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CNBC Exclusive: Liz Claman Interviews Warren Buffett, Berkshire Hathaway Chairman & CEO, Live at the Company's Annual Shareholder's Meeting in Omaha, Nebraska on "Squawk on the Street"  (Transcript Included)

In a CNBC exclusive interview, Berkshire Hathaway Chairman & CEO Warren Buffett discusses succession, railroads, the newspaper business, Newscorp's bid for Dow Jones & Company, private equity, China and the markets, among other topics.

DATE: Monday, May 7th
NETWORK: CNBC
PROGRAM: "Squawk On The Street"
TIME: 9:30 am ET

Transcript below. All references must be sourced to CNBC.

MARK HAINES: THANK YOU RICK SANTELLI. THAT TIME OF YEAR AGAIN WHEN INVESTORS FROM ALL OVER THE WORLD CONVENE IN WHAT MAY SEEM LIKE THE MOST -- IT'S HOME TO INVESTING ICON TO WARREN BUFFETT. WE'RE TALKING ABOUT OMAHA NEBRASKA WHERE I WAS ONCE 35 YEARS AGO. I ASSUME IT'S CHANGED. THE BERKSHIRE HATHAWAY ANNUAL SHAREHOLDER MEETING IS GOING ON.= LET'S GET STRAIGHT TO LIZ CLAMAN INSIDE COMPANY'S HQ AND SHE HAS A SPECIAL GUEST.

LIZ CLAMAN: MARK IT IS NOT FOR JUST THE GREAT STEAK. YOU HAVE TO COME BACK TO OHM HASM HAH. I KNOW YOU AND I HAVE -- OMAHA. YOU AND I HAVE BEEN WATCHING THE SEA CHANGE. BERKSHIRE HATHAWAY DRAGS IT OUT AN ENTIRE WEEKEND OF FESTIVITIES AND MEETINGS AND QUESTION-AND-ANSWER SESSIONS, BUT IT IS NOT OVER. THE BOARD OF DIRECTORS MEETS TODAY IN OMAHA. I WAS ABLE TO CORRAL WARREN BUFFETT THE CHAIRMAN AND CEO OF BERKSHIRE HATHAWAY ON HIS WAY UP TO THIS BOARD OF DIRECTORS MEETING. THANK YOU VERY MUCH FOR LETTING ME GRAB YOU FOR A MINUTE HERE.

WARREN BUFFETT: MY PLEASURE.

LIZ: APPRECIATE IT. WHAT IS THE NUMBER ONE THING THAT'S GOING TO BE ON THE AGENDA THE BIG THING FOR BOARD OF DIRECTORS AT BERKSHIRE TODAY?

BUFFETT: EVERY TIME WE MEET THE BIGGEST THING IS WHAT HAPPENS AFTER I'M NOT HERE. SO WE TALK ABOUT THE CANDIDATES FOR SUCCESSOR. WE'VE GOT THREE TERRIFIC ONES. WE KNOW WHICH ONE IS THE NUMBER ONE. BUT I GO THROUGH THE SITUATION EVERY TIME WITH THE DIRECTORS THEY ASK A LOT OF QUESTIONS.I TELL THEM ABOUT THE THREE, ANDWE TALK IT OUT, AND THEN THEY TALK IT OUT WHEN I'M NOT IN THE ROOM ALSO.BUT WE ALWAYS SPEND A THIRD OF OUR TIME OR HALF OF OUR TIME ON THIS THAT.

LIZ: YOU ARE TALKING ABOUT THREE FOR THE CEO CANDIDACY. BUT THE CIO THE CHIEF INVESTMENT OFFICER CANDIDACY WHICH YOU ALMOST PRESENTED TO THE WORLD AS AN OPPORTUNITY TO BE AN APPRENTICE. IS THAT JUST GOING TO BE ONE CANDIDATE OR MORE THAN THAT?

BUFFETT: ALTHOUGH THERE WILL BE A NUMBER OF CANDIDATES AND THERE WILL PROBABLY -- WE COULD VERY EASILY HIRE MORE THAN ONE AND THEN SEE HOW THEY PLAY OUT OVER TIME GIVE THEM EACH A BLOCK OF MONEY TO RUN FOR A FEW YEARS AND LOOK AT WHO MIGHT SCALE UP THE BEST BECAUSE THAT'S THE REAL THING. THERE'S A LOT OF PEOPLE CAN RUN A BILLION DOLLARS WELL OR TWO BILLION BUT THEY HAVE TO BE ABLE TO RUN 100 BILLION WELL. IT COULD BE BE TWO OR THREE TO SPLIT THE JOB UP.

LIZ: IT COULD TAKE FOUR PEOPLE TO REPLACE YOU?

BUFFETT: WE'VE GOT ONE PROPOSAL FROM A 4-YEAR-OLD. MAYBE A 4-YEAR-OLD COULD REPLACE ME OR BETTER YET A CAVEMAN COULD REPLACE ME, BUT THERE COULD BE SEVERAL PEOPLE IN THE INVESTMENT JOB. THERE WILL BE ONE CEO OBVIOUSLY.

LIZ: WHEN WILL WE KNOW?

BUFFETT: WE MAY NOT KNOW -- WE MAY NOT HIRE ANYBODY FOR CLOSE TO A YEAR. I MEAN, WE'VE GOT 700 APPLICATIONS. WE'LL NARROW IT DOWN TO 20 OR 30. I WILL TALK TO A LOT OF THEM. IT COULD TAKE UP TO A YEAR TO PICK TWO OR THREE.

LIZ: I WANT TO WHIP THROUGH A COUPLE OF THINGS EVERYTHING FROM INVESTMENTS TO THE MARKETS WHICH I KNOW YOU HATE TO COMMENT ON BUT I WILL STILL BOTHER YOU ABOUT IT. YOU RECENTLY MADE A BIG INVESTMENT IN THREE RAILROAD ONE WHICH WAS BURLINGTON NORTHERN YOU DECLINED TO SAY THE OTHER TWO. ARE YOU READY TO TELL US THE OTHER TWO?

BUFFETT: NO, BUT I APPRECIATE THE TRY.

LIZ: WHAT REALLY FACTORED INTO YOUR DECISION TO INVEST IN RAILROADS?

BUFFETT: WELL, THE RAILROAD INDUSTRY HAS GOTTEN A LOT BETTER. IT WAS A TERRIBLE BUSINESS 30 YEARS AGO. I MEAN REALLY TERRIBLE BUSINESS. IT'S NOT A WONDERFUL BUSINESS NOW BUT IT IS A LOT BETTER I WAS VERY SLOW TO RECOGNIZE. THAT I SHOULD HAVE BOUGHT THEM A YEAR OR TWO AGO. IT BECAME CLEAR TO ME THE COMPETITIVE DYNAMICS IN THE RAILROAD BUSINESS HAD CHANGED FROM WHEN I LAST THOUGHT ABOUT THEM WHICH WAS TOO LONG AGO.

LIZ: HOW MUCH DID HIGHER GASOLINE PRICES FROM THE TRUCKING INDUSTRY PLAY INTO THAT INVESTING DECISION?

BUFFETT: IT HELPS THE RAILS. WHEN OIL GOES UP, IT HURTS TRUCKERS MORE THAN IT HURTS THE RAILS THE RELATIVE COMPETITIVE POSITION FAVOR IN THE RAILROADS.

LIZ: YOU LOVE NEWSPAPERS. YOU WERE IN EARLY BOUGHT THE BUFFALO NEWS YEAR AGO BIG INVESTMENT IN THE WASHINGTON POST RECENTLY SO MUCH MERGER AND ACQUISITION NEWS PARTICULARLY NEWSCORP'S BIG BID OF $60 A SHARE FOR THE "THE WALL STREET JOURNAL" AND DOW JONES INC. WHAT DO YOU THINK OF WHAT'S GOING TO HAPPEN THERE, AND WOULD YOU CONSIDER EVER MAKING A PLAY FOR DOW JONES?

BUFFETT: IT WOULD BE EXTREMELY UNLIKELY THAT BERKSHIRE WOULD EVER DO ANYTHING, BUT IT WILL BE UP TO THE BANCROFT FAMILY AND JIMMY OTTOWAY WHO HAS ABOUT 6% OF THE VOTES HE'S REQUESTED HIMSELF QUITE VIGOROUSLY IN THE LAST DAY OR TWO HE AND HIS SON I BELIEVE. THE FAMILY WILL MAKE THE DECISION. RUPERT WOULD LOVE TO HAVE IT, YOU KNOW, BUT IF THE FAMILY DOESN'T WANT TO SELL, THEY DON'T HAVE TO SELL.

LIZ: YOU SAID RUPERT MURDOCH IS ONE GUY WHOSE CHECK WON'T BOUNCE.

BUFFETT: HIS CHECK WON'T BOUNCE.

LIZ: CERTAINLY HIS BID ALONE MADE THE STOCK JUMP CONSIDERABLY HIGHER. BUT YOU HAVE ALSO TALKED ABOUT HOW IMPORTANT IT IS TO HAVE AN OWNER THAT UNDERSTANDS THE PRESTIGE OF SUCH A BUSINESS.

BUFFETT: YEAH, IT HAS AN APPEAL BEYOND ECONOMICS TO MANY PEOPLE. UNDOUBTEDLY TO UNDOUBTEDLY UNDOUBTEDLY TO RUPERT BUT THERE ARE PEOPLE AROUND THE WORLD WOULD SALIVATE TO OWN THE "THE WALL STREET JOURNAL."

LIZ: HOW ABOUT YOU?

BUFFETT: THE ONLY THING I COULD DO ANYTHING IS IF I DECIDED TO DO IT INDIVIDUALLY WHICH IS VERY UNLIKELY. I DON'T DO ANYTHING FOR BERKSHIRE THAT'S UNECONOMIC. I DO SOME THINGS FOR MYSELF THAT ARE UNECONOMIC.

LIZ: LET'S TALK ABOUT THE PRIVATE EQUITY WASH OF CASH. AN OCEAN OF IT. WHAT WOULD SLOW THAT DOWN? A LOT OF PEOPLE SAY IT IS A TRAIN THAT ISN'T STOPPING AT THIS POINT.

BUFFETT: IT IS A BIG TRAIN. THERE'S A LOT OF PUSH BEHIND IT, AND THE URGE TO START THE NEXT PRIVATE EQUITY FUND IS SUCH THAT IF SOMEBODY HAS A 20 BILLION FUND, NOW THEY WANT TO GET THE MONEY OUT FAST BECAUSE THEY CAN'T START ANOTHER FUND AND START COLLECTING FEES UNTIL THEY GET THIS ONE INVESTED, AND THE MEASUREMENT PERIOD IS LONG. THE INVESTORS ARE LOCKED UP FOR A LONG PERIOD OF TIME, AND YOU DON'T REALLY SEE HOW THE DEALS WORK OUT UNTIL TWO, THREE, FOUR YEARS, SO I DON'T SEE IT COMING TO A QUICK END AT ALL. I THINK THERE'S A LOT OF MOMENTUM BEHIND THIS.

LIZ: YESTERDAY DURING THE PRESS CONFERENCE YOU SAID THAT IT DOESN'T NECESSARILY WORRY YOU BUT IT MAKES YOU THINK THAT SOMEBODY CAN JUST GO TO THE CORNER OF BROAD AND WALL AND SETONE UP AND PUT ON A SANDWICH BOARD AND SAY I'M STARTING A FUND AND PEOPLE ARE GIVING THEM MONEY.

BUFFETT: IT IS PRETTY EASY TO DO. SOME INSTITUTIONAL INVESTORS PARTICULARLY WITH LOTS OF MONEY THINK THAT IF SOMEBODY PUTS ON A SHIRT INSTEAD OF SAYING SUPERMAN IT SAYS HEDGE FUND OR IT SAYS PRIVATE EQUITY THAT IT MAGICALLY TRANSFORMS THAT PERSON TO EARN ABOVE AVERAGE RETURNS ON CAPITAL OF COURSE IT DOESN'T, BUT RIGHT NOW PEOPLE ARE IN THE MOOD TO BELIEVE.

LIZ: PEOPLE ARE BELIEVING IN THE STOCK MARKET. MARK HAINES WAS JUST SAYING WE HAVEN'T SEEN THIS AT LEAST FOR SOME PEOPLE IN THEIR ENTIRE LIFETIME THESE RECORD LEVELS. IS THIS A TRAIN THAT SOON STARTS TO AT LEAST SLOW DOWN? WHAT WOULD DO THAT IN

BUFFETT: I HAVE NO IDEA WHAT THE STOCK MARKET WILL DO. BUT THE STOCK MARKET IS NOT -- I DON'T LOOK AT THE STOCK MARKET AT ALL AS RIDICULOUSLY OVERPRICED. IF YOU TOLD ME I EITHER HAD TO BUY A 20 YEAR BOND OR MAKE A 20 YEAR INVESTMENT IN THE STOCK MARKET, I WOULD RATHER BUY THE STOCK MARKET. IT'S NOT CHEAP, BUT IT IS NOT RIDICULOUS.

LIZ: U.S. DOLLAR, DO YOU STILL OWN IT? ARE YOU STILL MAKING INVESTMENTS IN IT?

BUFFETT: WELL WE HAVE LOTS OF THINGS IN U.S. DOLLARS BUT WE HAVE GONE MORE INTO EQUITIES THAT EARN THEIR MONEY IN OTHER CURRENCIES OR A GOOD BIT OF THEIR MONEY, SO WE HAVE DIVERSIFIED SOMEWHAT THE SORT OF INDIRECT INCOME STREAM WE HAVE FROM THESE VARIOUS BUSINESSES THAT WE OWN PIECES OF. NOW, COMPANIES LIKE COCA-COLA WE'VE HAD RIGHT ALONG WE'VE ALSO BOUGHT SOME STOCKS THAT ARE DOMICILED AROUND THE WORLD AND THAT -- WHERE THEIR PRICES ARE DENOMINATED IN OTHER CURRENCIES. IT IS NOT A HUGE MOVE. IT IS NOT OVERWHELMING OTHER INVESTMENT CRITERIA, BUT IT'S A FACTOR.

LIZ: THE WEAKNESS OF THE DOLLAR, IS THAT SOMETHING THAT YOU THINK ABOUT AND SAY THIS IS EVENTUALLY GOING TO COME HOME TO ROOST?

BUFFETT: WELL, I THINK IT POSES PARTICULARLY POLITICAL PROBLEMS DOWN THE ROAD IF WE KEEP RUNNING CURRENT ACCOUNT DEFICITS LIKE WE HAVE BEEN, THAT WILL LEAD IN MY VIEW OVER MANY YEARS TO A WEAKENING DOLLAR, AND I THINK IT WILL ALSO LEAD TO SOME POLITICAL PRESSURES.

LIZ: YOU OFTEN SPEAK WHEN YOU TALK ABOUT POTENTIAL ACQUISITIONS THAT YEAH, YOU ARE OKAY WITH THE BIG FISH, BUT YOU WANT A BIG WHALE. THAT YOU WOULD LOVE TO MAKE A BIG ACQUISITION.WHAT'S HOLDING YOU BACK?

BUFFETT: FINDING ONE. I WOULD LOVE TO. I'VE GOT AN 800 NUMBER OUT THERE. YOU OR ANYONE ELSE COULD CALL IN AND JUST GIVE ME AN IDEA ON IT. IT IS HARD TO FIND BIG DEALS. WE ARE COMPETING AGAINST PRIVATE EQUITY. WE'RE COMPETING AGAINST OTHER CORPORATIONS, SO IT'S GOING TO BE -- YOU KNOW, IT IS NOT EASY TO FIND A REALLY BIG DEAL, BUT IT'S ALWAYS SOMETHING THAT KEEPS ME EXCITED, KEEPS ME COMING DOWN TO THE OFFICE, KEEPS THE JUICES FLOWING.

LIZ: BERKSHIRE HATHAWAY IS SITTING AROUND A PILE AROUND 46 BILLION OF CASH TO SPEND.

BUFFETT: IT IS PROBABLY SOMETHING LIKE THAT. WE JUST HAD 7 BILLION COMING IN FROM A DEAL. EVEN THOUGH WE SPENT OVER 5 BILLION IN THE FIRST QUARTER ON EQUITIES AND WE BOUGHT A BUSINESS, AND SO WE SPENT MAYBE 7 BILLION IN THE FIRST QUARTER, BUT THE MONEY HAS KEPT COMING IN FASTER. THAT WON'T CONTINUE AT THAT RATE. THE DEAL WAS A ONE OFF DEAL.

LIZ: WITH ALL OF THAT MONEY, YOU WOULD STILL SELL SOME BERKSHIRE STOCK IF A BIG ENOUGH DEAL CAME ALONG WHERE YOU NEEDED TO DO THAT?

BUFFETT: WE WOULD SELL SOME EQUITIES THAT BERKSHIRE OWN IFS WE NEEDED TO DO TO FINANCE A REALLY BIG DEAL. WE ARE VERY RELUCTANT TO SELL BERKSHIRE STOCK ITSELF OUR OWN STOCK IF A BIG DEAL CAME ALONG AND WE COULD DO IT LARGELY FOR CASH AND SOME EQUITY AND IT MADE SENSE, WE WOULD DO IT.

LIZ: YOU OFTEN USE GENERAL MOTORS I NOTICED AS AN ANALOGY ANALOGY. YOU SPEAK OF IT IN A POSITIVE WAY WHICH SURPRISES ME AND PERHAPS MANY OTHER PEOPLE BECAUSE IT'S GONE THROUGH SUCH DIFFICULT TIMES. DO YOU THINK THE AUTO INDUSTRY CAN BE SAVED?

BUFFETT: I DON'T KNOW THE ANSWER TO THAT. IT WILL DEPEND ON THE DEGREE TO WHICH THE UNION COOPERATES AND THE IMAGINATION OF THE MANAGEMENT I THINK GENERAL MOTORS IS VERY WELL MANAGED, BUT IT'S GOING TO TAKE A LOT OF COOPERATION FROM THE UNION. I CAN UNDERSTAND THEIR VIEWPOINT. THEY HAD PROMISES THAT WERE MADE TO THEM IN THE PAST. SO IT IS GOING TO TAKE SOME REAL UNDERSTANDING ON BOTH SIDES OF THE PROBLEMS OF THE OTHERS AND MAYBE IT WILL GET ACCOMPLISHED AND MAYBE IT WON'T. I DO THINK YOU HAVE GOT THE RIGHT PERSON RUNNING GENERAL MOTORS.

LIZ: RICK WAGONER.

BUFFETT: YEAH.

LIZ: HE'S THE RIGHT GUY YOU THINK.

BUFFETT: YEAH, BUT IT IS A TOUGH JOB. IT IS A VERY TOUGH JOB. I WOULDN'T WANT TO HAVE HIS JOB.

LIZ: WHOSE JOB WOULD YOU WANT TO HAVE OF THE BIG CONGLOMERATES?

BUFFETT: YOUR FRIEND JEFF IMMELT THE HEAD OF GENERAL ELECTRIC. HE IS A TERRIFIC MANAGER. THE ONLY JOB I MIGHT WANT IS CHARLIE MONGER'S

LIZ: WHY BECAUSE HE GETS TO SIT IN CALIFORNIA?

BUFFETT: HE HAS THE EASY END OF THE JOB.

LIZ: A QUICK MENTION ABOUT CURRENCIES. I HEARD YOU SAY THERE IS A FOREIGN CURRENCY YOU OWN. I'M GOING TO TRY AND PROD YOU KNOWING THE ANSWER IS YOU WON'T TELL ME, BUT YOU LIKE ANOTHER FOREIGN CURRENCY?

BUFFETT: THERE'S ONE OTHER THAT WE OWN THAT I WILL TELL YOU ABOUT NEXT YEAR.

LIZ: NEXT YEAR.

BUFFETT: GET YOU TO COME TO THE ANNUAL MEETING NEXT YEAR.

LIZ: ALL RIGHT. OVERALL THOUGH YOUR SENSE OF THE MARKET AS AN INVESTMENT FOR A KNOW NOTHING INVESTOR WHEN I SAY THAT I MEAN AN INVESTOR WHO HAS ANOTHER JOB DOESN'T HAVE A LOT OF TIME TO DO THE KIND OF RESEARCH.WHAT'S THE BEST WAY FOR THAT PERSON TO INVEST?

BUFFETT: THE BEST WAY IN MY VIEW IS TO JUST BUY A LOW COST INDEX FUND AND KEEP BUYING IT REGULARLY OVER TIME BECAUSE YOU WILL BE BUYING INTO A WONDERFUL BUSINESS WHICH IN EFFECT IS ALL OF AMERICAN INDUSTRY AND IF YOU BUY IT OVER TIME, YOU WON'T BUY IT AT THE BOTTOM BUT YOU WON'T BUY IT ALL AT THE TOP EITHER AND YOU WILL HAVE VERY LOW COSTS. FRICTIONAL COSTS ARE VERY IMPORTANT TO INVESTORS. IF YOU HAVE 2% A YEAR OF YOUR FUNDS BEING EATEN UP BY FEES, YOU ARE GOING TO HAVE A HARD TIME MATCHING AN INDEX FUND IN MY VIEW. I THINK PEOPLE OUGHT TO SIT BACK AND RELAX AND KEEP ACCUMULATING OVER TIME.

LIZ: LET ME GET TO POLITICS BECAUSE IT MATTERS IN WALL STREET. HILLARY CLINTON WAS CAMPAIGNING IN COUNCIL BLUFFS IOWA LATE YESTERDAY.

BUFFETT: THEY ALL LOVE IOWA.

LIZ: I BET THEY ALL LOVE YOU TOO. I NOTICE YOU HAVE BEEN HAVING CONVERSATIONS WITH HER. YET I ALSO NOTICED THAT AT THE ANNUAL MEETING ON SATURDAY YOU HAD BARACK OBAMA'S BEST SELLER THE AUDACITY OF HOPE FOR SALE. IS THERE ONE IN PARTICULAR YOU ARE GOING TO SUPPORT OR SOMEBODY ELSE?

BUFFETT: I THINK EITHER OF THE TWO WOULD BE ABSOLUTELY TERRIFIC PRESIDENT. ANYTHING I CAN DO TO HELP EITHER ONE OF THEM BECOME PRESIDENT OF THE UNITED STATES I THINK I CAN DO. I THINK THAT BOOK IS A TERRIFIC BOOK OF BARACK'S. I THINK HILLARY IS TERRIFIC. I LOVE THE IDEA OF EITHER ONE OF THEM BECOMING PRESIDENT OF THE UNITED STATES.

LIZ: HOW DOES THAT GO OVER WITH THEM WHEN YOU TELL THEM THAT?

BUFFETT: I THINK THEY WOULD RATHER HAVE ME SAY ONE. IT DOESN'T GO BEYOND THE TWO. IT'S NOT THAT MUCH MONEY. I CONTRIBUTED THE MAXIMUM TO BOTH OF THEM. IF EITHER ONE OF THEM ASKS ME TO HELP, I WILL.

LIZ: MARK HAINES WOULD LIKE TO ASK YOU A QUESTION.

MARK: GOOD MORNING, GOOD TO SEE YOU AGAIN.

BUFFETT: HI, MARK, 35 YEARS SINCE YOU HAVE BEEN OUT HERE.

MARK: YES. I WENT THROUGH IN THE MIDDLE OF THE NIGHT BECAUSE I THINK SOMEONE WAS CHASING ME. ANYWAY YOU MENTIONED LOW COST INDEX FUNDS. DOES THAT INCLUDE ETFs. DO YOU HAVE ANY THOUGHT ON EFFICACY OF ETFs FOR THE RETAIL INVESTOR?

BUFFETT: WELL, I'M NOT AN EXPERT ON THAT MARK BUT IT JUST SEEMS TO ME THAT A VERY LOW COST INDEX FUND IS PRETTY HARD TO BEAT. I MEAN, YOU PUT IT AWAY. YOU HAVE NOBODY ENCOURAGING YOU TO TRADE IT NEXT WEEK OR NEXT MONTH. YOU KNOW, YOUR BROKER IS NOT -- I HAVE NOTHING AGAINST ETFs BUT I REALLY THINK AN INDEX FUND THAT CHARGES A FEW BASIS POINTS FOR MANAGEMENT IS PRETTY HARD TO BEAT.

MARK: YOUR THOUGHTS ON PRIVATE EQUITY, OF COURSE YOU REMEMBER WELL MOST OF US REMEMBER WELL BACK IN THE BUBBLE THERE WAS A LOT OF MONEY, THERE WAS TOO MUCH MONEY CHASING TOO FEW GOOD IDEAS. PRIVATE EQUITY'S BEEN RAISING A LOT OF MONEY. ARE WE IN DANGER OF REACHING THAT POINT WITH PRIVATE EQUITY, TOO MUCH MONEY, TOO FEW GOOD IDEAS?

BUFFETT: I THINK THERE'S NO QUESTION THAT EITHER THAT HAS HAPPENED OR WILL HAPPEN, AND, YOU KNOW, THE INCENTIVES TO RAISE MONEY FOR PRIVATE EQUITY ARE HUGE. IF YOU ARE GETTING A COUPLE PERCENT ON 20 BILLION, YOU ARE GOING TO WANT TO RAISE ANOTHER 20 BILLION THE ONLY WAY YOU ARE GOING TO RAISE THE SECOND 20 BILLION IS TO GET THE FIRST 20 BILLION OUT. SO THE PUSH TO DO DEALS IS HUGE IF YOU ARE RUNNING A FUND LIKE THAT. FRANKLY IT MAKES IT VERY TOUGH COMPETITION FOR US.

MARK: YOU WERE TALKING EARLIER ABOUT NEWSPAPERS YOU MENTIONED THEM IN YOUR LET TORE SHAREHOLDERS BACK IN -- LETTER TO SHAREHOLDERS BACK IN MARCH. IS RUPERT MURDOCH WRONG?

BUFFETT: NO, HE'S NOT WRONG. IT DOES FIT WITH CERTAIN THINGS THAT NEWSCORP DOES. AND PLUS, YOU KNOW, HE WOULD LOVE TO OWN -- A LOT OF PEOPLE WOULD LOVE TO OWN IT. A LOT OF PEOPLE CAN'T AFFORD IT. BANCROFT FAMILY DOESN'T HAVE TO SELL. THEY CAN ALWAYS GET $60 A SHARE. THAT IS NOT A HIGH PRICE FOR DOW JONES AND COMPANY IF YOU HAVE THE INCOME YOU GET PLUS THE CASH INCOME. IT IS NOT LIKE THEY ARE PASSING UP THE OFFER OF A LIFETIME IF THEY TURN IT DOWN.

MARK: LAST QUESTION, KIND OF A SOFTBALL. HAS TO DO WITH EXECUTIVE COMPENSATION. I MEAN, I INTERVIEW EXPERTS, PEOPLE WHO I DON'T THINK HAVE ANY STAKE IN THE MATTER, AND MANY OF THEM BUY INTO THIS IDEA THAT THERE'S SO FEW GOOD MANAGERS OUT THERE, THAT YOU HAVE TO PAY, YOU KNOW, THESE KING'S RANSOMS, AND, YOU KNOW, YOU CAN CITE MEG WHITMAN TO THEM WHO IS PAID 1.7 MILLION A YEAR. YOU CAN CITE WHOEVER IS RUNNING TOYOTA. WHY ARE PEOPLE SO WILLING TO BUY INTO THIS IDEA THAT WE HAVE TO PAY HUNDREDS OF MILLIONS OF DOLLARS FOR GOOD MANAGERS WHEN CLEARLY IT'S POSSIBLE TO FIND PEOPLE FOR LESS, GOOD QUALIFIED PEOPLE?

BUFFETT: WELL, YOU HAVE THE CEOs TELLING THEM THAT. YOU HAVE THE COMPENSATION CONSULTANTS TELLING THEM THAT. I WOULD JUST LOVE TO BE ABLE TO TAKE 10% OF THE SAVINGS IF I GOT TO NEGOTIATE SOME OF THOSE CONTRACTS MYSELF. IT ISN'T -- IT'S NOT A FAIR FIGHT. I MEAN, THERE'S NOT A PAIR DI OF INTEREST. WHEN A LABOR UNION IS NEGOTIATING WITH MANAGEMENT THEY STAY UP TILL 3:00 IN THE MORNING AND HAVE IMPASSES WHEN IS THE LAST TIME YOU HEARD OF THEM STAYING UP TILL 3:00 IN THE MORNING NEGOTIATING WITH A CEO?

LIZ: I HAVE ONE LAST QUESTION TOO. ABOUT CHINA, EVERYBODY IS TALKING ABOUT HOW CHINA IS GROWING.CHINA HAS AWAKENED. YOU HAVE HAD OPPORTUNITIES TO BUY INTO CHINESE BANKS. WHY DID YOU PASS?

BUFFETT: I JUST DON'T UNDERSTAND THEM. I DON'T HAVE THE FAINTEST IDEA WHEN A CHINESE BANKS SAYS LOANS ON ITS ASSET SIDE 28 BILLION I DON'T KNOW WHAT'S THERE. IT IS ENOUGH TROUBLE FIGURING THAT OUT WITH AMERICAN BANKS. IT IS NOT A NEGATIVE VIEW. IT IS AN I DON'T KNOW VIEW. I'M AN AGNOSTIC NOT ATHEIST ABOUT IT.

LIZ: COULD WE EXPECT TO SEE SOME OF BERKSHIRE'S SUBSIDIARY PRODUCTS HOPEFULLY SELLING INTO CHINA FOR EXAMPLE FRUIT OF THE LOOM?

BUFFETT: THERE WILL BE PLENTY OF BUSINESS DONE BY BERKSHIRE IN CHINA.

LIZ: WE WILL BE LOOKING FORWARD TO THAT. MR. BUFFETT I WILL LET YOU GET UP TO YOUR BOARD OF DIRECTORS MEETING. MY THANKS TO YOU WE APPRECIATE YOU COMING ON "SQUAWK ON THE STREET" AND OF COURSE ON CNBC. WARREN BUFFETT.



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