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Warren Buffett Watch
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LIVE BLOG ARCHIVE: Ask Warren Buffett on CNBC's Squawk Box
7:02a: Emailer asks how do we know you're not a Bernie Madoff? Buffett says that's always a problem with financial advisors. It can be hard to know who is honest. "It is a problem who you put your trust in." "Crooks come in many forms." But he rejects the idea that the stock market itself is just a big Ponzi scheme. The machine works, and "equities, over time, are the way to do it."
7:03a: We can't have people worried about banks. Overwhelmingly people are honest, but there will always be crooks.
7:05a: Do you wish you hadn't written the "Buy American" New York Times piece last October? Buffett says he wasn't trying to call the bottom then and wasn't responsible for the headline. He stands by his arguments that you'll do better over a 10-year period with stocks than you will with Treasuries. It's not his game to say exactly when the stock market has bottomed. "I stand by the article, but do wish I had run it a few months later."
7:07a: Goldman [GS
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] and GE [GE
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] deals were attractive at the time last fall because he could get 10 percent on the preferred shares. He doesn't think he could get that yield now.
7:08a: The "fact that business is going to get worse" does not mean you shouldn't buy equities now.
7:09a: American Express is going to be around "forever." Can't buy more stock in the company due to restrictions involving bank holding companies. That doesn't mean it is not a "hell of a buy" at $10/share.
7:10a: Buffett says he likes to have a big cash cushion. Ten billion dollars is the "absolute minimum." Berkshire will do less catastrophe insurance this year. Buffett says Berkshire's insurance units will take on less risk because there's less cash around to handle large, unexpected losses. "We can't depend on anybody."
7:11a: Buy and hold is not dead if you buy into the right companies at the right price.
7:17a: What investment of the past year would you take back? Buffett laughs and says there are several. He cites ConocoPhillips [COP
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] and the Irish banks he mentioned in his letter to shareholders. He concedes he makes lots of mistakes, but hopes his successes make up for the errors.
7:19a: For the companies Berkshire buys, the holding period is "forever." He likes to buy stocks with the idea of holding them for a very long time. Even though Wells Fargo is going through a tough couple of years, he looks at its overall business prospects. Wells Fargo [WFC
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] and USB [USB
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] prospects are good several years out. Wells could generate $40 billion of annual pre-provision income within a couple of years.
7:22a: Buffett again calls on Obama to make it "very clear" what the government is doing. He's the commander-in-chief.
7:23a: Joe asks about Berkshire's "put options" on stock indexes. Buffett says he'd rather have written those derivatives contracts now instead of before, but he doesn't regret the decision and thinks they will ultimately be profitable. They've also generated a lot of income that can be used for investing. Asked about his "weapons of financial mass destruction" comment about derivatives a few years back, Buffett says derivatives aren't "evil" but they are potentially "dangerous." "We use lots of things daily that can be dangerous" like cars. He's used derivatives for many years, and must pay very close attention to how they are used.
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] go bankrupt. Automakers have done a lot of dumb things because their business model doesn't exist any more. They need a new business model and a recovery. Current management and the union didn't get us into the problems. No use being mad at them now. They should work together and try to avoid bankruptcy. Not good to have America's "home-town industry" in bankruptcy.7:35a: U.S. economy was not a "house of cards" but it was based on "leveraging up." "America works and America was working over the past ten years" but people did some very stupid things involving borrowing too much money.
7:37a: We're lucky we have population growth to "sop up" some of the supply of houses, which is too high right now. We must work through the "glut" of houses on the market. Need to create fewer houses than natural demand will "sop up." Depending on how much new construction there is, the glut could be worked through in a few years.
7:40a: While America made too big a bet on housing over the last ten years, a lot of other things were done right, and some things will be done right over the next ten years. Buffett: "You want to have enough rope to hang yourself, but not enough to hang the whole system."
7:41a: Free markets sometimes overshoot but they're still the best system. When they do overshoot, government is needed to help correct things.
7:46a: Would Buffett thought the Dow would go down to 2000 would he feel an obligation to say, or not to say, it publicly? Buffett says he doesn't know exactly where stocks are going, only that he knows they will go higher over time. Despite some difficult times, the "system works very well." I can "guarantee you" the Dow will be a lot higher in 10 to 20 years, but has no idea what the number will be.
7:48a: Buffett concedes the three billion dollar commitment to Dow Chemical [DOW
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] and Rohm & Haas [ROH
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] did not turn out to be a good deal for Berkshire, but will stand by it. It looked smart at the time but it looks dumb now. "That's the way the world is."
7:50a: We are doing things that are going to add to inflation. They are things we have to do.
7:50a: Buffett demurs from calling blue-chip stocks the "opportunity of a lifetime" but says it you buy a cross-section of well-capitalized companies you'll make money over 10 to 20 years. No idea whether you'll make money over 10 months. Getting quotes every day makes it hard to focus on the underlying businesses. "Forget the quotes."
7:52a: Geico is worth far more than we paid for it, but other companies we bought are not.
7:54a: People should still try to live within their means, even though lower spending is not helping the economy.
7:55a: To some extent, the people who behaved well are going to find themselves taking care of the people who didn't behave well, but everyone must help others. "There's nothing wrong with being mad, but there are times you have to overcome the emotion." Buffett says he didn't know Bernie Madoff, but if he was in a boat with him on Lake Michigan, and the boat sprang a leak on Madoff's side, he would still try to save Madoff and the entire boat. That is, we're all in this together.
Data is a real-time snapshot *Data is delayed at least 15 minutes
