CNBC Transcript: Warren Buffett on 'Slowing' Global Economy and 'Salivating' For Deals

BECKY: I'd say it's more of a three-on-one interview, but let's get back to our newsmaker of the morning, Warren Buffett, who's been kind enough to be with us for the past, oh, hour and 45 minutes or so. You know, Warren, we look at Europe all the time and you've talked to us in the past about the euro zone crisis and what you see happening. You already talked a little bit about the European banks that you think that they're in a very different position than the American banks. But last week, François Hollande suggested that the euro zone is well on its way past this crisis, is really moving out the other side of things. Is that the impression that you get?

BUFFETT: No, I wouldn't say so. I mean, I don't —I don't know how it plays out, but I certainly don't feel that it's clear that it's on the road to recovery. I mean, they have a real banking problem. I mean, they, to some extent, encourage their banks to load up with sovereign debt so you have the sovereigns counting on the banks and the banks counting on the sovereigns. And you know, that creates a problem. And then it's going to be a very tough thing to have austerity and at the same time grow GDP. I —it's not an easy solution. Europe isn't going to go away. I mean, we'll be doing lots of business there five or 10 years from now, but I think it could be pretty rough there for a while.

BECKY: Is that a good argument for pulling back from the area? Or is this a time you think businesses should be reinvesting?

BUFFETT: Well, they either have to come closer together or —I mean, they're going to go in one direction or the other, but the idea of having a monetary union independent of, really, discipline on the fiscal side, although they said they had it originally, they've got to come closer together or it won't be sustainable.

BECKY: Although the ECB has made some major moves to try and reassure the markets.

BUFFETT: Yeah.

BECKY: And that certainly has given them quite a bit more time.

BUFFETT: Yeah. Well, it —you know, central banks can print money. They —it's a wonderful machine to have. Every —in economics, just like in life, generally, you never can do just one thing. I mean, anything you say you're going to do, it's going to have consequences.

BECKY: Mm-hmm.

BUFFETT: And sometimes those consequences are delayed. Certainly printing money has consequences. And you can say not printing money would have consequences to the United States, too, but we haven't seen —the movie's not over in Europe.

BECKY: Joe, you have a question, too?

JOE: Warren, do you —do you still think a single family home is one of the best investments around? And have you actually tried to figure out a way to invest in that? You'd like to buy 100,000 —you've said that you'd like to buy as many as you could, but they're impossible to manage and you can't really do it. Have you figured...

BUFFETT: Yeah.

JOE: Have you tried to figure out a way to do it?

BUFFETT: Yeah. And I've had a lot of suggestions from people after I made that statement. But it's not really feasible, certainly, compared to other things we can do with money. They're —it's just too big a problem to deal with small units like that and management problems and human problems. So I think that anybody that knows where they're going to want to live, has a reasonably assured income. I think they're making a terrible mistake if they don't buy a single family home now and get a mortgage at these rates. And they should get a 30-year mortgage. It's a —it's a —really a golden opportunity. It was a little bit better six months ago, but it's still wonderful now. You're not going to see a chance like this five years from now. I'll guarantee you that.

BECKY: Five years from now it's going to be a different picture, and that's interesting.

BUFFETT: Yeah. Rates will be higher and all kinds of things. I mean, this is —this is the time to buy.

BECKY: And you think prices will rebound, too.

BUFFETT: If you know where you want —you've got to want to live there, I mean, and a home's a wonderful thing.

BECKY: Hm.

BUFFETT: But I wouldn't buy one if I was going to move in six months or something of the sort.

BECKY: Hm.

BUFFETT: And I wouldn't buy one if I was terribly nervous about my job.

BECKY: Warren, a couple of times you have mentioned Ted and Todd.

BUFFETT: Yeah.

BECKY: Ted Weschler and Todd Combs talked about what they've been doing as an investment cycle. A lot of times we get these notes from the SEC just about what Berkshire's doing with its investments. How much of that is yours? How much of that is theirs?

BUFFETT: Very little of it's mine. I mean, if it's Wells Fargo or IBM or Coca-Cola, I mean, I've got four stocks that aggregate over 50 billion that I manage. And then I've got a bunch of other things, too. But the action is with Ted and Todd. And they're building up portfolios, and they will buy $500 million at a time of something. And they're probably more prone —one of the two is more prone to move around in securities than I would be. But there's a lot of styles that work. So I am enormously pleased. They're getting lots of contingent compensation, less than they would if they were running a hedge fund, and they're paying a higher tax rate than if they were running a hedge fund, even though they're doing exactly what they would be doing if they ran a hedge fund. It's a real —it's a real indictment of the tax system when you look at two guys who've just moved to doing the same exact thing from morning the night they did before and now they pay double the tax rate for it.

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BECKY: Uh-huh.

BUFFETT: More than double.

BECKY: Wow. That's a good point. Andrew ...

ANDREW: Hey, Warren, I wanted to get an update on my favorite subject, newspapers. You bought the Omaha World-Herald earlier this year.

BUFFETT: Right.

ANDREW: You now had a little bit of time to get —to get under the hood. What do you think?

BUFFETT: Well, I'll have a big section in the annual report about newspapers, and I did write a letter to all our newspaper publishers. If you find —if you have a newspaper that's indispensable to a significant percentage of its community, I think you're going to do reasonably well over time. We still pay very, very low multiples for them. The trend of the newspaper industry is down. But you have to be primary about things that are of interest to your readers. And if they're —you know, if you're in Grand Island, Nebraska, where we have a product, we've got to be relevant to what people in Grand Island are interested in.

ANDREW: Right.

BUFFETT: And that's a much tougher problem as you get into bigger, metropolitan papers.

ANDREW: But it's working better...

BECKY: You know, this week...

ANDREW: Better or worse than you expected? I only say it because, you know, Newsweek just said they were going to stop printing recently. I know community newspapers are a different situation, but a lot of people always have questions.

BUFFETT: Yeah. Our small newspapers —and by that I mean towns of 20,000, 25,000 —our small newspapers this year that have operated throughout the entire year for us, the revenues are down about 1 percent. Our larger newspapers like Buffalo and Omaha and now Richmond, those papers, which are larger communities, their revenues, on average, would be down more like 4 or 5 percent. So there's a real difference based on the —on the relevance of the paper to a very wide —very significant portion of the community. The bigger the community, the harder it is to have a community feeling.

BECKY: You know, Warren, very quickly, earlier this week was the release of Greg Smith's book about Goldman Sachs, the guy who wrote that op-ed piece in The New York Times saying, `This is why I left Goldman Sachs.' Did you see any of the interviews that he has done? Did you take a look at any of the book. What do you...

BUFFETT: I haven't read the book. I saw an interview, but I think the idea of a guy 33, who was making $500,000 a year and is unhappy because he isn't making a million and probably in any other occupation but investment banking would be making $75,000 a year, I thought it was —I thought —the idea that one disgruntled employee leaving a company with 30,000 employees warrants an op-ed with no specifics really in it except the word Buffett, so I think I —I did not think that reflected great editorial judgment.

BECKY: OK. I bring this up because Lloyd Blankfein's going to be on a little later in the morning. Warren, obviously, we've covered a lot of ground, and we appreciate you for spending so much time with us and talking so much. When we come back, we still have the last word that we'll be giving to Mr. Buffett. And as we mentioned, coming up on "Squawk on the Street," there is a CNBC exclusive interview today with Goldman Sachs Chairman and CEO Lloyd Blankfein. Make sure you tune in for that. That's coming up at 11 Eastern.

ANDREW: Let's get back to Becky and Warren Buffett for the last word. Becky...

BECKY: Andrew, thank you. Last word, Warren, is a sort of free word association game that we've been playing lately. I say a word, you tell me what it makes me think of. And the question we get most frequently from people about you coming on is what should they be buying right now? So if I say buy, you say...

BUFFETT: I say —I say hold —basically hold. I mean, the idea that the European news or slowdown in this or that or anything like that, that would not cause you to own a good farm and had a run by a good tenant, you wouldn't —you wouldn't sell it because somebody said here's a news item, you know, this is happening in Greece or something of the sort. If you owned an apartment house and you got to raise your rents a little, it's well located and you have a good manager, you wouldn't dream of selling it. If you had a good business personally, the local McDonald's franchise, you know, you wouldn't —you wouldn't be thinking about buying or selling it every day. Now, when you own stocks, you own pieces of businesses, and they're wonderful businesses. So you can pick the best businesses in the world, and to buy or sell on current news is just crazy. You're in a wonderful business, you've got people running it for you. You know you're going to do well over five or 10 years, and to think news events should cause you to try and dance in and out of something that's a wonderful game is a terrible mistake. So get into a bunch of wonderful businesses and stay with them.

BECKY: But you said hold —I said buy and you changed it to hold. Does that mean don't sell or does that mean...

BUFFETT: Well, I mean, if you haven't —if you haven't got them yet, you buy them consistently over time. So you sort of average over time. And I've been buying all my life. I bought my first stock, you know, when I was 11 years old and it was about three months after Pearl Harbor and Corregidor was falling and they had the Death March at Bataan, and all the news was terrible. It was a great time to buy stocks. And I should've held that stock forever, and I've been buying stocks ever since.

BECKY: All right. Guys, do you have any last quick thoughts?

JOE: So, hey —I do. Warren, you —have you met (Facebook CEO Jeff) Zuckerberg? And if you sat down with him and he told you, is there any way that he could explain the business well enough to you to where you'd take a huge stake in Facebook?

BUFFETT: Probably not. That doesn't mean that I'm negative about it, I just don't understand it well enough, and I'm actually not even a member.

JOE: Yeah.

BUFFETT: There's a billion of them out there.

JOE: There's...

BUFFETT: So I have —I like to buy things where I feel I've got a reasonable idea about how a business is going to be doing five or 10 years ago —just like —10 years from now —just like I would buy an apartment house or a farm with the idea that I would think it was going to be a good thing to own five or 10 years later. And you...

JOE: Well, there is —there is a watershed event tomorrow that might change your view, and you are free to send me questions as well, if you'd like, Warren. But this is —this is a game-changer for Face...

ANDREW: Kernen's going to be on Facebook, so.

BUFFETT: Well, actually, Joe, I thought instead, you know, you've always wanted a share of NetJets. I've got a NetJets tie here, and instead of giving you an eighth, I'm going to take this —there's dozens of planes on this, and I'm going to give this to Becky to take back to you.

ANDREW: Wow.

BUFFETT: You are now a major Net —I mean...

BECKY: Here we go, Joe.

BUFFETT: Yeah, exactly.

JOE: A tie.

BECKY: Here we are.

BUFFETT: Dozens, dozens...

JOE: Thousands of jets, and I'm getting a tie. All right.

BUFFETT: Dozens of planes. Dozens of planes on it.

JOE: All right. Nice, Warren.

BUFFETT: OK.

BECKY: Well, thank you very much for your time today.

ANDREW: Thank you. Thank you, thank you.

BECKY: We appreciate it. Guys ..

ANDREW: Make sure you join us tomorrow. "Squawk on the Street" begins right now.

JOE: I get a tie.

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