The Key Takeaways From The Annual Berkshire Hathaway Meeting, Plus The Unemployment Rate Drops
Morning Brew’s jokes are always corny — but with the amount of news coming out of Omaha this weekend, the content is too. Here’s your Brew for May 8th.
QUOTE OF THE DAY
“I don’t think we mind killing chickens. And I think we are against nuclear war” — Charlie Munger, vice chairman of Berkshire Hathaway, answering a question about sustainable food production at the company’s annual meeting this weekend.
- The S&P and Nasdaq closed at record highs Friday after a mostly-positive earnings season and another solid month of falling unemployment.
- U.S. treasuries were mixed as investors sifted through other, less savory parts of the jobs report, like disappointing wage growth. Also, the euro reached its highest point in six months after centrist candidate Emmanuel Macron won France’s presidency (as expected) yesterday.
All Eyes on Omaha
Thousands of Berkshire Hathaway
(+0.18%) shareholders converged on Omaha, Nebraska this past weekend for the firm’s annual meeting. It’s basically the Woodstock of capitalism, so yes, it’s kind of a big deal.
In fact, the event has garnered such a reputation that many people purchase a single share of the world’s fourth-largest public company just to attend the famous event. But at $250,000 per share as of Friday’s close, it’d still cost them a pretty penny.
That’s a long time for anyone to be on stage, but for CEO Warren Buffett (86) and his right-hand man Charlie Munger (93), it took more than a few Diet Cokes and peanut brittle to get through 50 shareholder questions.
Here are just a few of the takeaways:
- On healthcare: Buffett said the new healthcare bill passed by the House last week is just “a huge tax cut for guys like me.” Not a huge fan.
- On tech: Berkshire is known for avoiding investing in tech stocks, and Buffett said it just sold a third of its IBM
(-2.44%)stake. Interestingly, he remains more confident in Apple as a consumer electronics company rather than a tech player.
- On Unilever: Remember Kraft-Heinz’s failed takeover bid of the consumer products giant earlier this year? Well, now Buffett says he’s prepared to invest $15 billion in the deal.
- On his age: Buffett still has not named a successor, but says he’ll work as long as possible (no surprises there). Cue the internal jockeying at Berkshire.
Jobs, Jobs…and More Jobs
The unemployment rate fell to 4.4% in April, with American companies adding 211,000 jobs— roughly 20,000 higher than economists expected. It’s huge improvement over March’s meager 79,000.
We’re now comfortably under the Fed’s goal of 4.7% unemployment and getting really close to full employment. Smooth sailing, right? Sure, but this presents its own set of challenges. With a smaller pool to pick from, it’s harder for companies to find people with that perfect skill set they’re looking for. All in all, it’s not a bad problem to have. Nice work, American businesses.
Uber’s Death Knell?
It sounds like the plot of a sci-fi movie, but Uber’s Greyball tool is very much real life, and now the ride-hailing firm is facing a criminal investigation for it. The software rolled out in places Uber wasn’t exactly allowed to yet, letting it gain traction in a new area without pesky oversight.
As for what the software actually did? It thwarted officials trying to shut Uber down in these forbidden markets by geo-fencing (blocking) government buildings, identifying government-issued credit cards and showing a fake version of the app to law enforcement agencies. After Uber’s tumultuous recent months, a criminal investigation has to be the last thing CEO Travis Kalanick wants…but it’s exactly what he’s getting.
Saudi Arabia is reportedly in talks with the U.S. for an arms deal worth billions. While purchases like these are nothing new (the U.S. is responsible for about a third of the world’s weapons sales, with Saudi Arabia the biggest recipient) some American companies can make a hefty profit off of war-related purchases. Here’s who stands to benefit:
- Lockheed Martin
(+0.93%): The defense contractor most known for its planes will sell its Terminal High-Altitude Area Defense (THAAD) missile defense system. It’s pretty much a very big (and very expensive) rocket launcher. An earlier one was sold to South Korea for a whopping $1 billion.
- BAE Systems
(+1.39%): No, it’s not your boyfriend, but the British artillery vehicle maker employs about 29,000 American workers and is also reportedly part of the Saudi Arabia deal.
(+0.99%): This Massachusetts-based contractor will sell $1 billion worth of armor-piercing warheads and ammunition.
What Else Is Happening…
- A Brooklyn cafe is suing Starbucks
(0.20%)for stealing the Unicorn Frappuccino
- Soylent, maker of the hip meal-replacement drink that got everyone sick last year, has secured $50 million in new funding
(+1.66%)should buy out Netflix
(+4.36%), a new Citi report says
(-0.40%)will launch a premium TV product this summer to compete with cable and other streaming services
- Friday (May 5): Berkshire Hathaway (-), Moody’s (+) Earnings
- Monday: Marriott, Pandora Media, Sysco Earnings
- Tuesday: Electronic Arts, News Corp, Tripadvisor, Valeant Pharmaceutical, Walt Disney, Yelp Earnings; Redbook
- Wednesday: Symantec, Whole Foods Earnings; Treasury Budget
- Thursday: Macy’s, Nordstrom Earnings; Fed Balance Sheet, Money Supply
- Friday: Baltia Air Lines Earnings; CPI, Retail Sales
All the Work, None of the Credit
Schools are banning them. Retailers are paying high prices to stock them overnight. Even the Brew Crew has a few in the office. But Catherine Hettinger of Florida, the inventor of the original fidget spinner, couldn’t afford the renewal fee for her 12-year-old patent, and off it went into unprofitable generic land. Here are some other notable inventors who didn’t exactly reap riches from their creations:
- Shane Chen invented the original “hoverboard” in 2012—but once his pricey, $1,000 toy hit the markets, so did cheap imposters.
- Todd Mills pitched the Doritos Locos Taco to Frito-Lay back in 2009. After a viral Facebook hit, Taco Bell finally took him up. Being humble, Mills declined any payout from the tacos, which have done over $1 billion in sales.
- John Walter accidentally discovered matches in London in 1827. Unfortunately, he thought his fiery chemical sticks that could light with just friction were too trivial to patent. Oops.
Interview Question of the Day
You’re standing on the surface of the Earth. You walk one mile south, one mile west and one mile north. You end up exactly where you started. Where are you?
It’s Elon Musk’s favorite question to ask candidates. There are multiple answers that are correct, so check yours here.
Stat of the Day
77% — That’s the alcoholic content that Canadian authorities found in some Bombay Sapphire gin bottles last week, forcing a recall. If you’re not a cocktail connoisseur, gin is only supposed to contain 40% alcohol. But something tells us not too many of the affected customers were clamoring to return their juiced-up bottles.
Nonprofit of the Day
Legendary hedge funder manager Paul Tudor Jones has established a new firm called “Just Capital” to keep American businesses from getting too out of touch. It will use data to educate people about which companies are “just” and which ones are less-than-fair.
Our bad: Friday’s issue incorrectly spelled Warren Buffett’s last name. Don’t worry, we triple-checked in today’s issue.