2012: Should Berkshire's buyback policy be more flexible?

AUDIENCE MEMBER: Mr. Munger and Mr. Buffett, this is Whitney Tilson. I’m a shareholder from New York. I have a question for Debbie.

I’m just kidding. I applaud the fact that you’ve —

WARREN BUFFETT: She’s in the president’s box. (Laughs)

AUDIENCE MEMBER: I applaud the fact that you’ve set a price above which you won’t buy back your stock, but it seems, based on the trading of the stock since the announcement, the wall may have put a floor on the stock. It also may have put a ceiling on it slightly above 1.1 times book value.

If so, this is obviously contrary to your desire to have the stock trade close to intrinsic value, which you’ve said is far higher than 1.1 times book.

Have you considered being a little more flexible in the price at which you’d buy back your stock depending on how well your business is going and what other opportunities are available?

For example, I would much prefer it if you bought back 3.4 billion of your own stock at 1.15 times book value last quarter, rather than the stocks you bought of other companies.

WARREN BUFFETT: Yeah, so would I. But the — I’m afraid — I don’t think it puts a ceiling on, but I do think it certainly has an effect on a floor. It doesn’t make a floor. I mean, you and I have seen enough of markets to know that if things get chaotic or anything like that, floors disappear.

So, I think there could be circumstances under which we would buy a lot of stock, but I don’t think they’re, you know, highly likely at all.

I think if we were at 115 — and believe me 115 would not be a crazy price — I don’t think we’d probably buy a lot more stock. It might have the effect of the stock selling at, you know, a little above that or even a lot above it, just like 110 can do the same thing.

I do think it signals to a lot of people that they don’t have much to lose if they buy it just slightly above the price we’ve named and perhaps they’ve got a lot to gain. But I don’t think it sets a ceiling, Whitney.

When people feel differently in markets, it can sell it at a much different price.

If I thought we would buy a whole lot more stock at a slightly higher price, I would probably adjust the price, but I don’t think that’s the case. I think it would just cause everybody to think, you know, I can buy it at this little higher price and have very little to lose, just like they may very well think now.

But you get into any kind of a chaotic market — and we’ll have chaotic markets in the future — and we might buy a lot of stock.

Charlie?

CHARLIE MUNGER: Oh, I’ve got nothing to add to that, either.