Warren Buffett to CNBC: All the Speculation is Just Speculation
CNBC's Becky Quick spoke by telephone with Warren Buffett this morning, asking him about today's Wall Street Journal article (the subject of my previous WBW post .. love that Buffett quote in which he compares himself to Imelda Marcos!) that offers a great deal of speculation about what he might be buying right now, including Countrywide Financial:
This is not going to be a surprise. Mr. Buffett tells Becky that all the speculation is just that, speculation.
Becky did another report on Power Lunch a little later. In this video clip of that appearance, Buffett-book author Andrew Kilpatrick tells us, "He would certainly be looking at the financials in this country, when he is standing on $47 billion in cash at a time of a credit crunch and a housing crisis. So his cash speaks .. if he has $47 billion in cash, it's probably worth quite a bit more because he can find something with that money where he's going to get it at a 20% discount. "
Here's more from Kilpatrick's off-air interview this morning with CNBC Producer Kelly Lin. Comments are paraphrased.
- I think it's good speculation. You know, it could be a company in South Africa. You never know.... Countrywide makes some sense because you'll recall the early 90s in California, he bought Wells Fargo stock. And Wells Fargo is a huge lender, as you know, in California. At that time, you had the savings and loan crisis. The worst thing you could say was 'real estate loan.' Banks were in trouble and he bought the stock. The P/E was 3 or 4. So he knows financials in California. He loves California. California is not a state - it's the 8th largest economy in the world, if I have my facts right. He would totally understand the Countrywide situation and could buy the stock and the assets.
He has been buying banks. He did increase his stake in Wells Fargo. He's bought into Bank of America , USB . He seems to be all over the lot. Burlington Northern , you know about. So he seems to be adding wherever he can get that low stock price on a quality company. Now, he's not buying anything that's not just a top quality company. Wells Fargo, I believe, is the only AAA credit bank in the U.S. So it's not the same as buying another financial institution. And I think they have much more conservative lending standards. And I think he would look for that kind of financial.
- He's trying to wring risk out of his investments. He wants as little risk as possible. People think when investing, 'I want a lot of risk and maybe I'll double my money.' He wants as little risk and as much knowledge as possible... He would certainly be looking at financials in this country when he is standing on $47 billion in cash at a time of a credit crunch in a housing crisis. So his cash speaks - if he's got $47 billion in cash - it's probably worth quite a bit more because he can find something with that money where he can get it at 20% discount or something like that. He will make a good investment. Whether its Countrywide, I have no idea.
- I think he's looking for the best credit. where there's some stigma to the company... Where he can help out - by putting his cash in and then getting something. He's not going to buy junk. He just simply won't. He's always looking for... AAA credit. Berkshire's one of the few AAA credits. He's looking for other companies who are AAA credits. It would be like when he bought American Express , Wells Fargo, Washington Post . He buys in times of turmoil - times of stigma. But it is a company that's going to be here a long time out. There may be turmoil for a short period and that's where he gets in - and he gets paid several years later.
- He did buy when California was on the ropes - and right now the credit situation is that kind of temporary thing where cash means everything.
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