Randomly Noted

One of the most interesting aspects of the 26-page annual missive penned by Berkshire Hathaway Inc. Chairman Warren Buffett was the reproduction of a 1939 letter from his grandfather and the mathematical trajectory one can trace from a homespun lesson on savings to Berkshire’s ability to massively benefit from the recent financial crisis.

In that 1939 letter from Ernest Buffett to one of his sons and the son’s wife, Ernest described the $1000 cash reserve he had built for them. “I hope it never happens to you, but the chances are that some day you will need money, and need it badly, and with this thought in view, I started a fund …” Ernest wrote. Without liquidity, he said, one might have to “sacrifice some of their holdings” when cash was immediately needed.

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A record 40,000 people are expected to show up at Berkshire Hathaway Inc.’s annual “Woodstock for capitalists,” otherwise known as the Berkshire annual meeting.

The unique Omaha event finds Berkshire at a bit of an odd crossroads. It had a strong 2009, a year in which the firm made a big bet on railroads.

But as successful as Warren Buffett and his partner, Charlie Munger, have been as investors for so many years, they also have been about more than just strong returns. They have occupied a moral high ground in an investment world where sticking strictly to the legal minimums is more the norm.

That Berkshire is somehow expected to behave differently than other large investors is probably a bit unfair to Berkshire. Still, there likely were some disappointed fans when it was reported that Berkshire did some lobbying to try to protect its own interests in the financial regulation bill now the center of Senate attention.

To add to this, the lobbying was about derivatives and collateral that needs to be held against derivatives positions.

The fact that Buffett and Berkshire have derivatives positions at all likely surprised some, given Buffett’s vocal condemnation of them.

But clearly Buffett and group saw a trading advantage in derivatives and acted. Lobbying was done to try to prevent the passage of legislation that would put Berkshire at a disadvantage.

So Buffett and Berkshire seem a bit more like everyone else in the investment community, just more successful than most. Nothing wrong with that. That pedestal just gets in the way, anyhow.