The 13-minute “60 Minutes” segment on Howard Buffett (Hint to CBS – don’t have more than one ad per online video, it is absolutely irritating):

60 Minutes “Overtime”: Growing up Buffett

60 Minutes: Why Howard?

Video: Breakout Blog’s 4-minute discussion of Howard Buffett.

From the “interesting but not to the point” series, Howard has some interesting things to say about plowing:

Berkshire’s isn’t the only board he’s in: count Coca-Cola Enterprises (the bottler) ConAgra and Archer Daniels Midland as very important companies he’s been in the boards of. He is an accomplished philanthropist as well.

The first task is clarifying what this means: it’s not necessarily a sign of his pessimism regarding the US or Global economy, it’s not necessarily an admission that he can’t find any acquisitions worth doing – neither private nor listed – despite a down market, and it’s not necessarily a sign of an impending retirement. It can mean all those things simultaneously, but the only logical conclusion that can be reached given what we know is this:

Buffett thinks that Berkshire’s valuation is approaching (or at) levels at which it’s a better use of part of Berkshire’s cash to buy back its own shares, compared to immediately available options that fit Berkshire’s rigorous criteria. These conditions may have changed today (and the 8% share price increase certainly affects this program), may change tomorrow or in 10 years from now, and in the meantime he’s still setting aside at the very least US$ 20 billion to invest in other opportunities should they come up (he’s just invested US$ 5 billion in Bank of America preferred shares and warrants and had bid for Transatlantic). And let’s not forget that Berkshire generates over US$ 10 billion in cash per year. Buffett himself has made it quite clear in the past, not only by writing about it but also by never once repurchasing shares (so far), that repurchases are supposed to be a rare event. Maybe its time has come, maybe not.

Another point: we had posted a few days ago about Alice Schroeder’s opinion on the hiring of Ted Weschler as portfolio co-manager. In this video interview today, also embedded below, she argues that this may be yet another step towards de-emphasizing Buffett’s role at Berkshire: with less cash to manage, the “Buffett premium” ceases to be as important, or so the theory goes. We’d rather wait before reaching this or any other conclusion.

Alice Schroeder interviewed for CNBC.com (do yourselves a favor and jump to 5:00 or so: the guy before Ms. Schroeder doesn’t know what he’s talking about):

LINKS:

- Reuters

- Value Line

- Wall Street Journal (video below):

Now for the meat of this post, a one-hour video (also embedded below) with Buffett and Ajit Jain, who emerged from the Dave Sokol affair as a very likely “candidate” for Buffett’s succession – and we say “candidate” because Mr. Jain has already said he didn’t really want the job… Also a great opportunity to reveal new Blogroll inductee ValueWalk.com!

Jacob Wolinsky et. al.’s excellent blog ValueWalk.com is a superb source for all things value investing, and we finally get to list it in our Blogroll.

The video itself was shot in India during Buffett’s recent visit. (1:01:30)

For background on the Dave Sokol affair – and why it could even be considered a net positive for those who already considered Buffett “human” as opposed to infallible – read our previous post on the subject. Finally, when reading the stories or watching the videos always remember to keep an open eye to the writer’s biases, experiences, leanings and incentives – as well as to your own, of course. Also keep in mind the relevant subjects discussed in the meeting that just weren’t given enough media because of the Sokol affair, such as the insurance cycle and Q1 2011 as one of the worst quarters in history for the insurance industry…

Bloomberg has a great video with Charlie Munger (as usual). We transcribe a very relevant highlight just below the video.

This highlight from the above video applies to a lot more than just the Sokol affair: “How often do we have an issue like this, once every 25 years?But it’s the nature of good enterprises that they know how to accept change – even sudden, unexpected change – and go on quite creditably, and that’s what will happen at Berkshire.” (…) “I would say that the Berkshire system, which has worked very well for 50 years – maybe we had a couple of near scandals, one every 25 years (note: Salomon and Sokol) - I think we had a good record. I don’t think human nature allows you to get a record much better than that. Our system for doing that is selecting very trustworthy people and trust them immensely. That’s worked very well for us. And people become more and more trustworthy when they’ve been trusted and successful and then trusted more and are successful and so on. It’s the most efficient form of organization you can probably have – it’s a seamless web of deserved trust. And that’s what we’re trying to do, and why would we change it?”

The Financial Times’ Dan McCrum had a pair of interesting stories. The larger one is a comprehensive account of the meeting’s Q&A session, but the second one is interesting in giving voice to shareholders’ impressions about Berkshire, Buffett, his handling of the Sokol affair and so on. One of the shareholders confesses to attending the meeting as a networking event, which it truly is – in fact, it’s hard to find another place where 40,000 value investors gather for 3 days of festivities…

This very good piece by the Wall Street Journal’s Deal Journal blog interviews some fund managers and financial commentators about their opinion of the meeting. The very fact that 100% of them were satisfied with the handling of the Sokol affair – as were we – can mean two things: either we’re all biased or they really did nail it. Probably both.

The NYT’s Dealbook by Andrew Ross Sorkin – who is one of the three journalists who select questions for the meeting – published a more Sokol-focused account, which is also useful to show that the legal battle, unfortunately, is only just beginning. They also published the full statement by Sokol’s lawyer issued after the meeting.

This very quick CNBC story, almost immediately after the meeting, says that Buffett mentioned currently looking at two deals potentially as big as Lubrizol. Also says that he would have liked Johnson & Johnson’s acquisition of Synthes if they had used cash instead of shares – absolutely right.

Video: After the meeting, a quick chat with Becky Quik of CNBC. Good questions, good answers (4:45). The next video, while longer, focuses on a lot more and serves as a kind of “meeting summary”.

This is the must-watch video. Over 13 minutes long, and the Sokol affair is just the beginning – much more discussed here. Who said CNBC isn’t of use? Check out this page for more Berkshire-related videos.

http://blogs.wsj.com/deals/2011/04/30/live-blog-the-berkshire-hathaway-annual-meeting/

Now that the “hype” is unprecedented in terms of a Berkshire “conflict”, and that the noise levels are bound to get even higher, it’s important to try and separate what’s relevant.

Separating signal and noise: Buffett is at fault for not asking the right questions at the right time, and for allowing controls to be too loose – but that’s it. The ethical fault is entirely Sokol’s. Remember the “seamless web of deserved trust” image Buffett once used? The keyword in that sentence is “deserved“, and Mr. Buffett apparently trusted one person too much. The whole hysteria surrounding Buffett – we’ve even read calls for his resignation – seems like another instance of the ages-old issue of “the more successful you are, the bigger the target”.

We can’t quantify the amount of “reputation” lost with this whole episode, which is sure to drag on for much longer (the ball is now on Dave Sokol’s court). By the way, by “reputation” we mean Buffett’s reputation as a manager and as an astute judge of character, because – we insist – there was no ethical line crossed by Buffett in this episode. So apart from the “reputational risk”, Berkshire’s business model remains intact and the Warren Buffett + Charlie Munger duo remains the best pairing in global business available for US$ 100,000 apiece per year – by a long shot. Last but not least, Mr. Buffett remains extremely well aligned with minority shareholders.

The net effect of all this mess may have been positive for Bekshire: 1) It has probably made the company’s Board, Mr. Buffett and Mr. Munger smarter/ readier; 2) It has cleared an “ethically challenged” person from the succession slate.

Here are the three summary points of the Audit Committee:

1) “His purchases of Lubrizol shares while serving as a representative of Berkshire Hathaway in connection with a possible business combination with Lubrizol violated company policies, including Berkshire Hathaway’s Code of Business Conduct and Ethics and its Insider Trading Policies and Procedures.

2) His misleadingly incomplete disclosures to Berkshire Hathaway senior management concerning those purchases violated the duty of candor he owed the Company.

3) These events should serve as an opportunity to reinforce to all officers, directors and employees of Berkshire Hathaway and its subsidiaries the importance of adhering to those policies and avoiding conduct that comes close to, or strays over, the line of propriety. To that end, we authorize Warren Buffett to release this report.”

The report itself:

Berkshire Hathaway audit report

Read the other Buysiders posts on the Dave Sokol/ Lubrizol/ Berkshire mess:

Updates: Carl Icahn and Dave Sokol – April 25th. Stanford 11-page article that was, up to that time, the best account of this story.

Update on Sokol – April 5th. Series of short updates and links, including a video.

Dave Sokol resigns from Berkshire – March 31st. The original post, the same day the news first broke.

“(…) Buffett undoubtedly told Lubrizol that he would refuse to participate in an auction. And here is where you see Buffett’s cleverness at work. He puts his targets in a dilemma that really only has one answer:  take the price that looks very good or let Buffett walk away. Buffett’s real genius is a mix of these tactics and his ability to identify undervalued companies combined with the courage to act quickly on his analysis. That mix has been a recipe for big profits for Berkshire.”

The last paragraph, albeit unfair and simplistic, quite honestly still sounded like music to our ears.

“So this is how the Oracle works. He pays a fair price. He refuses to permit his bid to be shopped. He makes his bid very attractive to management, which discourages them from suggesting alternative transactions. He allows a reasonably fair post-signing opportunity for a topping bid—keeping a leg up against other bidders and, in this case, a fat $200 million breakup fee if he gets topped. And, if he is true to form, he gets a bargain.”

Bonus: one of our readers has sent us a very useful transcript of Buffett’s June 2010 testimony at a Congressional Hearing about the 2008 financial crisis. They sought Mr. Buffett’s opinions and recommendations about the crisis’ causes, amplification factors, the role of different agents and so on. We thank him for, once again, sending us great stuff. You can do it, too. We’ve embedded both the PDF and the video here.

The transcript PDF by Santangel’s Review:

Transcript of Warren Buffett Interview With FCIC

Warren Buffett’s testimony at the FCIC hearing on Credit Rating agencies (2 hours and 17 minutes). Get the rest of the hearings here.