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Warren Buffett Watch

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Mar.09

5:57 AM ET

Monday, 9 Mar 2009

LIVE BLOG ARCHIVE: Ask Warren Buffett on CNBC's Squawk Box

Posted By:Alex Crippen

Topics:Warren Buffett

8:05a Buffett repeats that President Obama needs to be very clear with a message expressing confidence in American banks and support for the system. Bank failure may wipe out shareholders, but depositors need to feel safe. he says there may not be a recovery for Citigroup [C Loading... () ] shareholders.

8:07a: Toxic assets that banks hold probably have the best prospects for returns if the current value is based on mark-to-market. The big problem for banks is not the toxic assets. Banks need to pay very little in dividends and build up their capital positions. "This is a great time to be in banking." Banks can make a lot of money making loans.

8:10a: Buffett says Dairy Queen same-store sales have been up throughout the economic crisis, but Berkshire's higher-end stores see lower sales. American consumers are trading down. Why Tiffany's [TIF Loading... () ] then? Buffett says we loaned money to Tiffany's, we didn't buy the equity and he thinks Tiffany's will survive the downturn but anyone in the luxury goods business will have a bad year this year.

8:16a: Buffett says he has had only a few informal conversations with President Obama and is not really giving economic advice to the administration, but he repeats his support for Obama. "He is the right president and this is the right country." He expresses no regrets for his support of Obama during the presidential campaign.

8:18a: Obama's stimulus plan is part of the recovery effort but won't do it alone and won't bring about an upturn immediately. Other steps are even more important.

8:19a: Should the SEC suspend mark-to-market accounting? Buffett says people did play games with numbers and probably still do, and has always been suspicious of CEOs in the "honor system." Mark-to-market has put some gasoline on the fire. Buffett thinks mark-to-market should continue to exist but regulators should not necessarily demand that firms raise more reserve capital based on lower mark-to-market values.

8:21a: Buffett repeats that political parties should not think "a crisis should not be wasted" just as Americans didn't say a "war should not be wasted" back during World War II. Buffett says he doesn't want to use CNBC to give President Obama any advice, but should err on the side of doing too much on the economy and banking system rather than too little.

8:23a: What about the uptick rule? Buffett says people who are both long and short can say false things about stocks. Overall, he thinks the uptick rule should probably be put back in place. It is "probably" a good idea. He welcomes those selling Berkshire shares short because they'll be "sure buyers" later on.

8:24a: While biased due to Berkshire's ownership of NetJets, Buffett says it is a mistake to criticize company executives for using corporate jets. He says no one should be "demonized." Buffett says Berkshire has made deals it would not have otherwise made because he has access to a private jet.

8:30a: Buffett wants to see changes in the tax code, but this is not the time to try to make those changes. More important to get the economy working again.

8:31a: Agrees with email question that the Fed and the Treasury have become the "spenders of last resort." They have a "huge role to play" and have been doing it well. Buffett praises Bernanke's leadership at the Federal Reserve. He "should be given a lot of credit."

8:33a: Buffett says union elections should continue to be by secret ballot. He is opposed to the "card check" proposal for worker votes on joining unions.

8:34a: Are bank stocks a good buy now? Buffett says we own some bank stocks and likes them, but does worry that at some point they may be forced to issue more stock. The banking system will cure itself, although Citibank may be a "special case." Investors are lumping all banks together. By and large, banks are in good shape although some will continue to go broke.

8:36a: Financial institutions should not be allowed to get too big in the future, but that doesn't mean they didn't mean to be saved in the past.

8:37a: Buffett won't predict where the price of gold is going in the future, but he notes that it won't be making money for you over the years the way a business will.

8:39a: Government should do everything it can to make the automakers viable at a 12 million to 13 million unit year of sales.

8:40a: "It was essential that people believed in the financial system." Not inclined to second-guess on whether TARP money would have been more effective if cash was given directly to the people.

8:49a: Buffett says hard to know how bad inflation will be in the future, but we are certainly doing things that could boost inflation later on. Still, these things must be done. Best thing for an individual to do is invest in his or her own talents. The U.S. went "import-crazy, consumption-crazy" in the past ten years.

8:50a: Reducing deductions for charitable contributions may hurt a bit but have to look at the big picture. Helping the economy recovery will do the most good for charities.

8:52a: Putting a cost on putting carbon into the air is a "tax like anything else." Utilities will pass on those costs to their customers. Right now, the most important thing is to get the economy moving.

8:54a: What is the biggest lesson you learned in 2008? Buffett answers it is the dangers of extreme leveraging. Leveraging up is a "lot of fun on the way up" but can be a "tragedy" on the way down. The lesson that needs to be learned is we shouldn't let big institutions be "unchecked" in their use of leverage.

8:56a: "Corporate America has plenty of room to behave better." Corporations must report truthful, accurate numbers.

8:58a: Average American should certainly avoid credit card debt. Can't make money borrowing at 18 to 20 percent. "I'd go broke." His advice: "Stay away from debt as much as possible."

8:58a: Are you more optimistic or pessimistic about the economy since you first described it as a Pearl Harbor. Buffett says more optimistic because the government did step in last fall to prevent a total disaster and remains optimistic about the economy's long-term prospects. "This country will work fine even if we screw it up."

8:59a: Becky thanks Buffett and signs off today's special edition of Squawk Box.

Current Berkshire stock prices:

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