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Buffett sees no bank crisis
Europe’s sovereign debt issues greater
OMAHA, Neb. | Berkshire Hathaway CEO Warren Buffett says the sovereign debt issues in Europe pose a greater threat to investors and the world economy than to the health of U.S. banks, to which he said poses only a slight risk.
“My personal view is the chances of a banking crisis of any sort in the United States is very low,” he said, adding that European banks could have problems if those nations are unable to resolve their debt problems.
At the Sunday news conference that concludes Berkshire Hathaway’s annual shareholder events, the company’s vice chairman was even more critical of the European Union’s debt-ridden members.
Charlie Munger compared the situation in Europe to a business partnership with six productive partners who decide to add a seventh partner who then wants to do nothing but sit around, get drunk and live off the other six. It’s a question of how long the six will tolerate the seventh.
He said most of the measures taken so far to avert government bankruptcies and debt defaults in Greece, Ireland and Portugal have been inadequate.
“I think people are still thinking they can stop this elephant with a little bigger peashooter,” Mr. Munger said.
The two men also endorsed investment in the world’s emerging markets, with Mr. Buffett saying Berkshire would be crazy not to look for investment opportunities in a country with the economy or population of India.
“It’s of enormous interest to us as a market,” he said.
However, Mr. Munger cautioned that India seems to have adopted more of the Western world’s vices than its virtues. He said India’s bloated bureaucracy and widespread bribery are slowing the country’s economic growth.
“That is a country with a lot of dysfunction in it,” Mr. Munger said.
On Berkshire’s future, Mr. Buffett refuses to name the internal chief executive candidates Berkshire’s board will choose from after his death. But Mr. Buffett, 80, talked a bit during this weekend’s annual shareholder events about the qualities he thinks his successor will have. Mr. Munger is 87.
He says his successor will be an ethical leader who can act like an interested shareholder for Berkshire’s roughly 80 different subsidiaries, but needn’t himself know how to run the insurance, utility, railroad and other businesses it owns.
Berkshire is highly decentralized with just 21 employees in Omaha to oversee the company. Mr. Buffett told shareholders that he and Mr. Munger “delegate almost to the point of abdication” and let the managers of Berkshire’s subsidiaries run their businesses.
Mr. Buffett’s successor may not attract a crowd of roughly 40,000 to annual meetings like he did this weekend, but Mr. Buffett said he’s sure the Omaha firm will be in good hands.
The Berkshire managers who are thought to be possible chief executive successors are Ajit Jain, who runs Berkshire’s reinsurance division; Greg Abel, president and CEO of MidAmerican; Tony Nicely, chief executive of Geico; and Burlington Northern Santa Fe CEO Matt Rose.
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