Ground Floor: Even icons have their bad days and Warren Buffett's Berkshire Hathaway 2005 annual meeting probably wasn't the best six hours he's ever spent, given that he had to discuss ongoing regulatory probes into its General Re re-insurance subsidiary.
Many investors admire Buffett because of his general "all-round good guy" approach, such as changing the date of this year's annual general meeting (agm) so that it didn't clash with the weekend of Mothers' Day.
That kind of reasoning, plus his unwillingness to get involved in some of the more esoteric investments that Wall Street has managed to manufacture over the past number of years, has endeared him to his shareholders - and, of course, the fact that he's made a lot of people a lot of money also helps.
However, the investigations into the transaction between General Re and American International Group (AIG) - which had the effect of boosting AIG's reserves at a time when there were market concerns about the company - must be a worrying one for him. AIG has admitted improper accounting practises (the result of which is to knock $2.7 billion (€2.09 billion) off the value of the company, so slightly more than a simple clerical error), but Buffett himself is not part of the investigation.
However AIG's former president, Maurice "Hank" Greenberg, has taken the fifth on questioning on the basis that he might incriminate himself.
Buffett has spoken out in Greenberg's defence (a case of septuagenarians sticking together maybe since Hank is now 79 years of age), saying that he had built an extraordinary company.
Buffett's vice-chairman, Charlie Munger, also pointed out that, regardless of what the situation is now, a lot of good things had happened at AIG.
It's always the way, isn't it? Somehow or other, someone at the top makes a serious error of judgment (at best) or enters into an illegal agreement (at worst) and, in the end, everyone scrambles around to say that times are bad now but they did a lot of good things before.
But people's memories of, and disappointments with, the downside linger even with the satisfaction they get when everything's going well. Greenberg's reputation will always be tarnished by the reinsurance investigation.
Buffett's has taken a bit of a knock too, although the investigators have labelled him as a co-operative witness and have stressed that he's not part of the investigation. He was reluctant to talk much about it at the agm, though, using the fact that he wanted to protect the integrity of the inquiry as a reason.
Further difficulties for Buffett arose from losses derived from short dollar positions. The fund reported losses of around $310 million on currency trades although, in the context of a $1.66 billion pretax profit for 2004, it wasn't exactly a disaster.
In his letter to shareholders, which was sent out before the agm, Buffett makes it clear that his shorting of the dollar has nothing to do with his views on the US as a great economy, but is simply based on the mathematical situation that current account deficits result in a country owning less and less of what it produces.
According to Buffett, current US trade policies are leading the economy into a "sharecroppers society" and he likens their behaviour to that of a family selling off part of its farm every day to finance its overconsumption.
He also adds that he's now a bit nervous about his dollar position because so many people are calling it lower - he has a point; the best time to sell a share is when everyone starts tipping it as a great buy!
As in previous years, though, Buffett hasn't been buying into a lot of companies because he says that he hasn't found many attractive propositions.
In fact, Berkshire Hathaway slightly underperformed the Dow Jones last year, which led him to admit that he didn't do the job of deploying spare cash very well.
He rightly points out that investors who put their money in managed funds are looking to beat an index, although he also points out that many investors fail to do that because of high costs, portfolio decisions based on tips rather than rational thought and a start-stop approach to investing. However, he's itchy to invest, saying that right now the company has "more money than brains".
It's really hard not to like Buffett and to enjoy reading his newsletters or listening to him talk at the agm. He urges Berkshire Hathaway shareholders to support the companies in which they are invested - an idea that I wholeheartedly support. If, as an investor, you wouldn't use the product of the company yourself, why on earth do you think that somebody else might? Who are the company's customers going to be if you don't count yourself as one of them? Obviously this approach can sometimes lead to investing with your heart and not your head (think buyers of English Premiership football clubs) but you get the general idea.
In his letter to shareholders, Buffett was scathing about many institutional investors, saying that they focus on minutiae and ignore the questions that really count. His questions that count all concern the chief executive and boil down to this one - is he or she the right person for the job? Many times, he thinks not. Mind you, he's not convinced of the worth of many directors either, feeling that there are times at which their interests and the interests of the shareholders don't coincide.
For any of you who find the normal annual report a mass of incomprehensible jargon and far too boring to read through, I suggest that you download a copy of Buffett's letter.
Big business, and its directors, like to make things sound difficult so that they appear incredibly talented and worth the large amounts of money they pay themselves. But the nuts and bolts are always simple, even with a certain amount of technical information, and Buffett's letter shows you just how simple it really is. Get the letter at www.berkshire hathaway.com.
