CARL:  A lot of people who are watching us Warren, and even people who have just started watching us over the past week or two, look at the stock market every day and are confused.  They want to use it as a metric for how we're doing,  or at least the progress we're making on big issues.  I'm guessing you don't think it's reflective of anything that's based in reality right now?

BUFFETT:  Well, the stock market in the short -- my old boss Ben Graham said that in the short-run the stock market is a voting machine, in the long-run it's a weighing machine.  As a voting machine, it responds to people's emotions.  There's no literacy test for voting. You vote according to how much money you have, not according to how smart you (are.)  So the stock market does some very silly things in the short-run.  Over the long-run, it behaves quite rationally.  And, you know, five years from now, ten years from now, we'll look back on this period and we'll see that you could have made some extraordinary buys.  That doesn't mean it won't get more extraordinary a week or a month from now.  I have no idea what the stock market is going to do next month or six months from now.   I do know that the American economy, over a period of time, will do very well, and people who own a piece of it will do well.  But they shouldn't own it on leverage.  That's what people have learned in this period, that you've got to be able to play out your hand and it's a big mistake to let somebody else be in a position where they can sell you out.

BECKY:  Warren, when you first invested back in '87 in Salomon, I believe your partner, Charile Munger, was not as enthusiastic about the idea as you were.  Is that true?

BUFFETT:  That's true.  Of course, he's never as enthusiastic about my ideas as I am.  But I would say he was even less enthusiastic.  (Laughs.)

BECKY:  How does he feel about the Goldman deal?

BUFFETT:  Well, I'm glad you asked because I, (laughs), didn't tell him about it until after it was done.  (Laughs.)

CARL:  How rude!

University of Michigan Charles Munger, Buffett's longtime business partner

BUFFETT: (Laughs.)  Yeah, it is kind of rude.  But Charlie's wife had a bad fall and he's (inaudible) and I called him last night about an hour after I committed it, or something, and I called kinda like a little boy ... (laughs) ... bringing into the house something he was a little worried about.  But, Charlie's all for it. (Laughs.)

BECKY:  He's all for it.

BUFFETT: Yeah.  Now I'm really worried.

BECKY:  Uh-oh.  For the last nine months, Berkshire has spent a lot of that cash it's been hoarding over the last several years.

BUFFETT:  That's right.

BECKY: I was trying to figure it out.  I think it's about 24 billion dollars you've spent in the last nine months?

BUFFETT:  Yeah, we've spent a lot of money.  The money, the money we've spent, you know, we've found things we like to do.  It's nice to have a lot of money, but you don't want to keep it around forever.  I prefer buying things.  Otherwise it's a little like saving up sex for your old age.  (Laughs.)  At some point, you've got to use it.  (Laughter.)

JOE:  Uh-oh.

BECKY:  Twenty-four billion dollars.  Is that a right guess and how much cash do you have left?

BUFFETT:  You know, it would be 6-1/2 for the Mars deal, there's five for this, there's five for Constellation, there's a couple of other things.  So, yeah, your addition is fine, Becky.

BECKY:  How much cash do you have left?

BUFFETT:  Well, I've got enough.   (Laughs.)  I don't really look at it every day.  I look for opportunities every day, and then if I find opportunities, I see if I've got enough cash around to take care of them.

JOE:  Well, by my calculation, if you lever that up thirty times, Warren, you can really get serious here.  (Laughter.)  Maybe you don't want to do that, I don't know.  (Laughter.)  What about, how are we going to deal with this looming 50 -- we just had (New York State Insurance Commissioner) Eric Dinallo on, I don't know if you were watching, Mr. Buffett.  He talked about, he can, maybe New York and his unit can look at the twelve billion, or trillion, jeez, we've got to add a T.  I'm finally getting used to Bs, now we have to add a T.  But what we are going to do with that 50 trillion and how, having that still around, all these credit default swaps, how serious is that, and how are we going to unwind it and deal with it?

BUFFETT:  Yeah, well, it goes beyond credit default swaps into all forms of derivatives.  But the derivative genie got out of the bottle, and it's a huge genie, and it will never get back into the bottle.  It is a terribly tough problem because they are not homogeneous items.  It's one thing to have a clearing house for the futures in Chicago, or something, and every morning have everybody post to market and that's a very efficient system.  It's very hard to do that with derivatives where you can derivatives based on the New Zealand money supply or the number of babies born in Japan, and all kinds of things as the variables.  And they're often very complicated.  I applaud Dinallo.  He is an outstanding insurance commissioner.  But getting regulation around the entire derivatives market is really tough.  I've thought a lot about it.  But it's important.  Derivatives have been an important part of the problem in financial markets.  And they continue to be part of it.  And in AIG's case -- AIG would be doing fine now, I think, if they'd never heard of the word derivative.   

PART THREE OF THE BUFFETT TRANSCRIPT:
TIMED TO HELP THE PAULSON PLAN?                         

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