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Is Charlie Munger Too Pessimistic? Ask Warren Transcript - Part 8

Is longtime Warren Buffett partner Charlie Munger too pessimistic?

This is part eight of the transcript and video of Warren Buffett's 'Ask Warren' appearance on CNBC's Squawk Box on Monday, March 1, 2010.

CLICK HERE FOR PART SEVEN

QUICK: All right, welcome back everybody. We are live in Omaha, Nebraska, with Warren Buffett. We've been going through the questions that you've been sending in. We've got more to get to. And, Warren, I want to start out with a question from Jason Gould in Waco, Texas, who says, "Charlie Munger recently released an op-ed parable titled, `Basically, It's Over.' Is Charlie too pessimistic?"

BUFFETT: He's talking about the fact that when a country gets too occupied with being--with the casino aspects of the--of the economy and forgets about the rest that it's headed in to somewhat of decadence. That is what (economist John Maynard) Keynes wrote about back in 1935 in Chapter 12, and Charlie's more pessimistic than I am. This country is not an accident. I mean, 200 years ago look what we had and look what we have now. It isn't like we've forgotten any secrets or anything of the sort. So the country has a bright future.

QUICK: Another viewer had written in, and I don't have the e-mail here right now, but another viewer had written in and said, `What do you do when you and Charlie disagree fundamentally on a point? How do you make that decision?'

BUFFETT: Well, what Charlie always says to me is he's--when we disagree--he says, "Well, Warren," he says, "you'll see it my way because you're smart and I'm right." That's his technique. But pretty much in--if we really disagree on something, we're not going to do it. But if I like something, he just grumbles and mumbles and, you know, says, "That's kind of a dumb idea," where I go ahead and do it.

QUICK: What's the last thing that you disagreed on fundamentally so much that you didn't do it?

BUFFETT: Hm, there have been some like that. I can't pick them right out of the air at the moment. Certainly nothing in the last six months or I would recall it.

QUICK: OK. Let's get to question--a question from Streamwood, Illinois. "If you were Ben Bernanke or Tim Geithner, what specific monetary or fiscal policy would you recommend that would have an immediate impact on job creations?"

BUFFETT: That's very tough. I mean, if you really, you know, if you want to do something, you'd go out and--you would drop a $1 million in every household.

QUICK: Mm-hmm.

BUFFETT: But, of course, money would be worth nothing. The real trick is to--is to get the--have them drop a million in every household and have me be the only--have me think that nobody else got it except me. Now I think the money's really valuable. It--you--you're trying to stimulate and you stimulate by putting money in people's pockets who are going to spend it. But that has consequences down the line. I mean, we--you have to deal with the illness and then, unfortunately, you have to deal with the medicine, and the medicine is very strong this time. So there's going to be a lot of medicine to deal with.

QUICK: Has the government done enough already and now it's time to just and wait?

BUFFETT: It's hard to tell. It--I think it's--I think there's a political dissatisfaction element that enters into what government does. I mean, obviously, if people expect results next month they're not going to get them next month. But if they get--you know, want some kind of action if they get upset enough and they'll--you know, with an election coming up in November, you're going to see more and more people saying, you know, `Why isn't this working faster?'

QUICK: Although, you're probably talking about two disgruntled groups. One, who are people who are very worried who don't have jobs, they're worried about losing their jobs who'd like to see more done. The other like the Tea Party coalitions that are being formed that would like to see the government step out of it and not spend any more taxpayer dollars.

BUFFETT: And that's why out government's always been messy and it's going to continue to be messy, but it'll work in the end.

QUICK: All right, let's get to another e-mail question. This one comes from Dana in Fort Smith, Arkansas. She says, "Mr. Buffett, I've always used the trucking industry as a gauge on how the U.S. economy is doing. I've become more concerned lately as I see our country's major trucking companies struggling. Are my concerns legitimate?"

BUFFETT: Yeah, well, trucking is struggling and the railroads. I mean, the railroad carloadings last week or the week before, whenever it was, were down--they were up from last year, but they were down 16 and a fraction percent, as I remember from two years ago. And trucking is having the same experience. There are just less goods moving than there were a few years ago because the economy has slowed down very significantly. Trucking will come back, railroads will come back, but this economy has slowed down a lot from a few years ago. And...

QUICK: You haven't seen any pickup at all?

BUFFETT: Very, very, very little, and that's true of trucking. There's just the slightest uptick and--but who knows what it'll be six months from now. It will come back, but it's not--it's not roaring back on--there's no way that you can look at the figures and say that it's coming back fast.

QUICK: Do you worry about a double-dip in the--in the recession and the downturn? Or do you think that this is just a very slow recovery?

BUFFETT: It's a slow recovery. The only thing--I mean, if you had some big exogenous event, I mean if you had something go wrong in the European Union or--I mean, there--if something--a huge terrorist attack, I mean, you can--you can think of things that would cause another jolt to the economy like that jolt we had in September of 2008. But absent something really big from an exogenous nature to the United States, no, I think we will continue moving upward but not at a very fast rate.

QUICK: All right. Here's some questions that came in, too. Clayton Jennings in Greenville, South Carolina, "After so many years of limited media exposure, why have you been so accessible to the media in the last few years?" That's a question I get a lot, too.

BUFFETT: Yeah, well, it--for years I just wrote the annual report and that was pretty much it. And, you know, people kept inviting me on, and I didn't go on, and it's fine to go on. I mean, I'm perfecting happy to express my opinions on certain subjects that don't relate directly to Berkshire, which I probably wouldn't want to use the Berkshire vehicle to talk about. And, you know, it--nobody pays me very well for doing this, I must say, if you're listening.

QUICK: If you're listening, you're taking offers?

BUFFETT: Yeah. Yeah. But, you know, it's things I talk about privately so why not talk about them publicly.

QUICK: OK. David Gordon from Farmingdale, New York, says, "Do you watch the Olympics?"

BUFFETT: Yeah, but I like summer Olympics better than winter Olympics. I mean, because the sports are more the type of things that, you know, I identify with. I've never been a skier, an ice skater, but I've been a terrible basketball player, or something of the sort. So the summer Olympics are more interesting. But the winter Olympics have been terrific. I know more about curling than I knew a month ago. In the first 79 years of my life I never learned as much about curling as I have in the last month.

QUICK: OK. You know, Jay Leno is coming back to late-night television. Today is the day for it. Do you watch Leno? Do you--have you had interactions with him? I think he's reached out to you.

BUFFETT: I talked to him once or twice. He called me once about going on the show, and we talked a little about old cars. I had a Rolls Royce when I was in high school and--but, no, I've never gone on any of those shows, and I won't.

QUICK: You won't? OK.

BUFFETT: No.

QUICK: There's another question that came in from the Kingdom of Bahrain, Hussain Bushehri, "Citigroup was trading well below book value. As a value investor, why haven't you built up a position in the bank?"

BUFFETT: In which bank?

QUICK: In Citi--in Citigroup .

BUFFETT: Oh, Citi. Well, I mean the question isn't what the book value of what a bank is. The question is its future earning power, and it's harder for me to figure out the future earning power of a Citi than it is for me to figure out the future earning power of a Wells Fargo . Citi may be better, for all I know, but I--it is a much more mixed up situation. Their funds cost them a lot more than somebody like Wells Fargo, so their raw material has a higher cost, and I love the idea of being into the low-cost producer. But we have a lot of money in Wells Fargo and we have some money in US Bancorp . So it isn't like we're unexposed to it. I think Wells Fargo, you know, having the low cost of money, that's huge. It--it's like them being a low-cost copper producer or something of the sort, and they've done a great job of developing their business.

QUICK: OK. Joe:

KERNEN: You could have bought Ford at $1, Warren. It's now 11 or so. GM's going to come public again. Barrons thinks it's going to be big, it's going to be back. Would you ever buy one of the automakers? You got a shot here with Toyota with all these problems.

BUFFETT: It's very hard to figure out the future of those--I mean, you know, the Americans are going to be driving a lot of cars 10 years from now.

KERNEN: Yeah.

BUFFETT: I'd rather be insured--I'd rather--I'd rather bet on who's going to be insuring them than who's going to be building them.

KERNEN: Yeah, that's a good point.

QUINTANILLA: Yeah, that's paid off nicely, the Geico bet. Warren, you talk about, in the letter, being willing to buy companies now that require big capital investments. Can you...

BUFFETT: Right.

QUINTANILLA: ...characterize how big the playing field, or the potential playing field, has gotten? What are you willing to consider now in the way of industries or companies that you weren't before?

BUFFETT: Well, it is true, the capital intensive business, like our utility business or our railroad business, we are willing to consider now. But we'd, you know, we'd love to buy a very big business in almost any field that we understand that we think has got the right kind of management and right kind of economic future and the right kind of price. So I am, you know, I am optimistic that there are bigger fish in the sea than we've yet pulled out, and I intend to be out there looking for them.

QUICK: But you've also said that you like to have at least $20 billion on cash at hand...

BUFFETT: That's true.

QUICK: ...and you're sitting right at about that level. Should we assume that you're out of the business of deal making at least for another few months until you start getting some cash flow back?

BUFFETT: Just try me out with, one and I'll try and figure out how to do it.

QUICK: So you're actively looking, no matter what, all the time?

BUFFETT: Oh yeah, I love looking, yeah.

QUICK: All right. Well, Warren, we want to thank you very much for joining us here today, for being so generous with your time and taking so many viewer e-mails. We really appreciate your time today.

BUFFETT: Thanks for coming to Omaha.

QUICK: Yeah, of course. And Joe and Carl, I will see you back there again tomorrow or the day after. But, right now, I'll send it back to you guys.

QUINTANILLA: Depending on how you get back. We were just saying...

KERNEN: Yeah, stamina.

QUICK: Yeah.

QUINTANILLA: How old--how old, Warren, 79?

BUFFETT: Seventy-nine and your brick is on the way, Joe.

QUINTANILLA: Seventy-nine and...

BUFFETT: What color would you like?

KERNEN: Could you send me some kind of peanut butter brick or something from See's. Don't send me a brick, Warren. Please don't send me a brick. I don't want a brick. Please. Send me some kind of candy.

BUFFETT: You're going to get a brick, believe me.

KERNEN: Send me a candy brick. I know there's a peanut butter or something or other. Yeah, his stamina amazing.

QUINTANILLA: Unbelievable.

KERNEN: Thank you for your time.

QUINTANILLA: I think he could go for another three hours.

KERNEN: Yeah, yeah.

QUINTANILLA: And we know we couldn't.

BUFFETT: Absolutely.

KERNEN: Yeah. Perfect. Let's do this next Monday again.

QUICK: Yes.

KERNEN: Every Monday.

BUFFETT: I want a negotiate. OK. You'll have your brick.

QUINTANILLA: All right, Becky, thanks as always.

QUICK: Thanks, guys.

QUINTANILLA: All right, safe travels back. We'll see you when you can get back from Omaha. Flight frequency sometimes an issue getting back to New York, but we look forward to having her back at the desk. That does it for us today on this Monday morning. Have a great day.

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