Buffett Pre-Meeting Interview - Economic Outlook, Apple Investment & Corporate Governance

Buffett discusses preparations for the upcoming Berkshire Hathaway annual meeting, expecting around 42,000 attendees - a new record beating the 50th anniversary meeting. He reveals he and Charlie Munger don't rehearse anything and may only see each other twice or three times per year, with zero preparation for their Q&A sessions. Buffett mentions planning a 'little lesson' as a curtain raiser at the start of Saturday's meeting.

Buffett provides his assessment of the economy through the lens of Berkshire's diverse businesses. He notes business is 'pretty strong generally' worldwide, with significant increases in metalworking tool sales (used for current production, not inventory) and electronic component distribution. The 'Berkshire Hathaway index of activity' shows business is stronger than it's been, though he acknowledges the GDP seasonal adjustment issues affecting Q1 data.

Buffett explains why he liked Apple's recent earnings, emphasizing it's 'an unbelievable company' that earns almost twice as much as the second most profitable U.S. company. He marvels at how all Apple products can fit on a dining room table yet generate approximately $60 billion in earnings. Buffett criticizes the obsession with quarterly predictions, comparing stock investing to buying a farm - the relevant question is where it will be in 10-20 years, not next quarter.

Buffett reveals that Berkshire bought 'quite a bit more' Apple stock in the first quarter of 2018 - approximately 75 million additional shares on top of the 163.5 million shares held at year-end. This represents a major increase in an already substantial position. He notes this information will be disclosed in Berkshire's 10-Q filing on Saturday morning, and they won't be active buyers going forward (post-disclosure).

Buffett confirms Berkshire has completely exited its IBM position, with zero shares remaining. This finalizes a position that had already been reduced by 94.5% by year-end 2017. The complete exit represents the conclusion of what was once a significant Berkshire technology holding.

Buffett explains Berkshire's strategy for several holdings where they want to stay just below 10% ownership, particularly important for bank holding companies due to regulatory requirements. When companies like Wells Fargo repurchase shares, Berkshire preemptively sells minor amounts (a tenth or two-tenths of a percent) to avoid crossing the 10% threshold. These are not discretionary sales driven by investment thesis changes.

Buffett discusses the rare instance of Berkshire voting against company directors at USG, where Berkshire owns 31-32% and has been a shareholder for 18 years. Berkshire twice provided critical financing - helping USG exit bankruptcy in 2006 and providing additional capital during the 2008 housing crisis. Buffett criticizes directors for not engaging with Knauf, a fellow long-term shareholder (18 years, 10% stake) making a $42/share takeover bid. After Berkshire's public opposition, USG agreed to sit down with Knauf.

Buffett updates Berkshire's massive cash position, which started 2018 at $116 billion and decreased to slightly over $100 billion by the end of Q1. The reduction primarily reflects stock purchases significantly exceeding sales during the quarter, with the Apple purchase alone accounting for an estimated $12-13 billion. This still leaves Berkshire with substantial dry powder for future investments.

When asked about speculation that Berkshire might acquire General Electric or portions of it, Buffett diplomatically confirms they are 'not doing anything on that.' He expresses strong admiration for GE CEO John Flannery, noting he has 'a very tough job' and is handling it 'very logically.' Buffett emphasizes familiarity with GE through extensive buying and selling relationships, and notes GE's status as a 'terrific American company' dating back to the original Dow Jones Average.