Berkshire Hathaway 2009 Annual Meeting Audience Question # 44

You can hedge a major currency

Warren Buffett:

Area 10?

Audience Member:

Gentlemen, Patrick O’Donoghue from Cork in Ireland. So I suppose I should start by saying I’m sorry you’ve had such a tough time in my otherwise wonderful little country.

Warren Buffett:

I love the Irish. We’ve got some… we’ve had great luck with the Irish. It was my mistake.

Audience Member:

OK. Now, I’d like to grow my investment in Berkshire Hathaway. And I think we’ve established it’s a wonderful company.

So I’m left with a couple of other issues, which, for a foreigner, are maybe a little different for people domestically, the first of which is that any gains in Berkshire Hathaway may be wiped out by a slide in the dollar versus the euro. And we’re talking a long-term investment here, obviously.

The second is, perhaps you could discuss the… your… global acquisitions, which will reduce your dollar dependence and increase your foreign-source income.

I’ve lost the third. If you could discuss those, please.

Warren Buffett:

Sure, yeah, and if it comes to you, that’ll be fine.

The… predicting the euro versus the dollar, I’m no good at. You…

Charlie Munger:

You did pretty well.

Warren Buffett:

Yeah, we did make a couple billion. But the…

You could, if you wished… I’m not suggesting this at all… but euro/dollar is an easy thing to hedge. I’m not recommending that. I’m just telling you that that is an option, if you’re worried about a major currency. It’s hard to do with smaller-country currencies.

But when you’re talking the euro/dollar thing, you can keep hedging that, if you want to.

But like I say, we don’t normally do that sort of thing. And that could be a pain in the neck to you.

I would say, in terms of Berkshire’s earnings, we will just keep doing things that make… we think make sense. Now, if we own…

We own over 8 percent, for example, of Coca-Cola. Coca-Cola, you know, makes 80 percent or more of its money outside the United States.

We own a lot of Procter & Gamble. They make a lot of their money out of the United States. Kraft makes a lot of money out of the United States.

So we have a lot of indirect sources of earnings. And then we have a lot of direct sources of earnings outside the United States.

ISCAR makes most of its money… it makes money in the United States, but it makes a lot of money elsewhere. And we have other businesses like that.

We do not have a predetermined goal at all of developing X percent of our earnings here or there or that place. We just keep, you know, every day, we go to work.

And we don’t know whether the phone call will come from Israel or from Indiana, in terms of a chance to invest some money.

We want all of our subsidiaries to be looking at opportunities everyplace. And some of them will find them abroad. And some of them won’t. So it… we are not a… we are not heading anyplace, in terms of sources of earnings.

There are a lot of countries we feel comfortable with. And we would be happy to put money into those countries.

But we don’t wake up in the morning saying that we would like to have more money in Germany or Spain or whatever, or that we would want to take money out of those countries.

And Charlie, have any more?

Charlie Munger:

Yeah. People look at a modern, liberal democracy. And it’s very easy to conclude that it’s messy and full of defects. And I think that’s a correct view.

But it’s not at all clear to me that the messy defects that we have are worse than the messy defects of Europe.

I am an agnostic about these things. I think there’s plenty wrong and plenty right on both sides of the Atlantic.

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