THIS IS THE SECOND PART OF A TRANSCRIPT OF WARREN BUFFETT'S SERIES OF LIVE APPEARANCES THIS MORNING (MONDAY, MARCH 3) ON CNBC'S SQUAWK BOX.
ANNOUNCER: Live from Omaha, Nebraska, here again, Becky Quick with special guest Warren Buffett.
QUICK: Welcome back, everyone, to this very special edition of SQUAWK BOX. We're live in Omaha, Nebraska, and we're standing by at the Nebraska Furniture Mart. This store is the largest home furnishing store in the entire country. We're standing by right now in the electronics store which just opened up last year. Nebraska Furniture Mart, if you don't know, folks, is one of the 76 holding companies--or operational companies of Berkshire Hathaway. And we are very fortunate to be joined this morning by Warren Buffett, the "Oracle of Omaha," who has been gracious enough to offer--to take questions from our viewers this morning. And, Warren, I have to tell you, the demand was overwhelming, thousands of e-mails coming in, and we've tried to narrow them down a little bit. Why don't we jump straight to it.
BUFFETT: Just give me the easy ones.
QUICK: Yeah, just give you the easy ones. I have to tell you, there were some very, very thoughtful questions that came in.
EMAIL TEXT: In your annual letters you make it very clear you are not a fan of hedge funds and think they destroy wealth. Do you think hedge funds have an edge which justifies their huge fees? Brad Alford, Atlanta, GA
QUICK: I want to start off with a question from Brad in Atlanta, Georgia, and he asks, `In your annual letters you make it very clear that you are not a fan of the hedge funds and you think they destroy wealth. Do you think hedge funds have an edge which justifies their huge fees?'
BUFFETT: Well, the answer is an aggregate no. When there were very few of them and a lot of talent, but not a lot of competition with each other, it's very likely that they did. But in Wall Street you have this progression from the innovators to the imitators to the swarming incompetents. And what happens is that the results achieved by the innovators enable the product to be sold by a lot of people simply because the record of a few people was good. So the idea that billions--well, trillions of dollars can be managed to get above average results while charging fees that are way higher than normal just defies the--just defies the logic. So, in aggregate, people are going to be disappointed with the results you get from hedge funds. But there will be ones that do terrifically, but it's--I would not want to buy them across the board.
QUICK: OK. Jake Kamm from Cleveland, Ohio, writes in and he says, `Among the CEOs within the universe of publicly traded companies in which Berkshire doesn't have an ownership position, which CEO do you believe is doing the best job on behalf of shareholders?' Tricky.
BUFFETT: Well, there's a number of them. The fellow at Fastenal has done a very good job.
QUICK: I'm sorry. Which company?
CNBC has scheduled a one-hour special program on Buffett's unprecedented Squawk Box appearences.
It's called Warren Buffett - The Billionaire Next Door: Face to Face. It will be hosted by Becky Quick and airs tonight, Monday, March 3 at 9pm ET.
BUFFETT: Fastenal. I mean he, all you have to do is look at the record on it. Jim Senegal has done a terrific job of running Costco. We own a tiny bit of it, but I don't think that's warped my view. There are a lot of good CEOs in the country that--I'm thinking right now a few where we own them, but I think Jeff Immelt at GE. We have some in a pension fund, we don't have anything at Berkshire, has done a first class job. Some of these people got handed the baton at the wrong time.
BUFFETT: Jeff got handed the baton at kind of a bad time. There are--there are a lot of outstanding--there are a lot of outstanding CEOs. I may think of some more that I want to name as we go along.
QUICK: OK. If you think of more, you can jump in with them.
BUFFETT: Yeah. I've got to think of who I'm playing golf with next week.
QUICK: Let's move on to David from Defiance, Ohio. He asks, `How would you define a recession?' This is something we talk an awful lot about on the show, but he says, `I've been listening to a lot of discussions on CNBC, some of which can be very annoying because they tend to be so outrageously vocal and the experts believe two quarters of negative growth qualifies as a recession.' Is that the surest definition of it? Or do you think it's broader than just that?