Warren Buffett was on CNBC for three hours this morning.Highlights include a recommendation to buy distressed houses, support for taxes on rich people, an anecdote about Steve Jobs and encouraging words about the US economy and financial sector.
- The key to success is for them to dominate some area, and to charge online.
- No forecast for the next 3 months of a year, but Buffett is absolutely confident that they’ll outperform cash or non-productive assets, like gold, over the long term.
- That said, “spring is over” for the current rally.
- He loves them at these prices, and these ultra-low rates.
- If you’re an investor, buying a few distressed homes and renting them out is as attractive of an investment as you can make.
- At the end of last year, Buffett says he spent 175 million euros and bought stock in 8 European companies because they were cheap.
- Every quarter since the Summer 2009, Berkshire’s businesses have gotten better (with the exception of housing). And that’s still happening now.
More on housing:
- It’s the one area that’s still holding everything back, and it explains why jobs haven’t come back nicely. Berkshire’s own housing-related units have shed jobs considerably, but when housing comes back, they’ll be adding jobs again.
On naming a successor:
- Other big companies haven’t publicly named a successor, so why should he. “Who’s Tim Cook’s successor? Who’s Jeff Immelt’s successor? Who’s Jamie Dimon’s successor?” he asks. Buffett says he and the board have long known who his designated heir was.
- His chosen successor does not know he/she has been chosen.
- “I’ve left them all a Ouija board so they can stay in contact with me.”
On David Sokol:
- He hasn’t heard anything since he spoke to the SEC in June, but Berkshire has paid $1.4 million in legal fees for Sokol. Berkshire can claw this money back if Sokol is found guilty of a crime.
- “They’re a minus, but I don’t see them stopping anything… I do not think it will derail what has been going on for two and a half years.”
- “We will have a growing pie, but a growing pie will not solve the deficit. Fortunately having a growing pie means we can have a 2.5 gap between expenditures and revenue and have a sustainable economic picture…”
- Should they let Bush Tax Cuts expire? “We hired 535 people to run the government and represent us and they should not act on a default basis and say we will let everything lapse back to how it was. They should act proactively and say what is the best way… I can put the government on default setting without hiring 535 people.”
- The Simpson Bowles proposal isn’t perfect, but at least it’s sustainable as opposed to the plan we have now.
- He shows a chart of US Tax Revenue as fraction of GDP By Component. Individual income taxes bounced around but been steady. Payroll taxes (the yellow line) have gone from a small part of GDP up dramatically. Corporate taxes have declined steadily.
- No one talking about corporate competitiveness ever talks about how high CEO salaries are in America.
- “This is a remarkable country.” People have been getting pessimistic on America since 1760 and we keep proving them wrong.
On Chris Christie telling him to “write a check and just shut up”:
- Other people have put it “more eloquently” than Christie.
- “Astounding to me that Sen. McConnell thinks you can solve the deficit by writing personal checks.”
On the Buffett Rule:
- He suggested greater taxes for people who earn over $1 million. Obama seems to be pushing for a more aggressive plan with greater taxes on people who earn over $250,000.
- He doesn’t like paying any taxes, but he believes in government services. He believe good schools are important and even people who don’t have kids should pay for them.
- “I would be surprised if the unemployment rate went back to 9 per cent.”
On government spending:
- America has done great “in spite of and because” government spending. He tells Joe Kernan that he would have felt different about government spending on December 8, 1941.
Sorkin asks why Berkshire doesn’t own stock in JP Morgan.
- “I’ll let you in on a little secret. I own some stock in JP Morgan personally,” Buffett says. But Berkshire doesn’t invest in JP Morgan to avoid raising suspicion of inside trading. Buffett adds that Dimon has the best annual letter in the business.
On other banks:
- Berkshire owns over 7 per cent of Wells Fargo. “Banks aren’t going to be as good a return on equity as they did historically… [but] US banks are arguably in the best shape they’ve ever been.” American banks are in good shape, though around the world banks aren’t. “If I had to own one bank I would probably own Wells.”
- “Unequivocal in his praise of Lloyd [Blankfein].”
- Brian Moynihan was handed a “terrible” situation.
Would you rather have all the gold ever mined or all the money ever printed?
- “I definitely don’t like printed money”… but he also wouldn’t buy gold or stamps or paintings.
- “I’ve never bought Apple, but I wish I had.”
- He saw Steve Jobs a few times. Called him a couple of years ago and said “we’ve got all this cash” and said “Warren, what should we do with it?” After discussing several options Buffett recommended repurchasing stock, which Jobs thought was undervalued (at around $200). But Jobs didn’t take his advice, sitting on his cash instead.
- “J&J obviously has messed up in a few ways in the past few years… It does not have the reputation that it had. Clearly they have not lived up to their own standards.”
- But Berkshire has been adding to its stake in J&J, which is “still an attractive business at its price.”
- The auto bailout was “one of the best things ever to happen to the economy.”
- “I got a call in 2009 from one of the automakers looking for capital, but there wasn’t any place they were going to get a dime.” The federal government was the only one who could prevent a collapse.
- Buffett says there’s no moral hazard involved as the shareholders of AIG et al. “got creamed.”
- “My greatest fear is nuclear, chemical or biological attack whether by a government or another group… Just like the attack on 911… There are people who wish us ill and there are those who can accomplish it.”