exceptional economic times, something Bryce agreed with during the mere half dozen times I repeated that same mantra.

Bryce said I would be breaking my contract with the bank if we re-negotiated without an outrageous bank fee and I agreed with Bryce at that stage but had to point out that the terms of our contract had clearly changed because I was now going guarantor for both his and my borrowing, hence making it cheaper for Goldstein and his fat American buddy to borrow money in the first place.

We both became dizzy as I reiterate the above several times (I don't let go once I sink my teeth in) to no effect at all.

The bank will not negotiate at all, that is all he had to say from the get-go

Before we both left the conversation, Bryce pointed out that the bank had been around for 100 and something years and was "very safe" immaterial of any taxpayer/Government guarantees and then I asked him why then did the bank sign up to the guarantee and he kindly pointed out because that is what the other banks were doing and it wouldn't "be fair" to the ASB if they didn't join the party.

Fair... mmm, yes but, why?...

A asked whether the bank had these sort of guarantees during the 1930s, he didn't know, I left none the wiser and Bryce left probably wishing he hadn't returned my call.

I don't think Bryce is going to take another call from me.

I will however have another go in a few more months.



More Banking Madness @ Shareinvestor

Westpac: I'm Thinking of Returning

ASB Bank: Customer "Service"

Bryce the Banker: The Final Insult
Banks not participating in Recession
Bank Guarantees: Time for banks to return the favour
The Return of Bryce
Banking Madness!

Discuss this topic @ Share Investor Forum

c Share Investor 2009