Warren Buffett picked Bill Gates up at Eppley Airfield one day last week and drove his longtime friend to the Hollywood Diner on Abbott Drive, where the two spent a couple of hours before Gates returned to his plane and departed.
The occasion was partly a midafternoon photo shoot for Fortune magazine, according to diner owner Larry Richling, but the two also ate lunch, with Buffett ordering a chicken fried steak sandwich with extra gravy and Gates a cheeseburger.
Among the topics they talked about was the May 1 shareholders meeting for Berkshire Hathaway Inc., of which Buffett is chairman and CEO and Gates is a director.
In a recent YouTube video, Gates said he would stay on the board of Berkshire forever because of his admiration for Buffett, calling him “a unique leader. I can't think of anyone close.”
Other great CEOs have led their companies successfully, Gates said, “but in terms of breadth and thoughts about business itself and how it helps society, how it should be done, Warren is singular in my view. ”
On a personal level, Gates said, he has learned from Buffett as well.
“There's a philosophy of life, of embracing people, having fun at what you do, doing it with some humor, that I'll always strive to do those things nearly as well as Warren does.”
As for Berkshire after Buffett, Gates said: “No one will be as good as Warren Buffett. ... But this is an unbelievable franchise. Its economic value will continue to go up. Warren calls it his painting, and he's done it in a way that it's based on principles that will endure.”
Gates works full time for the Bill & Melinda Gates Foundation and limits his business involvement to Berkshire.
He said he would remain a Berkshire director “for as long as I'm around. If I'm wanted, I will do that. It's not that he's asked me to stay forever. But I will view that as my top business priority.”
Going to Batt
Buffett's purchase of the Burlington Northern Santa Fe Corp. was lampooned Saturday evening by the Omaha Press Club in a number featuring not Buffett but Bob Batt, an executive with Berkshire's Nebraska Furniture Mart subsidiary.
To the tune of “I've Been Workin' on the Railroad,” Batt's lyrics:
Warren purchased his own railroad
Called BNSF.
Berkshire boxcars made of gold
While silver whistles make you deaf.
Platinum rails and ruby cross-ties,
Diamonds on the wheels
Warren's working on the railroad
And sealed the sweetest deal.
A chorus followed:
Buffett won't you blow,
Buffett won't you blow,
Buffett won't you blow some cash?
Buffett won't you blow,
Buffett won't you blow,
Buffett won't you blow cash?
Nobody's in bed with U.P.,
Nobody that I know, oh, oh, oh.
Nobody's in bed with U.P.
Now that Warren has his own railroad.
Some folks in Omaha still wish that if Buffett had wanted to buy a railroad, he would have picked Omaha-based Union Pacific Corp., the “U.P.” in the song.
Buffett has said that Burlington Northern offered some operating advantages but that both of the huge Western U.S. railroads will do well in the future. To avoid any chance of conflict of interest, Berkshire sold its shares of Union Pacific and other railroads.
Smart move
Buffett, or at least a cartoon of him, could show up on your smart phone, or at least on your kids' smart phone.
Marketwire reported that Getfugu Inc. of Los Angeles is developing as its first project an application with A2 Entertainment's “Secret Millionaire's Club,” which features Buffett as a cartoon character explaining business to children.
A2 Entertainment co-founder and CEO Andy Heyward said the application will extend the identity of the program and is “the most innovative work we've ever seen on mobile phones.”
Getfugu President Carl Freer said A2's content for children “brings new definition to the children's entertainment market.”
Marketwire said 22 percent of children ages 6 to 9 own mobile phones, 60 percent of children ages 10 to 14 have cell phones, and 84 percent of children ages 15 to 18 own the phones.
Educare center
Buffett's daughter, Susan, is close to an agreement on opening a $12 million early childhood education center in the Parkside neighborhood of Washington, D.C., the Washington Post reported.
The Buffett Early Childhood Fund would combine with the J.B. and M.K. Pritzker Family Foundation to finance the new Educare center, which would serve 175 children at a new site near an elementary school. Head Start and other state and federal child care programs would provide most of the $3.3 million annual operating budget, the Post reported.
Construction could begin this summer. The district's governing council is to consider a land lease for the site next month.
“It's one of these situations where there are a lot of winners,” said Vincent C. Gray, chairman of the governing council. “This adds to our arsenal of tools we have available to influence these children.”
About 2,000 children in the district lack access to such programs, and demand is increasing.
The new center would be one of 10 funded by the Buffett fund, including facilities in Omaha, Chicago, Milwaukee and Denver.
Coca-Cola
Malaysians are excited that Coca-Cola, a long-held Berkshire investment, plans a new bottling factory there, reportedly Coke's first investment in that country since the brand appeared there in 1936.
On the Malaysian Web site The Edge, commentator Thomas Soon noted that Buffett once called Coca-Cola the ultimate American brand. Some observers are viewing Coke's decision as a signal that the U.S. government is warming to the administration of Malaysian Prime Minister Datuk Seri Najib Razak.
The country desperately needs foreign investment and has an unsustainable deficit, Soon wrote. Malaysia is trying to transform itself into a new economic model, he said.
“Even Najib being pictured taking a sip of the iconic drink spoke a thousand words,” Soon wrote.
But the reality may be that Coke decided to bottle its own beverages to break away from the Fraser & Neave Ltd. food distribution company.
Is it a coincidence that the first PGA Tour event in Southeast Asia, the CIMB Asia Pacific Classic, will be played Oct. 28-31 at the Mines Resort & Golf Club in Malaysia? And will Tiger Woods compete there?
IOUs
Commentators are making points by noting that bonds sold by Berkshire are several basis points cheaper than U.S. Treasury bonds.
We're talking hundredths of a percentage point known as basis points in financial parlance but the implications could be large, the observers said.
Bonds are essentially IOUs promising to repay money within a certain time and at a certain percentage rate of return. Interest rates on bonds are followed closely because they tend to reflect how investors view the risks that the companies issuing the bonds will default.
Investors demand high interest rates if they think a company might default but accept lower rates if they think a default is unlikely. Other factors enter into the interest rates, too, such as the overall direction of the economy.
A two-year U.S. Treasury note sold in February at 1.099 percent per year, a low rate compared with past history. At the same time, a two-year Berkshire note sold for 1.021 percent, a spread of nearly 8 basis points.
“It suggests that the bond market likes Buffett more than the Treasury,” MSN.com said. “Or, to put it in more dire terms, the bond market sees a Treasury default more likely than a Buffett default.”
But MSN.com said the low Treasury rates are a sign that nobody foresees a default.
“It's more a recognition of the ungodly amounts of debt the Treasury has issued $2.9 trillion since 2009 to pay for stimulus programs, the troops in Afghanistan and Iraq, national parks, highway construction and the like.”
For Berkshire and other corporations issuing bonds, such as Procter & Gamble and Johnson & Johnson, the below-Treasury rates also mean there's little risk of default. And because many companies are paying down their debts, bond-loving investors are willing to accept lower rates.
‘Possible synergies'
Bloomberg News reported that Berkshire and other investors want South Korean steel maker Posco to look carefully at its bid to acquire Daewoo Shipbuilding & Marine Engineering Co.
Choi Doo Jin, a Posco spokesman, said Berkshire, which owns 4.5 percent of Posco, and the other investors “have expressed concerns that the shipbuilding industry may go through a prolonged downturn. ... We will thoroughly review possible synergies once the shipbuilder is put up for sale.”
Posco CEO Chung Joon Yang said in January that Posco would consider bidding for Daewoo Shipbuilding, the world's third-biggest shipbuilder. Posco also plans a $30 billion expansion of its steel operations, including new plants in India and Indonesia.
Contact the writer:
444-1080, steve.jordon@owh.com
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