Warren Buffett Watch

Published: Friday, 24 Jul 2009 | 12:28 PM ET

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Warren Buffett appeared live on CNBC's Squawk Box this morning to promote a new online animated series called the Secret Millionaire's Club in which he teaches kids about finance and investing.

Buffett told us that stocks are still a better investment than cash investments, like Treasuries, even though the Dow has recently rallied to its highs of the year over 9000.

This is a transcript of the CNBC interview that got underway after Squawk showed a clip from the animated show in which Buffett talks to kids about the potential positives and negatives of investing in a fictional Ohama candy company.

BECKY QUICK:  Warren, thanks for joining us this morning.  We appreciate it.

BUFFETT:  It's my pleasure.

BECKY:  You know --

BUFFETT:  Have some candy. (Laughs.)

BECKY:  Have some candy.  That's something we hear from you often.  That's something we hear in the webisode, too.  But how did you get involved in these webisodes?

BUFFETT:  Well, I've got a friend, Andy Heyward that started producing cartoons for the Berkshire annual meeting ten years ago.  He did it just out of the goodness of his heart and did a terrific job.  We've become good friends and then a few years ago he did something called Liberty's Kids that was a cartoon, animated arrangement, that retaught history from around the time of the Revolutionary War.   And I was really impressed with the product.  It was - I found myself enjoying the episodes myself and an eight-year-old could enjoy them.  So he knows how to tell a story.  And he loves to do something beyond tell a story and amuse.  He really wants kids to come away smarter or with better habits.   So I love working with Andy.

BECKY:  What's your hope that kids will take away from these episodes?

BUFFETT:  Well, one way or another you develop financial habits when you're very young.  And the habits you develop live with you for the rest of your life.  So if we can get through to some young people that it's better to be a little bit ahead of the game than behind the game, watch out for credit cards.  The most important message is that the best investment you can make is in yourself.   Teaching them if something's too good to be true, it probably is, and so on.  If they learn those things the easy way through these stories early on, it may save them learning it the hard way later on.

BECKY:  The webisode we just watched was something to save the Omaha Candy Company.   What other sorts of episodes can we expect to see?   Have you done them yet?

BUFFETT:  No, we haven't done them yet.  Andy may be well along but I haven't done any of the work myself.  Andy is the guy who delivers the story lines but what we're really trying to do is get through, at least to some of that young audience, some messages that will help them later in life when they start facing choices as to whether they run up a big credit card bill.  Or like I said, the most important message you can deliver to a young person is that anything you invest in yourself, you get back ten-fold.  And nobody can tax it away, they can't steal it from you.  So we'll be trying to deliver those messages.  You have to do it with a good story.  They're not going to watch it to get a lecture.  They're going to watch it to get entertained, and in that entertainment we hope there can be a good message.

JOE KERNEN: Warren, I've always been told that there's huge money in voiceover work.  (Buffett laughs.)  And I'm just wondering, just wondering is that what drew you to this?  They don't have to show you, you see all these Hollywood types are in there, you see them in the room, they've got the big microphone with the muffler --

CARL QUINTANILLA:  Improvising.

JOE:  Improvising.  Was that it?  Big money in voiceover work that attracted you here?

BUFFETT:  Joe, you'll have to talk to my agent.  (Laughs.)  No, I'll tell you, obviously, I'm not getting paid for this.  There was a time when the market was, you know, hitting 66-hundred or so, that I thought maybe I'd renegotiate, but things have come back enough so that I'm doing this for nothing.  (Laughs.)  I'm open to ideas, though, Joe.

JOE: I was wondering, what is now a prescient piece in the Journal about buying American.  I was wondering --

BECKY:  Times.  New York Times.

JOE:  Was it in the New York Times?  OK.  I was wondering where the averages were at that point, because I think you're, now it looks prescient.  For a while it looked, but you said long-term, you didn't say this week or next month or whatever, but it's hard to short America long-term.

BUFFETT:  Yeah.  It was not designed to be a one-week or one-month market forecast.  But it was designed to tell people who were keeping their money in short-term investments where they thought cash was king, and all that sort of thing, that I really thought that if they were going to be investing over the longer term, equities were going to do way better than cash investments.  And if you held cash investments since that article, you've received virtually nothing.  And if you've held the index, you've done modestly better plus you've gotten a better yield.  But it wasn't - whether the market is up or down now does not make much difference.  But I would have been very surprised if five years from when I wrote that article that stocks hadn't vastly outperformed cash investments.

JOE:  Well, it happened pretty fast.  I think it was only about a month ago, was it during Berkshire's release?  I don't remember what it was, but you said this still is awful.  And across the board none of your businesses were, seemed to be improving at all.  Now the market's improved a lot.  Is it as bad as it was a month ago or are you seeing, I can't call them crocuses or green shoots, but has anything gotten any better in the past couple of weeks?

BUFFETT:  No, business is flat.  But I said in that article, I said if you wait until you see robins, spring will be over.  You can't wait for business to turn up and be very clear about the fact it's turned up.  You'll probably only figure it out three or four months later anway.  But the market is very, very likely to turn up before business.  But I don't try and time stocks.  I try to price stocks and stocks were a decent value when I wrote that article.  They got to be an indecent value some months later.  But it's a mistake - in fact, maybe we'll work it into an episode of the Secret Millionaire's Club, that people who think they can pick the market day-by-day are probably making a mistake.

JOE:  If you get laryngitis, Carl is available to do some voiceover work for you.  (Buffett laughs.)  I don't know if anyone can really -

CARL:  I'm going to try to teach kids how to write algorithms and CDOs.  How about that?

JOE:  That's an idea.  But in Mr. Buffett's voice.

BUFFETT:  We'll save you for a later session then, Carl.

BECKY:  Hey, Warren, you said that markets got to an indecent level.  I guess you were talking about back below 7000, but when you look at the Dow above 9000 now do you think that's a decent level?  Or is it less indecent, at least?

BUFFETT:  I would much rather own equities at 9000 on the Dow than have a long investment in government bonds or a continuously rolling investment in short-term money.  Now, again, I don't know where it's going to go next week or next month.

JOE:  Good answer.

BECKY:  But you still think equities is the place to be?

BUFFETT:  I would, you know, I own 'em myself.

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