THIS IS THE EIGHTH PART OF A TRANSCRIPT OF WARREN BUFFETT'S SERIES OF LIVE APPEARANCES THIS MORNING (MONDAY, MARCH 3) ON CNBC'S SQUAWK BOX.
QUINTANILLA: We do have--thank you, Charlie. We do have Becky and Warren, of course, in Omaha, listening to all of this.
QUINTANILLA: And there's a lot--a lot of cross currents here, Becky. Any thoughts from that part of the country?
QUICK: Mm-hmm. Yeah. Actually, Charlie, Warren was just listening in to what you were talking about, and we started talking about Moody's because Berkshire owns about one sixth of Moody's. And that was a question that came in from a lot of--from viewers, as well, Warren, is what do you think about the value of Moody's? Was this a mistake to jump in and buy this stake?
BUFFETT: Well, it wasn't a mistake at the price we bought it. But in terms of the--the intrinsic business value of Moody's decreased last year. I mean, Wells Fargo stock was down last year. I don't think the intrinsic business value shrunk. In fact, I said I thought it probably increased a touch. And there's a lot of companies whose stock went down where the intrinsic business value did not go down, or maybe went up. But I--our holding a Moody's, which is a significant holding, they're--I don't think there's any question that the intrinsic business value of a Moody's shrunk last year, just as McGraw-Hill owns S&P and the S&P component of McGraw-Hill, it--they have less of a moat around them and they're going to be affected for a long time by the experience of the last couple years.
QUICK: OK. And, you know, that's something interesting, though. Does that mean you would sell this stock and try and get out of it, or do you hold onto it through this time?
BUFFETT: Well, we own 48 million shares, so we have not seen a lot of bids for 48 million share blocks. We have a much more difficult problem either buying or selling stocks than the average investor. I mean, moving big blocks of stocks around, it's very difficult for us to sell, except on the way up, and it's difficult for us to buy except on the way down just because of the quantities involved.
QUICK: OK. Charlie, that's Warren weighing in on what he'd just heard you reporting about.
QUICK: And, guys, we'll toss it back to you.
KERNEN: All right. Warren, I may lighten up on that a little bit if I--if I do come in and start running--I mean, maybe a million here, a million there. You're not going to--I mean, you're not going to come in and tell me what to do, right, once I become CIO, right?
BUFFETT: Well, I don't know how many million shares you've got, Joe, but we'll let you go first.
KERNEN: Well, no, I got--I'm going to sell some of yours when I'm running the place. Forty-eight...
BUFFETT: Oh, I see. Well, you...
KERNEN: If we got--if we got 48 million, I'm going to start lightening up. I just--I don't want you looking over my shoulder every...
KERNEN: ...you know, every time I do something.
QUINTANILLA: Joe, have you started looking at homes? Have you started looking at homes in Omaha?
KERNEN: Oh, yeah, I forgot about that. That--I won't be able to buy a sports team, either. Charlie, you want to get back in here?
GASPARINO: Yeah. I mean, you know, listen, we've been writing--I've been covering the bond rating issues for a long time, and every now and then you have this huge flare up where everybody says they haven't done their job and, you know, there should be more competition. And basically nothing has really changed much. This--if we--we were talking about bond insurance as a license to steal. Well, let me tell you something: The rating agencies is--you know, multiply that by 10. I mean, these guys have an entrenched--it's not a monopoly, because it's three of them. What is that, a triopoly? Those generally aren't bad businesses to invest in, unless, of course, you think there's going to be regulation out there. And this SEC does not seem to want to regulate the rating agencies. It's not really--it's not really--it keeps saying that it wants to open up the competition, but the types of competition it's opening up to doesn't seem to--these are not--these are not companies that could really compete against big companies like Moody's, S&P and Fitch, which is a growing company. So, you know, we've sang their--you know, we've said in the past that they're not great investments. Whenever we hit these sort of bump in the road, like now, they've obviously missed the subprime market. But, you know, they're there for a reason, and three of them, and it's hard to break in. And I guess Warren Buffett would agree with everything I say.
KERNEN: Yeah, and I would...
BUFFETT: Yeah, I--can I?
QUICK: Yeah, go ahead.
BUFFETT: I do agree with that. But they have--certainly structured finance rating has been a--quite a profitable--everything's profitable at the rating agencies.
BUFFETT: But structured finance has been very profitable, and certainly that stream of revenue probably has diminished dramatically for quite a while.
QUICK: OK. I...
KERNEN: All right, thanks...(unintelligible).
QUICK: Warren--thanks, Charlie. Guys, I'd like to bring in a few more viewer e-mails that have been coming in, as well. This one comes from Shan Ausaf in Katy, Texas, who writes in: `How do you know when you're dealing with an honest and capable person?'
CNBC has scheduled a one-hour special program on Buffett's unprecedented Squawk Box appearences.
It's called Warren Buffett - The Billionaire Next Door: Face to Face. It will be hosted by Becky Quick and airs tonight, Monday, March 3 at 9pm ET.
BUFFETT: Well, it's a great question, and I would say this: If you--if we get 100 possible sellers to us of businesses, I don't think I can make a correct judgment all--on all of the 100. But I only have to be right on the ones I make an affirmative judgment on. So I think I can be right a high percentage of the time on the six or eight that I might pick out from there, and I think I can sort of pick out the obvious thieves, you know, of the six and eight. But in between, I think, I can't grade everybody in that 100. And--but we have had--I mean, when we bought the Furniture Mart from the Blumkin family, I'd seen them operate for 20 or 30 years. I knew them personally. There wasn't any doubt in my mind whatsoever that they would work harder and more--you know, for me than they had when they owned it all themselves. And we've had good luck in that. But we've not batted 100 percent. Every now and then I make a mistake.
QUICK: In terms of the management that you're betting on?
BUFFETT: Yeah, yeah. It--human beings sometimes change. Sometimes they change with age. I hope not, but I kind of feel it myself some days, the--but you can be right most of the time. We love buying businesses from people who are second and third generation. You've really got to--you've got a scorecard on them then. Buying them from a financial operator, we've never done it.
QUICK: OK. Steve Cady from Charlottesville, Virginia, writes in: `With the obvious understanding that you have of economics and of business, how in the world can you be a Democrat?'
BUFFETT: Well, I think--I first became a--I was president of the Young Republicans Club at the University of Pennsylvania. My dad was a Republican congressman. We used to sit around the dinner table thinking that if Roosevelt won again that the country would disappear and all that sort of thing. But civil rights in the early '60s probably changed my view. I just felt--it wasn't exclusively a Democrat vs. Republican issue, but I felt the Democrats cared more about it. I feel the Democrats--I feel people like me can take care of ourselves. The Democrats, I think, have some more concern on average, but it's not universal. I vote for Republicans. But I think they worry a little bit about--more about the people that get the short stick in life.
QUICK: OK, we had a viewer write in from Zimbabwe--I believe the name's Mfaro Hove--who writes: `What approach would you use to invest in a country where inflation is at more than 100,000 percent a year?'
BUFFETT: The only--the only defense you have in--when money is turning into confetti is basically your own talents and earning power. If you're the best brain surgeon, if you're the best meat cutter in town, if you're, you know, the best professional football player, whatever it may be, if you have your own talent, whether the currency becomes, you know, totally devalued or they go--they go to sharks' teeth or seashells for currency, you'll command your share if you have personal talent. So the best investment you can make is always in yourself. I tell students that all the time. If they learn how to communicate better, all the--all the things they--they develop their own talents, they don't have to worry--they don't have to worry as much about the currency. It's when you're trying to store wealth that you have to worry enormously about what a currency does.
QUICK: OK. Warren, I have stacks of more e-mails that we're going to try and get to throughout the morning. And what I haven't told you yet is we also have another celebrity e-mail that's coming up, too...
BUFFETT: Oh. QUICK: ...from one of your famous friends. And, guys, we're going to get to all of that when we return.
Transcript prepared by BurrellesLuce
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