Buffett: Bin Laden’s Death Not A Big Market Factor

Berkshire Hathaway (BRK.A) CEO Warren Buffett along with Vice Chairman Charles Munger, Microsoft (MSFT) Chairman Bill Gates and Berkshire Hathaway board member Susan Decker spoke with FBN’s Liz Claman this morning about the weekend’s shareholder meeting, controversy surrounding the departure of Berkshire Hathaway executive David Sokol, the economy and news of Osama Bin Laden’s death. Buffett stated that while “the American people feel wonderful today,” Bin Laden’s death would not be a “big factor in the market” and that “the big factor in insurance will be the number of catastrophes we’ve had this year.” Addressing backlash following the press release announcing Sokol’s departure, Buffett stated “people did not feel that I was expressing a sufficient degree of outrage. I personally thought that I was laying out the good things he’d done for Berkshire.” In addition, Munger added his reaction to the Sokol scandal saying “I saw it instantly as tragedy. It certainly was an error.” Excerpts from the inteview can be found below, courtesy of Fox Business Network.

Buffett on the market reaction to news of Osama Bin Laden’s death:
“I don’t think this is a big market factor. The American people feel wonderful today. In terms of earning power of American businesses or anything, I don’t think that factor will change dramatically because of this. How we feel about the country and what our government has accomplished has changed dramatically.”

Buffett on whether the death of Osama Bin Laden makes our world a safer place:
“It goes in that direction but the world is not a stable place. We will have to be on guard against people who think similarly. This country can never give up being vigilant.”

Buffett on the impact terrorism had on the insurance business:
“There was a lot of worry about it and of course we are in the insurance business and it got reflected in the insurance market. And I give credit to both administrations for the fact that we have gone without an attack for a long long time.”

Buffett seeing a larger impact from natural disasters than terrorism in the insurance business:
“The big factor in insurance will be the number of catastrophes we’ve had this year. The first quarter in 2011 was probably the second worst quarter in the history of the insurance business in terms of natural catastrophes. Japan was huge, New Zealand was very large… and then Australia had floods and cyclones, there’s been a lot of activity…It cost us about $1.7 billion pre-tax in the first quarter. Usually the third quarter is the worst quarter for catastrophes, I hope this is the worst.”

Buffett on the press release announcing David Sokol’s resignation:
“Obviously people did not feel that I was expressing a sufficient degree of outrage. I personally thought that I was laying out the good things he’d done for Berkshire, which were many and substantial. And I pointed out which was a very unusual press release, a number of trades that would prove quite damning. And the day of the release we made a call to the head of the enforcement division of the SEC to report exactly those trades to the SEC. So I thought that I was giving some pretty terrible information out. But I also thought I out to say the things he done for the company. And I think it enraged some people that I said the nice things about him.”

Buffett on why he dodged the media after the Sokol press release:
“Because I didn’t have any new information beyond what had been put in the press release. If I started talking to you I would have talked to 100 reporters and they all wanted something different, and I didn’t have anything different.”

Munger on the press release announcing David Sokol’s resignation:
“It was written one way and then after talking to Dave he changed it and it ended up imperfect. Of course I approved it. If Warren does something dumb I am not going to catch it by and large.”

Susan Decker on the press release announcing David Sokol’s resignation:
“Warren has a high value on putting all the information as he knows it. I think it’s fair to say after the audit committee did its report, if he were to write that press release today it would probably be a little bit different in content and in tone based on what was learned. But he put out what the facts were at the time.”

Bill Gates on the board approval of the Sokol release:
“The board got the press release in advance and we talked about it and we did approve the release and then the audit committee went off to really dig into and get more facts about what had gone on and they put out a report more recently that provided more information about the chronology.”

Gates on Sokol disappointment:
“Absolutely. Dave did a lot of great work for the company and, as Warren said, it was inexplicable that he had make the mistake he made.”

Munger on the David Sokol insider trading scandal:
“I saw it instantly as tragedy. It certainly was an error.”

Gates on Berkshire Hathaway’s compliance rules:
“Berkshire has very good compliance rules and the fact is no compliance rules are going to stop someone from making a mistake. This is a mistake that was picked up, the penalty to Dave in terms of ending his Berkshire career is pretty significant. And there will be an immense effort to dig into that by various groups. So I don’t think anyone has gotten away with anything here. I do think the policies that Warren has always enunciated, not only do we have the letter of the law, but we need to think about how things will be perceived. I think it’s fantastic and we need to make sure that the number of mistakes are kept to a minimum.”

Buffett on including the board in his decisions:
“I call them up just before the fact. I do call them just before the fact. We try to avoid any kind of leakage. They have to approve of it but I am pretty darn sure they will approve of it based on the fact that I do think the deal is attractive. Sometimes I have talked to board members ahead of time before the board meeting that actually approves it.”

Buffett on whether Berkshire would consider spinning off their businesses in order to unlock shareholder value:
“Over time we think more value will be created per share by keeping the companies intact and adding to them. It gives us a flexibility in capital allocation that if we had a See’s Candy all by itself it would be a much less efficient operation in terms of the aggregate wealth that would be created from this group of companies.”

Munger on whether the board of Berkshire would consider spinning off portions of the business to unlock shareholder value:
“That’s a no.”

Buffett on residential housing inventory:
“What I do believe is the inventory is getting worked off, and that the United States will continue to grow and will continue to have more households and 500,000 is not a normal level over time. When it gets back to one million, you will see effects way beyond just construction workers. You’ll see lots of ripple effects.”

Buffett on what would shake the economic recovery:
“I don’t think it will get shaken. I think events in Europe are very unpredictable. This recovery, although it’s relatively slow, it came off an incredible shock, but it’s been quite steady. When residential housing will come back and it will, we have to work off an inventory.”

Buffett on Greece:
“We are not better off than a year ago in terms of the European sovereign debt situation. The problem of what you do with 17 countries tied to a common monetary until incapable of issuing their own debt in their own currency we don’t know the answer to that one yet.”

Munger on Greece and the debt crisis in Europe:
“It’s just so extreme. Whether the rest of Europe wants to allow countries that don’t want to work and don’t want to suffer and don’t want to pay taxes to be in a monetary union with them so in effect that country has a credit card which it can draw on the others it’s serious. I think the European Union is grossly underestimated the problem it has. I suspect the euro will survive but there may be fewer members.”

Buffett on the 2012 elections:
“I do think the economy has made progress within the last year. I think we have some very important problems. One thing that’s kind of interesting in terms of the deficit problem, both sides agree on it, they may not agree on a solution, but they both put it at the top of the list. So at least you have a common recognition that something has to be done and now they are going to argue about what does get done. I think the economy is going to continue to make progress just as I thought a year ago and if it doesn’t make enough progress each party will be blaming the other.”

Buffett on whether he still supports President Obama:
“I am supportive of the president.”

Gates on President Obama:
“I think he’s done a lot of great things. This fiscal problem is gigantic and it’s not easy to solve because medical costs continue go up and as long as you are going to have an open check book on that, you either have to raise more revenue or cut other spending. So there’s a lot of things you can be concerned about as they talk about these tradeoffs but at least it’s on the agenda. That’s real progress.”

Buffett on Rep. Ryan’s proposed budget:
“I looked at that, but I really think Alan Simpson and Erskine Bowles have done a terrific job, a heroic job. 11 out of 18 voted for it and people crossed party lines. It was a very serious effort by people that gave a lot of themselves to do it. And I think it’s a very good starting point. Changes are going to be made. Nobody is going to be happy with the final result, but the American public will be very happy if something is done about the deficit.”

Gates on healthcare reform costs:
“The medical costs are where you’ve got the biggest conundrum. There will be lots of ways to spend money on people at every age. And should the government be funding all of that, should it have any limitations there, if not, you need more revenue or you need to make massive cuts in other activities.”

Munger on whether we should have extended the Bush tax cuts:
“No. I would argue we could stand a little higher taxes on people like me.”

Gates on whether we should have extended the Bush tax cuts:
“I pay higher taxes than anyone and I am happy to pay more.”

Buffett on healthcare costs:
“We made promises to people in terms of their future medical expenses that can’t be kept if we still have the current medical system. The question is what’s going to get done about that and to some extent you want people to move away from trying to shift the blame for that to the other party, to work on constructive solutions themselves. But that problem will not go away by itself.”

Warren Buffett on whether if high gas prices will derail the American recovery:
“It will not derail the comeback of the economy but it is a decided negative.”

Susan Decker on whether Yahoo (YHOO) should have teamed up with Microsoft:
“Yes absolutely. I think it was a mistake that the merger was not effected for Yahoo shareholders.”

Bill Gates on the strategic partnership between Yahoo should have teamed up with Microsoft:
“The companies are doing a lot together. Google is a tough competitor so combining some of the strengths of Yahoo and Microsoft clearly made sense; whether that was done through a merger or a key business deal where it ended up that gives that partnership a chance of competing with Google and making sure they don’t get too lazy.”

Gates on whether he advises Buffett to buy technology companies:
“I think he is very wise in sticking to businesses that have a more predictable future.”

Buffett on whether the world should move towards using nuclear energy:
“The world should go more toward nuclear. As a practical matter this dramatic event will slow down the development in nuclear power.”

Bill Gates on his involvement with TerraPower which is making a safer nuclear reactor:
“If things go well in the next 10 years there will be a pilot plant built to show that the safety and economics of that new nuclear design can be a lot better.”

Buffett on where Berkshire will invest in the future:
“We need sizeable acquisitions and we hope we get calls from around the world but we get more calls from the us.”

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