NEWSPAPERS' DWINDLING VALUE Berkshire owns the Buffalo News and it has a sizable investment in the Washington Post Co. Buffett reiterated Saturday that Berkshire won't be adding to those newspaper investments. "For most newspapers in the United States, we would not buy them at any price," Buffett said. He said most newspapers face the possibility of unending losses because the industry has lost its essential nature. "They were only essential to advertisers as long as they were essential to the reader, and that is changing," Buffett said. CREDIT-RATING PROBLEMS Buffett said he doesn't think the conflicts of interest at credit-rating agencies caused their problems, or the problems with the complicated collateralized-debt obligations that turned out to be worth much less than ratings agencies estimated. Buffett said Moody's, Standard & Poor's, Fitch Ratings and other credit-rating agencies all seemed to buy into the faulty notion that house prices would continue increasing indefinitely and based their ratings models on that. "They made a major mistake in analyzing the instruments," Buffett said. "But they made a mistake a great many people made." DERIVATIVES Buffett said he still believes that derivatives can create huge problems for society, but he also believes the derivatives that he's written for Berkshire will eventually generate money for the company because they were mispriced. "I think our shareholders are intelligent enough to realize how beneficial they are if we explain them," Buffett said. Buffett emphasized that Berkshire's derivatives require very little capital to be posted, and the company has the use of the full premium for them for years until the contracts mature. Berkshire had received $8.1 billion in payments by the end of 2008 for derivatives that can be invested until the contracts expire years from now. INVESTMENT FORMULAS Buffett said he and Munger don't use fancy formulas or spreadsheets to determine how much a company is worth and whether it's a good investment at the current price. Instead, Buffett said it all boils down to the concept Aesop explained in fables. He said they just determine whether the bird in hand is really worth more than the birds in the bush and whether there are more birds in a different bush. Buffett said many of the worst business decisions ever made are based on elaborate formulas and projections. "It should be so obvious that you don't have to carry it out to tenths of a percent," he said. INVESTING IN FINANCIAL INSTITUTIONS Buffett said that if investors were to study the annual and quarterly reports major banks file with the Securities and Exchange Commission, they'd be able to recognize the differences between the banks. Buffett said he believes Wells Fargo, in which Berkshire owns a large stake, has the best competitive advantage among large banks. He said investors should be able to tell the difference between Wells Fargo and a highly leveraged bank like Washington Mutual from the filings, but it can be hard for an investor to sort that out without spending a lot of time on it. Munger said the accounting rules make it harder for investors to determine the health of banks. "A lot of the new regulation that's coming wouldn't ever have been needed if accounting had done a better job," he said.

Buffett's and Munger's wit and wisdom

"For most newspapers in the United States, we would not buy them at any price," Buffett said.