Buffett and Munger share wit, wisdom with shareholders

Here is a sample of their wit and wisdom on a variety of topics:

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THE OLYMPICS

Neither Buffett nor Munger thought it would be a good idea to use this summer's Olympic games to penalize China.

"I think it's very hard to rate a couple hundred countries that are participating on their behavior," Buffett said.

Berkshire owns a sizable stake in the Coca-Cola Co., which is a major sponsor of the Olympics.

"I think the more people that participate in them, the better," Buffett said.

Munger said he thinks the most important question is whether China has been improving in recent years. "The answer is, China is moving in the right direction," Munger said.

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CREDIT DEFAULT

Buffett said he doesn't think the roughly $60 trillion market for credit default swap derivatives will implode like subprime mortgage funds, although the number of defaults is likely to increase.

Those credit default derivatives are essentially an insurance policy on the chance that a company will go bankrupt.

Munger said that there could be problems with those derivatives, but that it likely won't be nearly as bad as the subprime mortgage mess.

"I think the stupidity while it's extreme is not quite as bad as sweeping bums off skid row to give them a house," Munger said.

The Federal Reserve's bailout of Bear Stearns reduced the chances of widespread problems with the credit derivatives, Buffett said.

Berkshire has written some of those credit-default derivatives and accepted $2.9 billion in premiums.

"I think we're going to make significant money, although we can lose money, too," Buffett said.

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SECURITIES

The recent credit crunch that has created turmoil in financial markets has also created opportunities.

Buffett said Berkshire has invested about $4 billion in auction rate securities because the interest rates those bond funds offered became attractive. Buffett offered one example of a municipal bond fund that offered 3.5 percent interest one week and 8 percent the next as the market was disrupted.

"This happened with billions and billions and billions of securities," Buffett said.

The $330 billion auction rate securities market used to offer investors the chance to buy and sell long-term bonds frequently, because the interest paid on the bonds was reset every seven, 28 or 35 days.

But investors began fleeing late last year as the credit crunch intensified, and investment banks, in turn, starting backing away from their promise to buy the bonds at auctions.

That caused many auctions to technically fail.

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HEALTH

Neither Buffett or Munger are likely to win a doctor's endorsement of their health advice.

Buffett, 77, took a bite of candy from the box in front of him, and then recommended a balanced diet of See's Candy, Wrigley's gum and Coke products. Berkshire owns See's and a large stake in Coke, and it will soon own part of Wrigley.

Munger, 84, said he and Buffett ignore every health rule out there.

"It seems to have worked for us," Munger said. "I don't think we could recommend it for everybody, but I, for one, don't plan to change."