When: Wednesday, October 24, 2007 at 7:45 AM
Where: "Squawk Box"
The following is the unofficial transcript of a CNBC interview with Warren Buffett, Berkshire Hathaway CEO, on CNBC's "Squawk Box" today. All references must be sourced to CNBC.
In the interview, Buffett discusses his stake in PetroChina, the economy, and China, among other topics.
CARL:IF YOU'RE JUST WAKING UP, MERRILL LYNCH COMING OUT WITH AN ADDITIONAL TWO-AND-A-HALF BILLION DOLLARS IN WRITEOFFS FOR THE 3RD QUARTER. WE HAVE BECKY QUICK TRAVELLING WITH WARREN BUFFETT IN CHINA THIS MORNING. THEY ARRIVED IN DALIAN, HOW LONG AGO BECKY?
BECKY: CARL, WE'VE BEEN HERE FOR JUST ABOUT TEN HOURS, LESS THAN 12 HOURS. WE ARRIVED THIS MORNING I BELIEVE AROUND 9:30. WE'VE JUST FINISHED UP FROM THAT DINNER WE TOLD YOU ABOUT. LAST TIME I CALLED IN YOU WERE ASKING ABOUT SOME OF THOSE PETRO CHINA HEADLINES, AND MY GUESS IS THAT HAPPENED BECAUSE MR. BUFFETT EARLIER TODAY, PROBABLY ABOUT THREE HOURS AGO, WAS AT A PRESS CONFERENCE WITH SOMEWHERE BETWEEN 35-50 JOURNALISTS HERE IN DALIAN. HE WAS ASKED A SERIES OF QUESTIONS ONE OF WHICH WAS WHAT ABOUT THAT PETRO CHINA STAKE. HE DID POINT OUT THAT HE HAS SOLD OFF HIS ENTIRE STAKE, AS HE SAID BEFORE. AND ALSO ADDED TO THAT TODAY THAT SINCE HE'S SOLD OFF, SINCE THAT NEWS WAS MADE, HE HAD WRITTEN A LETTER TO THE HEAD OF PETRO CHINA THANKING HIM FOR ALL OF HIS EFFORTS AND HIS WORK AND THE REASON HE SOLD OUT OF THAT STOCK IS BECAUSE IT HAD APPRECIATED SO MUCH. OF COURSE, THE STOCK'S TAKEN OFF SINCE THEN, AND HE POINTED THAT OUT AS WELL. HE HAD WRITTEN THAT LETTER TO MAKE SURE IT ARRIVED IN CHINA BEFORE HE DID TODAY. INTERESTINGLY ENOUGH, AS YOU WERE POINTING OUT, THIS NEWS JUST COMING OUT, IT'S SOMETHING MR. BUFFETT AND I HAD BEEN TALKING ABOUT. WE JUST HEARD THE NEWS OURSELF, BUT HE'S HERE RIGHT NOW. I THOUGHT HE'D -- I'D PUT HIM ON WITH YOU. I HEAR YOU ALSO HAVE A FRIEND OF HIS ON THE SET, JACK WELCH, SO MAYBE THE TWO OF THEM COULD TALK A LITTLE ABOUT THAT. I'LL PUT HIM ON RIGHT NOW.
JOE: MR. BUFFETT --
BUFFETT: JACK?
JOE: HOW ARE YOU, IT'S JOE KERNAN.
BUFFETT: OH, HI, JOE.
JOE: YOU AVOIDED THE BEAR STEARNS-- NEVER HAD ANY INTEREST. NOW WE SEE THAT MERRILL LYNCH LOST $2.85, THEY'RE $5 BILLION WRITEDOWN IN THE LAST MONTH HAS BECOME SEVEN-AND-A-HALF BILLION. DO YOU THINK WE'RE GETTING CLOSE TO FAIR VALUE YET ON THESE, ON SOME OF THIS STUFF?
BUFFETT: WELL, I DON'T KNOW THE ANSWER TO THAT. BUT THAT IS A BIG NUMBER. BUT I, YOU KNOW, I'VE LOOKED AT SOME OF THE INSTRUMENTS THAT ARE OUT THERE, AND THEY'RE HARD TO FIGURE THE VALUE OF.
JOE: IS IT MARKET TO MYTH? THAT'S A TERM YOU LIKE TO USE. ARE WE GETTING CLOSER TO MARKET TO REALITY?
BUFFETT: WE'RE GETTING CLOSER, BUT THAT DOESN'T MEAN WE'RE THERE. THE WAY TO FIND OUT WHAT SOMETHING IS WORTH IS TO SELL A SMALL PIECE OF IT. IF THEY SELL 10% OF THEIR POSITION, IT'S HARD TO ARGUE THE OTHER 90% IS WORTH MORE. YOU KNOW, THEY MAY NOT LIKE THE MARKET, BUT I DIDN'T WANT LIKE IT ON SOME OF THE STOCKS I'VE LOANED OVER THE YEARS, BUT THAT WAS THE MARKET.
WELCH: I WAS -- WARREN, JACK.
BUFFETT: JACK, HOW ARE YA?
WELCH: GREAT, HOW ARE YOU.
BUFFETT: I'M OVER HERE IN CHINA, AND THEY'RE ALL ASKING ME ABOUT THE ROUND OF GOLF YOU PLAYED AGAINST GREG NORMAN. DO YOU HAVE ANYTHING YOU'D LIKE ME TO TELL THEM?
WELCH: GIVE THEM THE T-SHIRTS YOU MADE.
BUFFETT: I'M GIVING IT TO THEM HOLE BY HOLE.
WELCH: WHEN I HEARD YOU WERE LOOKING AT SOME BEAR STEARNS STUFF, IT REMINDED ME ABOUT JOINT FORAYS INTO WALL STREET.
BUFFETT: RIGHT.
WELCH: I NEVER COULD FIGURE OUT WHICH WAS GETTING THE OTHER ONE IN TROUBLE, YOU WENT INTO WALL STREET, YOU WENT INTO AIRLINES, MAYBE IT WAS VICE VERSA. WE WENT HAND IN HAND INTO TROUBLE.
JOE: MR. BUFFETT, THIS SUPERFUND, THIS SIV SUPERFUND, DO YOU THINK THAT'S A GOOD IDEA?
BUFFETT: I DON'T KNOW THE FACTS ON IT. BUT I DO THINK IF THEY, IF THEY SELL PAPER INTO THE SUPERFUND, THEY OUGHT TO SELL 10% INDEPENDENTLY AND FIND OUT WHAT THAT BRINGS IN TERMS OF THE PRICE THEY STICK ON WHAT'S BEING PUT INTO THE SUPERFUND.
JOE: FROM WHAT YOU KNOW OF SO FAR, DO YOU SEE THE PROBLEMS HERE, THE SIV PROBLEMS, THE MORTGAGE-RELATED PROBLEMS, HAVE WE GOT A GOOD HANDLE ON HOW BADLY IT'S GOING TO HIT THE ECONOMY AND THE STOCK MARKET AT THIS POINT, OR COULD IT GET A LOT WORSE.
BUFFETT: NO, IT'S HARD TO FIGURE. THERE ARE A LOT OF PEOPLE HAVING PROBLEMS WITH THEIR MORTGAGES NOW, BUT THERE ARE GOING TO BE MORE PARTICULARLY IF THERE ARE RESET PROVISIONS IN THE MONTHLY PAYMENT. IT'S HARD TO TELL. IN THE END, OUR ECONOMY DOES FINE, BUT THAT DOESN'T MEAN IT CAN'T HAVE SOME DISLOCATIONS FOR A YEAR OR TWO. FIVE YEARS FROM NOW, TEN YEARS FROM NOW, THE AMERICAN ECONOMY WILL BE FINE, BUT THAT DOESN'T MEAN IT WILL BE TRUE IN FIVE OR TEN MONTHS.
CARL: WARREN, IT'S CARL. I KNOW YOU'VE GOT A PRESS CONFERENCE EARLIER TODAY, YOU'VE GOT $47 BILLION IN CASH, AND YOU'VE TALKED FOR MONTHS ABOUT YOUR INABILITY TO FIND INVESTMENTS THAT ARE WORTH YOUR TIME. ALL OF A SUDDEN YOU'RE TRAVELLING TO ISRAEL, YOU'RE NOW IN CHINA FOR THE FIRST TIME IN 12 YEARS, ARE YOU FINDING ANYTHING OVERSEAS THAT YOU WERE NOT FINDING AT HOME?
BUFFETT: NO, WELL, WE'VE BOUGHT SOME INTERNATIONAL STOCKS THIS YEAR, AND WE WERE BUYING THEM LAST YEAR. BUT I'M OVER HERE IN CONNECTION WITH AN OPERATING BUSINESS, CARL, THEY'RE OPENING A PLANT HERE. IT'S A MAJOR PLANT, AND IT'S A TERRIFIC COMPANY. I JUST CAME OVER THE CUT A RIBBON WHICH IS ABOUT THE LIMIT OF MY TALENT.
CARL: I BET YOU CUT A RIBBON MUCH BETTER THAN JUST ABOUT ANYBODY.
BUFFETT: I'VE HAD A LITTLE PRACTICE.
CARL: YOU'RE QUOTED THIS MORNING AS SAYING THAT THE CHINA MARKET IS STILL, I THINK IN YOUR WORDS, TOO HOT. KEEP LOOKING.
BUFFETT: NO, I JUST SAID THAT WE VERY SELDOM BUY INTO A MARKET THAT'S GONE UP A WHOLE LOT. I DON'T REALLY KNOW ANYTHING SPECIFIC ABOUT CHINESE MARKET OR CHINESE STOCKS. I DO KNOW WHEN PRICES HAVE GONE UP A WHOLE LOT THAT I'M MORE SKEPTICAL THAN WHEN THEY'VE GONE DOWN A LOT. I REALLY LIKE TO LOOK AT MARKETS THAT HAVE GONE DOWN, BUT I WILL SAY THIS, WHAT I'VE SEEN IN CHINA JUST TODAY IN TERMS OF THE INDUSTRIAL DEVELOPMENT, YOU KNOW, IT'S MAKING A BELIEVER OF ME CERTAINLY IN THE ECONOMY, BUT THAT DOESN'T MEAN I THINK THE STOCKS ARE ATTRACTIVE.
JOE: I DON'T KNOW IF YOU WATCH OIL COMPANIES, YOU'RE RIGHT ON BURLINGTON NORTHERN, MR. BUFFETT, THERE IT GOES. I'D JUST LIKE TO GET YOUR TAKE ON WHAT YOU FIND SO APPEALING ABOUT THE RAILROADS. I'VE HEARD PEOPLE SAY YOU'RE GOING TO RUN FIBEROPTICS --
BUFFETT: OH, NO.
JOE: I'VE HEARD PEOPLE SAY IT'S AN ETHANOL PLAY. WHY ARE YOU GOING INTO THE RAILROADS IN A BIG WAY?
BUFFETT: IT'S NEITHER THING YOU MENTIONED. THE RAILROADS ARE A BETTER BUSINESS THAN THEY WERE IN THE PAST. THEY AREN'T A WONDERFUL BUSINESS. THEY'RE VERY CAPITAL INTENSIVE. THEY EARN REASONABLE RETURNS ON CAPITAL, BUT THEY DON'T EARN SENSATIONAL RETURNS. THEY'RE A LOT BETTER BUSINESS THAN THEY WERE IN THE PAST. THEIR POSITION VIS A VIS TRUCKING HAS IMPROVED, AND JUST THE EXCESS CAPACITY SYSTEM IN THE RAILROAD SYSTEM HAS DECLARED. IT'S A BETTER BUSINESS THAN IT WAS, BUT IT'S NOT A MARVELOUS BUSINESS, AND I DON'T SEE HOW IT EVER WILL BE. BUT FOR 100 YEARS IT WAS A TERRIBLE BUSINESS FOR A HUNDRED YEARS. SOMEBODY SAID ABOUT THE CHICAGO CUBS, EVERY TEAM HAS A BAD CENTURY EVERY NOW AND THEN. WELL, THE RAIL INDUSTRY HAD A BAD CENTURY TOO. IT'S GOTTEN A LOT BETTER, BUT IT'S NOT A WONDERFUL BUSINESS.
WELCH: HEY, WARREN, JACK. THERE ARE 40,000 CONSUMERS IN BOSTON WHO HOPE LIKE HELL THAT JORDAN LOSES THAT BET AND YOUR INSURANCE PAYMENT HAS TO BE PAID.
BUFFETT: THERE'S GOING TO BE A LOT OF FREE FURNITURE IN BOSTON.
WELCH: 40,000 PEOPLE WENT IN AND LOADED UP.
BUFFETT: THAT SOUNDS ABOUT RIGHT, JACK. I FIGURED YOU WERE ONE OF THOSE THAT BOUGHT FURNITURE THERE WHEN YOU GOT RED SOX WON THE WORLD SERIES.
WELCH: ABSOLUTELY.
BUFFETT: WHEN YOU'RE COACHING, THEY'LL PROBABLY MAKE IT.
CARL: WARREN, I DON'T WANT TO KEEP YOU TOO LONG, BUT IS THERE ANYTHING THAT THE CHUCK PRINCES OF THE WORLD OR THE JIMMY CANES OF THE WORLD CAN DO TO WHET YOUR APPETITE FOR SOME OF THESE NAMES THAT ARE GETTING A LOT OF ATTENTION?
BUFFETT: IT'S ALWAYS POSSIBLE, BUT WE HAVEN'T DONE ANYTHING. BUT, WELL, YOU'RE TALKING ABOUT THE SECURITIES THEY OWN OR WHETHER YOU'RE TALKING ABOUT THEIR OWN SECURITIES. JACK'S MY ADVISER ON BROKERAGE STOCKS.