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CNBC Excerpts: Billionaire Investor Warren Buffett Sits down with CNBC's Becky Quick on "Squawk Box" Today

When: Today, Monday, May 6, 2013

Where: CNBC's "Squawk Box"

Following are excerpts from the unofficial transcript of a CNBC interview with billionaire investor Warren Buffett today on CNBC's "Squawk Box" (6-9AM ET). For more on Buffett's interview, including embeddable videos visit buffettwatch.cnbc.com.

All references must be sourced to CNBC.

BUFFETT ON JPMORGAN
I don't know the details but if you are the director of a company like JPMorgan you cannot know the details of what's going on with trading or anything. Your key decision is whether you believe that you have the right CEO. If you have the right CEO the board has done its job, and if you prevent the CEO from overreaching in terms of comp or something and I've written about that and I think they have right CEO, so I think they've done their job.

BUFFETT ON ECONOMY
But in terms of our businesses, and we have 70 businesses and a lot more indirect, we're seeing the same thing we've been seeing for 4 years, and that's gradual improvement in the economy and we cut across whole economy, so I think it's a pretty good view of what's going on. And what you are seeing now in certain areas which didn't participate initially like homebuilding coming back fairly strong.

BUFFETT ON EUROPE
We've bought-- in the last 12 months we've bought a couple smaller businesses in Europe. We've bought some European stocks. And-- the fact that there are troubles in Europe, and there are plenty of troubles, and they're not going to go away fast, does not mean you don't buy stocks. We bought stocks when the United States was in trouble, in 2008 and-- and it was in huge trouble and we spent 15 1/2 billion in three weeks in-- between September 15th and October 10th. It wasn't because the news was good, it was because the prices were good. And if you believe that Europe is going to be around, which it certainly is, and it's going to have huge amounts of purchasing power with citizens and all of that-- then you-- you look at-- you actually look at troubles as possibly being-- offering you an opportunity to buy.

BUFFETT ON STOCKS VS. BONDS
BUFFETT: I don't know the exact specific comments -- in terms of bonds some day they will sell the yield a whole lot more than they are yielding now. I don't know when it will happen.

QUICK: So you agree with him on that point?

BUFFETT: Oh it's going to happen. The question is always when – I'm no good on that. The question is to what degree it happens. You could have interest rates very significantly different than what they are now in some reasonable period in the future. It's not a game that I can play. I mean, I don't have any special insight into that sort of thing other than that it will happen. In terms of stocks, stocks are reasonably priced – they were very cheap a few years ago – they are reasonably priced now. But stocks grow in value over time because they retain earnings and they expand basically the companies underneath you. So I like owning stocks. I do not like owning bonds now. There could be conditions under which we would own bonds, but they are conditions far different than what exists now.

BUFFETT ON INVESTING IN BONDS
BUFFETT: I would have productive assets. I would favor those enormously over fixed dollars investments now, and I think it's silly-- to have some ratio like 30 or 40 or 50% in bonds. They're terrible investments now.

QUICK: So now, this is not just your lifelong look on it. This is particularly to--

BUFFETT: Oh, it's now. No, I bought bonds back in the early '80s. We bought-- we made a lot of money and we bought zero coupon bonds-- I bought them personally. And-- no, the price of everything determines its attractiveness. And when the price of stocks was way down a few years ago. The news was terrible, but the stocks were cheap, you know. News is better now. Stocks are higher. They're still not-- they're not ridiculously high at all, and bonds are priced artificially by some guy buying $85 billion a month. And that will change at some point. And when it changes, people can lose a lot of money if they're in long-term bonds.

BUFFETT ON CHASING YIELD
Chasing yield is crazy. Just because you'd like to earn 8% or you'd like to earn 10% or you'd like to earn 6%, the world is not going to adapt to that. You have to think about what is the most intelligent thing to do, and if that produces 5% or 6% that's the best you are going to do. But to get enticed into some investment that is risky or that you don't understand because someone promises you a higher yield – I can take you down to the waterfront or something like that and they'll promise you 15% percent or something.

BUFFETT ON U.S. BEING ENERGY EXPORTER
Well, it would be good for the short term, but in the end, I regard this huge finding we've had of both oil and gas-- in terms of fracking-- well, I mean, it's a huge natural resource. And my general feeling is that we ought to save that for grandchildren. So I've often said that you can't rob your grandchildren. But in terms of a natural resource which is-- although we found much more of it-- but it's still a finite asset. And if you're thinking about the country for hundreds of years to come, I don't think I'd be in favor of it.

BUFFETT ON JCPENNEY
BUFFETT: Well, they're a supplier, but I worked for JCPenny for a considerable period. I've got a rooting interest for them, I don't have a financial interest. But I would like to see JCPenny succeed.

QUICK: You would like to see them succeed, do you think they're going to?

BUFFETT: I think it's very tough. I mean, they obviously alienated a significant part of their customer base in the last 18 months or whatever it's been. And retailing it's a tough game.

BUFFETT ON HIGH SPEED TRADING
QUICK: On Friday, I sat down with Charlie Munger. And he talked a little bit about the high frequency traders. Listen to what he said in terms of who he was comparing these traders to. Oh, we don't have the sound bite. But at the time, Charlie said this is basically legalized front running. What do you guys think about that?

BUFFETT: I agree. I agree. I mean, that's why these fellas exist and why they spend enormous sums on trying to get the speed of transmission, you know, that's a millionth of a second or a thousandth of a second faster than the other guy. I mean, you know, and it is not contributing anything to capitalism.

BUFFETT ON FLASH CRASH
The flash crash didn't hurt any investor. I mean, you know, you're sitting there with a stock. And, you know, and the next day it's gone past. The frictional cost in investing, for somebody that does it in a real investing manner, are really peanuts. I mean, they're far less than the cost in real estate or farms or all kinds of things. So it's-- unless you turn it to your disadvantage by trying to do a lot of trading or something of the sort, it's a very, very inexpensive market to operate in.


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