CNBC News Releases


WHEN: Today, Monday, May 7th

WHERE: CNBC's "Squawk Box"

Following is the full unofficial transcript of a CNBC interview with Berkshire Hathaway Chairman & CEO Warren Buffett, Microsoft Founder & Co-Chair of the Bill & Melinda Gates Foundation Bill Gates and Vice Chairman of Berkshire Hathaway Charlie Munger, on CNBC's "Squawk Box" (M-F, 6AM-9AM ET) today, Monday, May 7th. Video clips from the interview are available on and the full interview will be available on the Warren Buffett Archive.

All references must be sourced the CNBC.

BECK QUICK: Good morning. I am in Omaha, Nebraska this morning that's the site of the Berkshire Hathaway Annual Meeting. Our special guest for the next three hours if you haven't figured it out is Berkshire Hathaway Chairman & CEO Warren Buffett. Thank you so much for being here

WARREN BUFFETT: Thanks for having me.

BECKY QUICK: You are coming off the 53rdannual shareholders meeting Its something that we have been coming to you for years but 53 years in I just want to ask you what you thought about this weekend and how you feel about all of it? What stood out to you through this weekend?

WARREN BUFFETT: I think everybody had as much fun as ever. We had a crowd certainly equal our record I run into thousands of shareholders and they are all having a good time and our directors have a good time here so its sort of a Mardi Gras

BECKY QUICK: Is there anything different about this meeting or is it the sameness that makes it so special?

WARREN BUFFETT: It is the sameness pretty much working with Charlie Munger we are not going to change the format very much

BECKY QUICK: Although Brian pointed out earlier, there were a lot of controversial subjects and things that caught peoples attention and picked up a lot of news this time because you and Charlie say what you think especially Charlie

WARREN BUFFETT: Yeah. Charlie says exactly what he thinks and he thinks in colorful language too. Have you noticed that?

BECKY QUICK: I have noticed that. Has that changed over the years or Is that more of the same?

WARREN BUFFETT: That's Charlie

BECKY QUICK: That's Charlie since you met him?

WARREN BUFFETT: Since 1959 when I met him.

BECKY QUICK: Lets talk about some of the things that really resonated with people and maybe start where you began the annual meeting this year it was talking to your investors and telling them a little bit about investing some tips and lessons along the way. You kind of used it as a teaching experience at the top.

WARREN BUFFETT: Yeah normally I don't do that in fact I cant remember when i did it we just go right into questions and answers. I really thought that maybe we were giving a little bit the wrong lesson because all the questions would naturally tend to be towards current events. So this time I went back to 1942 when I bought my first stock as an illustration of all the things that have happened since 1942 we have had 14 presidents, 7 Republicans. 7 Democrats. We have had world wars, 9/11, Cuban Missile Crisis we have had all kinds of things. The best single thing you could have done on march 11th, 1942 is buy an index fund and never look at a headline never think about stocks just like you would if you buy a farm. Just do it and let the tenant farmer run it for you. If you put $10,000 in an index fund that reinvested dividends and i paused for a moment to let the audience guess how much it would amount to. It would come to $51 million now. The only thing you really has to believe in then is that America would win the war and that America would progress as it has since 1776 You would have to know that if America moved forward, American business would move forward. You didnt have to worry about what stock to buy or what day to get in or out. You didn't know the Federal Reserve would exist. America works.

BECKY QUICK: You went back to the day in 1942 because it was the day you purchased your first stock which to point out you were 11 years old then

WARREN BUFFETT: Yes and the headlines were terrible every day.

BECKY QUICK: This is the new york times that day

WARREN BUFFETT: Yeah. 1942 new york times sold for 3 cents and I also got the headlines from some days before. Everything was going badly the Philippines were going to fall within two months, things were grim in Europe, our ships were being sunk the war was bad then and that day that I bought March 11, The Dow Jones cracked 100 on the down side, it was a 2% decline which would be 500 points today the night before on march 10th I said to my dad I want to go all in I had $125 put every bit of it in three shares of City Service Preferred. And-- which is still my personality is to get it all in and--

BECKY QUICK: As we've seen with Apple.

WARREN BUFFETT: Yeah, somewhat. And-- as I pointed out to the crowd, I bought that stock at 38 and a quarter. It was down from 84 the year before and it was down from 55 in January. I thought I'm really buying it cheap. So it went down to 27 after I bought it. And then I did-- it-- and it went up to 200 later on. But-- I sold at 40.

BECKY QUICK: You know, these are lessons that you point out because you tell investors that they shouldn't really be trying to market time. They shouldn't be looking at things. You should invest, stop paying attention and look away. But you are somebody who does pay attention to market valuation, buys more if you think a t-- a stock is cheap and less if you think it's expensive. And I'm just wondering where you think the markets stand right now. When we talked to you back in February, at the end of February-- you said you thought things were not overly priced. But you didn't find any businesses that you, yourself, felt like you could purchase. Where-- do you think things stand right now?

WARREN BUFFETT: Yeah, and we haven't bought any businesses in their entirety since I saw you last. We bought a lot of Apple as we pointed out the other day. If--I had a choice between buying the S&P index or buying the ten-year U.S. Treasury or the 30 U.S. Treasury it wouldn't take me a nanosecond to--go into stocks. Now that-- it may be because bonds are going to fall a lot-- but the investor has a choice between three or four things. They've got stocks, they've got short-term governments, got long-term bonds or long-term governments. And-- or they could buy-- they could buy a farm, piece-- a small farm or--

BECKY QUICK: What about corporate bonds--



WARREN BUFFETT: --yeah, they can buy corporate bonds. But they-- they probably don't know enough to evaluate credits. I mean, they will-- they get enticed into junk bonds with exactly the wrong time. That's when the issuances will come and the covenance will be non-existent. And so--

BECKY QUICK: So you're talking about average investors who don't--

WARREN BUFFETT: The average investors.

BECKY QUICK: --do this for their day job.

WARREN BUFFETT: No not professional investors. But-- average investors-- but-- but 99% of people are non-professional-- investors. And-- that would-- if they had to do that to come out decently you-- can understand I'm sort of gambling on that. Or-- but the point is you don't need to do it. You-- don't have to buy exactly the right stock or b-- buy at exactly the right time. The one thing you have to avoid is buying the single wrong stock or at the single wrong time. And most people get excited about a stock or about the market after it's gone up. I mean, their neighbors made a lotta money and they know they're smarter than their neighbor. Very irritating to have a neighbor buy a new car and your spouse says, "You-- that-- that guy's smarter than you are or what." So they-- have this-- they're enticed into the market at the wrong time. And all they need to do is buy a cross section of America. And it's best to buy it over time. If the first ten years of your working life you just save and—that's for that period of time, that-- you don't have to be the right time.

BECKY QUICK: You-- you made the point even more drastically over the weekend in terms of looking at treasuries-- U.S. Treasuries-- basically said there-- there's-- never been a good time to buy it even going all the way back to the war bonds back in the '40s.

WARREN BUFFETT: Yeah, that--

BECKY QUICK: That was the--

WARREN BUFFETT: --that is true now. You bought it for patriotic reasons. But-- the government then was offering you t-- 2.9%. You bought a U.S.-- you called it a war bond. They called them defense bonds. And then savings bonds later on. But-- we were happy to buy war bonds then. And we paid $18.75 and we got $25 in ten years. Four-- three gets you four. That was-- in fact, they had-- they took Take Me Out to the Ballgame and turned it into a song about buying war bonds. You know? And for each three you get four at the old bond game. And-- that's-- that-- there's a little song. And we'd sing it in school. And but-- and the government happily pointed out to you that you were getting 2.9% compounded for that. But that-- and of course now you have a situation the Federal Reserve says they want inflation of 2%. So they say they're going to try and devalue that bond by 2% a year in dollar terms. And-- it's almost always equities have been a better buy. And certainly if you're gonna put away money over time when you're younger-- you can buy stocks over a conservable period of time you're not gonna get the lows but you're not just gonna buy at the highs. And if you buy a cross-section-- well, like I say, you turn $10,000 into $51 million and you'd never have had to look at a financial page again or listen to a broker.

BECKY QUICK: Going back to this idea though that the markets, you think, are a good place for average investors right now. The S&P 500 is a good place. If you're a professional investor, if you're somebody like you, you look at prices and you think what?

WARREN BUFFETT: Well, I look at prices and I-- find it hard to buy things. And incidentally professional investors aren't going to do better than the average-- amateur-- in almost all cases. But I-- don't find things easily. I mean, we were on and-- in March of 2009 when the Dow was in the 660s or 670s. And-- we talked about it then. I mean, there's-- this was the bargain counter. And-- it continued for a long time. Stocks have been very, very cheap. But you have to measure-- you have to measure 'em against alternatives. I mean, if—government bonds got to 15% like they were in 1982 that's a different equation against stocks than exist now.

BECKY QUICK: You've had periods in the past though where you have said stocks look expensive to you or that we look like we're in bubble type territory. This is not one of those times I take it?

WARREN BUFFETT: That-- this is not one of those times. That-- now if government bonds go to 7% or 8% which means if you own a long bond now you'd get killed-- stock you bought now will not necessarily look attractive. It-- probably won't be attractive.


WARREN BUFFETT: Interest rates are like gravity. If interest rates are 1% and they're gonna be that for 100 years obviously anything that yields you 2% or 3% is going to do way better. But I don't think they're going to be 1% for 100 years.

BECKY QUICK: Just to get into the nuances again though.


BECKY QUICK: What-- you're talking broadly about issues in terms of how you see the stock market as a great place for average investors. Maybe a place where you're not finding all that many bargains. And when you look to buy a company all in, I mean-- I've spoken with some people here this weekend who know an awful lot about M&A, who know a lot about private businesses, what they're valued out at different things you'd say, that when they're looking at prices things look really rich. You're talking about prices that are 15% to 20% above what the fair price of base-- ha-- does that match up with what you see--


BECKY QUICK: --right now?

WARREN BUFFETT: --I would agree with that. That's why we haven't bought any businesses for quite a while. In addition to the normal factors in the public market too, when people buy businesses these days frequently-- they're being bought by people that are-- borrowing 60% or 70% of the money, maybe even more.

BECKY QUICK: You're talking about private equity?

WARREN BUFFETT: Mostly private equity but not exclusively private equity. And if some-- we're not willing to calculate our returns based on borrowing money at 70%-- of the purchase price. That may be the best thing to do. But-- we--calculate things generally on an all-equity basis. And we are not competitive. And-- then you've got a general euphoria that-- to some degree. The private equity funds have to put the money out. And it's kind of interesting what they do because-- they take the money which they get usually from institutional investors and then they buy a company in the market from some of those same institutional investors except pay a premium and they say we can run it better if it's private. Then they hold it for a while. And then they sell it back to the market in these private institutional investors having-- with them having paid substantial fees in the meantime and say it's better to be public. I mean, it's-- an interesting exercise.

BECKY QUICK: Let's talk about some of the things that came up this weekend that really caught people's attention and some of the more controversial statements that came out. At one point this weekend you said that Bitcoin and this is was based-- you were asked-- Charlie said, "Bitcoin's like rat poison." You were asked about that comment. And you said, "Well, it's probably more like-- rat poison squared." Charlie went on in the meeting to then basically call Bitcoin turds.

WARREN BUFFETT: He--is an expressive sort, isn't he? Maybe when he gets a little older he'll mature.

BECKY QUICK: I just wanna ask you about that because it sparked so much controversy. And it's-- particularly on Twitter and some of the places where you might expect people who are trading in-- in cryptocurrency-- to be pretty-- loud about what they heard. What-- is it about Bitcoin that gets you guys so fired up?

WARREN BUFFETT: Well, when you buy a farm-- you look at the crop every year and what prices are and you decide whether it was satisfactory investment, I mean, you look to the asset itself and what it produces for you. When we buy a business we look at what the business earns and decide how we feel about it in terms of what we paid. But we are buying something that at the end of the period we not only have what we bought in the first place but we have something that the asset produced. And when you buy non-productive assets-- all you're counting on is whether the next person is going to pay you more because they're even more excited about another next person coming along. But the asset itself is creating nothing. One of the interesting things—for example is gold. If you go back to the time of Christ and you look at how many hours of labor you had to give up in order to buy an ounce of gold and you take it forward to now you'll find a compound right, maybe 1/10 or 2/10 of 1%. You know, and then you have to insure it during that time and make sure, you know, somebody doesn't steal it from you and every-- but it doesn't produce anything. And-- productive assets-- you may have even paid too much for a productive asset. But I bought a farm in the 1980s. And--every year look at how much it produced in the way of soybeans and corn. And at the end of that period I've still got the farm and I've got some significant income off of it. Apartment house, operating business. But-- if you and I buy various cryptocurrency they're not gonna multiply-- they're not gonna be a bunch of rabbits sitting there in front of us. They-- they're just gonna sit there. And I got a whole-- next time you get more excited after I bought it from you and then maybe I'll get more excited it and buy it from you. And actually we could-- we could sit in the house by ourselves and we could keep running up the price between the two of us. But at the end of the time there's one Bitcoin sitting there. And now we gotta find somebody else. And-- they come to an end. I mean, those--

BECKY QUICK: That-- that, I mean, that's a greater fool theory. That's what you're saying?

WARREN BUFFETT: It-- well, yeah. It's-- buying something because you expect the pool of people who wanna buy it because they wanna sell it to somebody else will grow. And-- you know, it's-- wonderful because it does create a rising price. Does create more buyers and people think, "I've gotta get in on this." And--it's better if they don't understand it. That's the other thing about non-product-- if you don't understand it you get much more excited than if you understand it. I mean, if you buy a bond that says it's gonna pay you 4% a year you're not gonna get any pleasant surprises. It only pay you 4% a year. But if-- you can have anything you wanna imagine if you just look at something and say, "That's magic." You can do it with sharks teeth or seashells or anything. And-- you know, they did it with tulips in the 17th century in-- Amsterdam. And-- they'll do it again. I mean, people-- they like to speculate. They like to gamble. And-- if you can get something-- particularly if you have something half plausible going on. If you had bought gold in 1942 and you said, "We might lose the war. We might have to run off to some other country and, you know, so let's put our assets in gold," you would have less than a penny for every dollar you got from owning stocks. Less than a penny. Now somebody calls that a stored value. I mean, I think they're delusionary.

BECKY QUICK: Andrew has a question too. Andrew?

ANDREW ROSS SORKIN: Hey, Warren, related to this-- issue of Bitcoin, you saw that Goldman Sachs just last week announced that they were gonna-- create a-- effectively a trading operation around cryptocurrencies and Bitcoin in particular. You've been an investor-- in Goldman. What do you think of their decision to do that?

WARREN BUFFETT: Well, they probably think that lots of people are gonna get very excited about, well, and-- maybe already are. But they think there's money to be made trading them. I don't think they're expressing an opinion on the ultimate value. I would be very surprised if the top partners of Goldman are selling their Goldman stock and putting it into Bitcoin. But I wanna cover the subject now because my friend, Charlie, will come on at 8:00. There's no telling what he will say.

BECKY QUICK: Well, that-- that's my whole entire point. I do wanna ask Charlie about it because I think when he talked about the turds he was referring to this he said, "If you're trading this it's like watching other people trading turds and deciding you wanna get a piece of that."

WARREN BUFFETT: Well, you're not gonna get me to comment on that.

BECKY QUICK: Hopefully Charlie's not awake and is not--

WARREN BUFFETT: Well, the truth is--

BECKY QUICK: --watching right now.

WARREN BUFFETT: --there's people who do trade on very crazy things over time. You know, imagine people selling their homes to buy a tulip in Amsterdam. If people think they're going to make money the next day and, worse yet, if they think somebody else that they know is going to make money and they aren't going to make money they-- it just draws people in. You know, I can whisper something on this program and kind of the more sillier it was the more it right react because there's no quantitative limits. If you buy a stock and you say, "Well, I'll buy it at 15 times earnings but I won't buy it at 20 times earnings." But when you get into something that doesn't produce anything, you know, there's no checkpoints there. There's nothing to reference it to. It's just-- it's gone up and it will keep going up

BECKY QUICK: Now I will say when I was tweeting the things that you and Charlie were saying about this weekend all I was doing was repeating what you were saying. And people were coming back with some pretty angry comments-- --including things like, "I bought a house-- buying cryptocurrency. You're outdated on this." They said a lot meaner things that-- "You don't understand it so you should shut up about it." What-- you're not.

WARREN BUFFETT: Well, the interesting thing is if you're investing you or other people. You--


WARREN BUFFETT: --if I'm investing in Apple-- I love the idea of people saying Apple is terrible 'cause I want the stock to go down because the repurchasing shares and my interest will go up faster. You-- don't get defensive if you're buying something that produces. You don't buy a farm and get real defensive if somebody comes and says, "You shouldn't buy a farm." If somebody says, "I watch the crops go and I can see what I sell-- I'm selling my crop for at the end. And I'm making s-- 4% or 8% on my investment." You're getting defensive when you look at this thing and it doesn't do anything. You're just hoping somebody comes along to pay you more tomorrow and the next day. And you're dependent on more people-- the mob growing, you know, basically. So-- those people do get angry. But-- the person that bought a house with it, I would say they did the very right thing. They sold it.

BECKY QUICK: They sold it. They sold it and bought something else with it. Hey, Joe-- you have a comment to?

JOE KERNEN: Just-- I was saying in it-- but look how long it took you to buy Apple though, Warren. I mean, you finally did buy it. But-- you needed to be, you know, it needed-- it just took a long time. I don't know what happens with Bitcoin. But you see these-- I don't understand it either. But-- it's got quite a following amongall these people that, you know, think it's going to 25,000 or 100,000. I mean, it did take you-- you've never embraced-- technology as much as a lot of other things that you understood a lot better. And you're finally in Apple. But what did you finally buy Apple? It's was already probably a $700 billion company when you finally bought it. Coulda-- you know, woulda been nice to buy it a $100 billion or $50 billion.

WARREN BUFFETT: Yeah. I say about buying Apple is I don't care whether anybody ever mentions Apple again. I mean-- you know, whereas with Bitcoin you do-- people that buy it wanna taut it because they want more people joining the crowd. So they wanna come on and say, "You buy Bitcoin," because the only-- they're gonna lose money unless the crowd gathers. If the crowd starts to dispersing-- so they've got every reason in the world to taut it. When I buy Apple I know that Apple is going to repurchase a lot of shares. So right now Apple had whatever it did at the quarter 4,927,000,000 shares or 923 million, whatever it was. And we own about 5%. But I know I don't have to do a thing. And probably in a couple years we'll own 6% without laying out another dollar. Well, I love the idea of having 5% go to 6%. And the cheaper the stock is, the more they will get for their money when they're buying it in. So there's-- no reason at all for me to encourage other people--

JOE KERNEN: Hey-- Warren--

WARREN BUFFETT: --to buy Apple. I'm--

JOE KERNEN: -- I hadn't heard anyone say City Service in a long time. Was that-- it was-- it was a preferred stock? I-- I don't-- it must've been convertible. Wasn't it or something to have huge price—swings like that

WARREN BUFFETT: Now what---- happened, Joe, was that City Service started out as a utility company like it sounds. Way-- back around 1910, sometime around then.


WARREN BUFFETT: But then they bought it-- they started developing natural gas and then they found oil in connection with it. So over a period of time it still = it was a big utility company. It-- morphed into a basic energy company-- productive company. But they issued when they were a utility primarily-- they issued a $6 preferred that-- cumulative preferred. And it quit paying dividends in 1932-- a lotta people, they ran outta money then. So-- from 1932 forward you had this preferred which, $100 par, which was accumulating at $6. A rarity just-- the year before I bought it they actually made a $3 payment on a rarity. But that still was less than $6 coupon. And then they eventually called it at 200 and something which was-- $100 par, probably a call premium plus all the rariges. It was not convertible.

JOE KERNEN: I see. That's pretty amazing that you were 11 years old when you-- and what a history City Service had. I mean, there's a boom ticking and a Pacman defense, it was bought by Oxy. And then part of their gas stations were bought by Venezuela, remember? And they were given free gas around it. And-- the Red Sox, the big--


JOE KERNEN: --CITGO sign up at-- near the-- baseball stadium. It's amazing--

WARREN BUFFETT: Right, right. It became-- a major oil company.


WARREN BUFFETT: They actually I think sold the preferred door to door-- way back in the-- in the '20s, sometime like that too. But--

JOE KERNEN: Quit talking about buying--

WARREN BUFFETT: --it was cheap. You know.

JOE KERNEN: -- every time you say bought the farm I'm like, "What--" I'm, like, not listening for a second and then you go, "I'm buying a farm-- buying--" like, stop talking about that. I looked up what-- that's a weird-- expression that came from-- it's very morbid-- what it actually came from. But-- I'm not even gonna go into it. But it-- there's-- a-- derivation for what it came from when I guess the guys-- they wanna come back from a war and they're gonna buy a farm when they do. And unfortunately it's their family that ends up buying it from insurance proceeds or something. It's horrible. But-- anyway-- yeah, let's move onto-- Bitcoin and--

BECKY QUICK: To different assets--

JOE KERNEN: --Apple.

BECKY QUICK: --different assets on this.

WARREN BUFFETT: The War-- World War II there wasn'tgo ahead actually.

BECKY QUICK: Go-- ahead, go.

WARREN BUFFETT: It was very interesting in one sense because John Maynard Keynes had written in 1935 or 1936 The General Theory. And-- Keynes in economics of-- around my household everybody thought it was a total fraud and all of that. World War II forced the country into this huge Keynesian type financing. I mean, we had the deficit financed in a way that was incredible. And-the debt went up to 120% of GDP which is considerably higher than it is now from a figure far lower than that. And we sent millions of the most productive people-- we took a lot of the economy. We started building things that we dumped into the sea. We did it on borrowed money. And it created the runway for, you know, the greatest economic progress the world's ever seen.


BECKY QUICK: Warren, let me ask you one more question on-- oh go ahead.

JOE KERNEN: No I-- so that almost-- so is that, like, an endorsement of Keynesian economics, Warren?

WARREN BUFFETT: It certainly worked in World War II. I mean, we would-- we-- I don't-- I do not think the '40s and '50s and '60s would have developed remotely like they did without the huge deficit spending. And-- all these events that, you know, we were trying-- we were struggling to get out of the '30s. And-- then they just turned a spigot loose which they had to do and build a whole bunch of things they dumped in the sea. You know, they-- weren't building refrigerators or cars or anything like that. They-- and-- there were a lotta people that predicted a-- one of the things that I do remember very well was that a lot of very respected figures that we would come out and have a Depression post-World War-- II just like we had post-World War I. So-- that was a prevailing sort of--

BECKY QUICK: But are there times to be Keynesian and then times to pull it back in and rein it back in?

WARREN BUFFETT: Yeah, well, that's-- but Keynes would say that too. Yeah.

JOE KERNEN: Well, we need a guy with a little--

BECKY QUICK: Let-- me ask you--

JOE KERNEN: --experience-- to talk about all this. Not someone-- you're age, you know. We need-- Charlie on who can probably really--



ANDREW ROSS SORKIN: --with a little experience under his belt.

WARREN BUFFETT: Give him a s-- yeah, g-- be prepared to bleep him out though.

BECKY QUICK: We need a three-second delay with Charlie. Hey, Warren, let me ask you, just City Services, you've talked about this. I knew that was your first purchase. I knew you were 11. But for people watching at home, you hear an 11 year old picks out a stock and asks their dad to buy it, particularly when their father is a stock broker, you assume their father is the one that led them to that conclusion. My guess is you did that all by yourself. How-- did you come up with it?

WARREN BUFFETT: Well, I must've heard somebody talk about it. But-- and if you looked at City Service at that point, here was this company in the Depression, didn't have the money to pay it. Now all of a sudden was paying down its debts and it was going to earn a lotta money. And they had a lot of, you know, they had- -- assets that were becoming worth more. And we were going to have inflation after World War II so that assets probably were going to be worth more while their debt was coming down. And the earnings on the preferred were terrific. They just weren't paying 'em out. So-- I was gonna get $200 at some time. But the problem was that I-- buying it at 38 and a quarter, as a matter of fact, and having it go down to 27-- and walking to school with my sister who also wanted to buy three shares 'cause I was buying it-- she hated to see me get rich, while she wasn't getting rich- and having her point out that this thing was going down every day,when it got back up to 40 and we had-- each had a chance to make a $5 profit I thought, you know, now my sister will again consider me a genius and I will have $5 more. How could life be any better? So then I watched it go to 200 after selling it at 40.

BECKY QUICK: Well, lessons learned early in life. Probably very powerful ones. Warren Buffett's gonna be with us until 9:00 a.m. We have a lot to talk about still. But, guys, I'll send it back to you in the studio right now.

ANDREW ROSS SORKIN: Okay, thank you, Becky. Coming up, when we return, we have two special guests joining Becky and Warren Buffett. That's gonna happen in the 8:00 hour, Berkshire vice chair Charlie Munger. We are getting the three-second delay ready for him. And then Berkshire board member Bill Gates. Stick around, we've got a lot more coming back from Omaha in just a moment right here on Squawk.

ANDREW ROSS SORKIN: Good morning. Welcome back to "Squawk Box" right here on CNBC. Let's show U.S. equity futures at this hour. Let's let you know what's going on right now. Dow looks like it could open up higher, about 60, almost 70 points higher now. NASDAQ looking to open about 38 points higher and the S&P 500 looking to open up about nine points higher. A quick look at crude right now. Barrel costs a WTI, $70.42. That's the highest level since November of 2014.

JOE KERNEN: And it makes you wonder when – if the Iran deal is decertified, is it in the stock or is it in the price already? Because that's not going down if the president decides to exit that deal. Let's get back to Becky out in Omaha with our special guest, Mr. Buffett. Beck?

BECKY QUICK: Joe, thank you. Once again, we are in Omaha with Berkshire's chairman and CEO, Warren Buffett. He's going to be with us through the entire morning. We'll be joined also by Charlie Munger and Bill Gates a little later in the program. But right now, Warren, let's talk through some of the individual stocks that you've spoken about this weekend. Maybe the most controversial one was Wells Fargo. You were questioned directly on that at the shareholders' meeting with questions from shareholders. And who have said, "Okay," and I did hear this from other shareholders later on –


BECKY QUICK: Wells Fargo has run into trouble time and time again. The fines have continued. The developments and things that we've found out about some of the cockroaches particularly – you know, as you might phrase – continue to come out. But you've stuck with this stock and said that you're not selling and that you have faith in Tim Sloan who's the existing CEO. People have pushed back and said, "Look, this is a company that's run into trouble and it doesn't jive with what we've heard you say about Salomon." How do you say yes this does fit with our investing philosophy?

WARREN BUFFETT: Well, at Wells Fargo they made one mistake that maybe I've made from time to time, which is incentives work, and they came up with improper incentives and they work. And so they incented bad behavior instead of incenting good behavior. And that happens from time to time. You could put too big a commission in something of the sort.

BECKY QUICK: But let's talk very specifically about what incentives were created. They were incentives that rewarded people for the number of new accounts that were opened.

WARREN BUFFETT: Number of new accounts. And they got in – they regularly on their investor presentations would say, "We've got so many. And eight would be great. And 6.2 was better than 6.1 products." So it put this huge emphasis to the public out there as well as to their employees. But to the public that they had more services per customer.

BECKY QUICK: To their shareholders.

WARREN BUFFETT: And shareholders. And everybody would listen. And surprise, surprise, people started creating fake accounts. And when bad behavior gets in there, other people figure it out – I mean if you get rewarded for bad behavior, you're going to have a lot of bad behavior. That's a problem. I'm sure it's a problem we've had from time to time in Berkshire and other places. But the real problem was when you find out about it, you've got to stop it immediately. And I don't know the details about why it wasn't stopped, but I've seen that before. And then it just gets out of hand. And if you don't stop it immediately, then if you do it four months later everybody will come and say, "Well, why didn't you do something four months earlier?"

BECKY QUICK: But let's be a little more pointed with this. This was not just a case where Wells Fargo was not stopping bad incentives immediately. It was quashing whistle-blowers who were behaving properly and firing them.

WARREN BUFFETT: I don't know the details too much on that.

BECKY QUICK: From what's been reported. I don't know this first-hand.

WARREN BUFFETT: I won't argue with you.

BECKY QUICK: I don't know this first-hand, but from what's been reported, there have been many whistle-blowers who said that they were trying to do the right thing. They tried to report it. And as a result they wound up losing their jobs.

WARREN BUFFETT: Yeah, once you have not done it, you're in the soup. I mean, John Gutfreund in April of 1991 got word that Paul Mozer, a trader in government bonds, was doing something that was very wrong. And he absolutely – John was not profiting by it. He didn't know about it. But the next minute he had to pick up that phone and call Gerry Corrigan of the Federal Reserve of New York. And everybody thought he was going to do it in the room. But it was unpleasant or he got distracted. And then on May 15th Mozer did it all over again and now the position you're in is you caught him and you knew this pyromaniac was out there who would set fires and you let him light another match. And then you're in big trouble. Anyway, you have to act. I mean, Charlie's been very good with me on things like that. If I tell him about anything is a problem, I mean, he doesn't let me procrastinate. And I might procrastinate a little. It's a very human trait. But anyway, and then they uncover other wrong things as you get into it. Now a couple of our great opportunities came from similar situations. I mean GEICO had a CEO in the early '70s who refused to accept the fact that the lost reserves were developing badly. Now if you refuse to accurately assess your loss reserves, you also don't know your costs because you sell the product first and then you start kidding yourself on the cost. And then you get in a hole. And now your reserves are at a – maybe you figure it out. But then you've got to admit it if you do it. And it's just easier to shut your eyes and hope that something good happens. And it essentially bankrupted the company. Now that was a huge opportunity for us because GEICO was a solid company underneath. But their balance sheet was a mess. They needed to raise capital. They almost got their licenses withdrawn. And we bought half the company for less than 50 million bucks. So the fundamental business of Wells Fargo, they've still got the accounts, they've got the loan customers. We do business with them every day. And incidentally, other banks ran into much other kinds of trouble in the 2008 and '09 period. More on the selling bigger stuff, you know, maybe mortgage back securities or something of the sort. So the banks had their share of trouble. But Wells had theirs in a particularly egregious way, which was really kind of thumbing their nose at the public. They made way, way, way less money doing that than if they were bundling big MBS' and raking it in by the tens or hundreds of millions. And the fines were big, you know, even bigger. But going forward, you can stop bad practices. They should be stopped earlier and much earlier is easier.

BECKY QUICK: I look at the situation with Salomon and you came in and were the person who had to clean it up. Tim Sloan was an insider. Tim Sloan was not the one who – this didn't happen on his watch.

WARREN BUFFETT: No it didn't.

BECKY QUICK: But he was an insider. Is that – can you be an insider and still be the one who cleans it up?

WARREN BUFFETT: Well, I cleaned up affairs with Congress and tried to set a tone and everything. Deryck Maughan came in and I put him in total charge of running Salomon Brothers. And everything he did, you know, was perfect. I mean, and he had all kinds of things he had to look at, we didn't know when we'd get more surprises. He was working 15-hour days. He never asked for any extra compensation of any kind.

BECKY QUICK: And he was an insider at Salomon.

WARREN BUFFETT: Oh yeah, he'd been an insider there. Sure, he was one of seven or eight people that would – top people I interviewed. I had to have an insider because I arrived there on a Friday, you know, and they were about closing us up – and somebody had to run a business that was doing more maybe hundreds of billions of dollars' worth of business and things like government bonds and everything. We had the largest balance sheet of Wall Street. So there was no way I could wait and get an outsider. I interviewed people on a Saturday. I started interviewing at 9:00 in the morning. I got in on a Friday. And I had to come up with somebody by Saturday afternoon to run the place. And there were people in that room that semi-contributed to the culture anyway that led to this activity. And so I picked an insider who knew about it, knew all the people involved. And the guy behaved magnificently and got me outta trouble.


JOE KERNEN: Andrew wants to talk to you.

WARREN BUFFETT: The same thing happened to GEICO. They picked a new guy. They picked Jack Byrne.

JOE KERNEN: Warren, I wonder how much Wells Fargo talked to you. They're on a complete reset now. Yesterday was a Wells Fargo championship down at Quail Hollow. I don't know if you saw it. But the entire advertising campaign they go back and show when Wells Fargo was, you know, was founded and they show stage coaches and everything they did. And then they just go completely blank where they say, "But this happened. And now it's the new—" I mean, they paid someone to get an entire ad campaign that there's been a complete reset and we're starting over. And, you know, the spokesperson that they had on at the tournament it's all they talked about as well. I mean, that took a while. But they finally got to the point where they're saying, "All that history is in the past and we're starting all over right now," which is pretty amazing that they had to come to that point. Did they talk to you about that advertising campaign?


JOE KERNEN: I guess they did.


JOE KERNEN: No, they didn't?

WARREN BUFFETT: No, we never – and at Salomon, we did not run an advertising campaign. But I ran a two-page, double truck ad in the New York Times and the Wall Street Journal and the Financial Times when we reported our third quarter. And I said what was wrong and I said how we were going to change it. And it was in very small type. And we needed change. Wells, it's interesting. I first bought in when Carl Reichardt was running it. I can tell you that there's no finer guy than Carl Reichardt. It wouldn't have happened under Carl Reichardt. But institutions make mistakes. And I will tell you this, we have 377,000 people working for Berkshire and right now I don't know whether five of them or ten of them or 20 of them – but I'll guarantee it isn't zero – are doing something wrong. And my job is to act when I hear about anything. And to make sure we've got some system so we do hear about things. So we get about 2,000 contacts through what we call the hotline a year. I get anonymous letters. And those are the two best sources of finding out where something's wrong. I mean, it's better than having 100 people crawling all over the books. Anonymous, anonymous. Sometimes they sign them. But I just received one last week, you know.

BECKY QUICK: You received one last week about something happening at Berkshire?

WARREN BUFFETT: Yeah, sure. But, I mean, I receive them all the – and I mean, they're going to come in. And sometimes people just don't like the person working next to them so they, you know, they come in for a lot of frivolous reasons. But you have to look into what it is. And if you look at 100 and 99 are, you know, the guy next to me has bad breath, you know, or something like that. But that's the way you do find them, overwhelmingly, is tips basically.

BECKY QUICK: How do you track down every one of those tips?

WARREN BUFFETT: Well, we have an audit department that sorts out the ones that they think I ought to see. I mean, you know, so Becki Amick is in charge of the audit department. And incidentally, the larger companies, they have their own groups too. But those people could not only write their own company but they could write us. And some of them just come into, you know, a letter comes into Warren Buffett chairman – it's usually not signed. But that's okay, I mean, and obviously when they get very specific and say, "This is going on or that's going on," that's what happened at American Express in 1964. They had a field warehousing subsidiary. They were getting calls from a guy at a bar in Bayonne to the head of the – and he was saying, "The tanks are phony. Go to this tank and go to that tank and you will find that it's not filled with solid oil." And the guy didn't want to hear it. And he didn't want to tell his boss. And it just gets worse and worse and worse.



ANDREW ROSS SORKIN: You know, after you had commented on Wells Fargo during the meeting when we discussed it on Saturday I got a couple of emails of folks who asked me I could – if there could be a follow-up question. So the follow-up question is this. When you bought Salomon you came in after Salomon had its problems. And some of the other examples that you gave, the opportunity came because you weren't in the stock. In the case of Wells Fargo, you've been in the stock. So there were two questions. One is do you wish you weren't in the stock when they had the problems, meaning would you have preferred to put your money, for example, in something like JPMorgan, which I know you've put personal money in before. And somebody else said that, you know, you famously said if you lose reputation, "I will be ruthless." And the question is, when will you be ruthless or at what point would you be ruthless either in this case of Wells Fargo or does it have to be even more egregious?

WARREN BUFFETT: Well, I'd be ruthless if anybody was working for me. But I don't – and the answer is, of course I wish I wish I'd bought the other stocks – bank stocks – and then sold them now so I'd be buying Wells Fargo now. I mean, Wells Fargo actually is buying in a lot of shares. And you can argue that they are improving the per share value because they had this bad news they're buying it cheaper. But I think ten years from now, I think if you look at the ten-year record of Wells Fargo ten years from now you will – you're very likely to find that it outperforms most of its competitors.

BECKY QUICK: Would you be buying more shares now if you could? You can't because of the bank thresholds, bank owned 10%.

WARREN BUFFETT: Yeah, if – I don't want to give recommendations on which stocks to buy.

BECKY QUICK: Yeah. To Andrew's other point though, I think you touched on it very quickly. But the idea of being ruthless, if you lose a shred of reputation for the company—

WARREN BUFFETT: That's Berkshire.

BECKY QUICK: Right, but what you're saying, you're distinguishing between Berkshire-owned companies and investments.


BECKY QUICK: It may be worth pointing out that you're a passive investor in Wells Fargo and the bank and you have to be.

WARREN BUFFETT: Yeah, well, I have to be a passive investor.

BECKY QUICK: But I'm not sure everyone understands that.

WARREN BUFFETT: Yeah. No, no, no. We are not – we do not want to be a bank-holding company. Now, we can become a bank-holding company if we own over 10% and there's a point at which your activities could make you or some of these – we have no – we owned a bank. And we had to dispose of it back in 1980. We bought a bank and then they passed the banking act of 1969. We'd have bought more banks actually. I like the banking business. And then they changed the law in 1969 and we had ten years to divest. Maybe they changed it in 1970. We had ten years to divest of the bank we owned. But I would not – we'd still own that bank and we'd own other banks if they hadn't changed the law in the 1970 period.


WARREN BUFFETT: But I don't feel responsible. If you're having trouble with your Apple phone don't blame me.

BECKY QUICK: Okay. We have much more from Warren Buffett still to come. Right now we're going to send it back to Joe and Andrew in the studio.

ANDREW ROSS SORKIN: Okay. Coming up when we return, billionaire summit. Warren Buffett's going to be joined by Berkshire vice chair Charlie Munger and Berkshire board member Bill Gates. That starts at 8:00 a.m. eastern time. "Squawk Box" returns from Omaha in just a moment.

BECKY QUICK: All right, good morning again, everybody. Welcome back to "Squawk Box" where we are live from Omaha. Today we are introducing the Warren Buffett archive. This is a website with the world's largest collection of Buffett speaking about business, investing, money and life. It includes 25 full annual meetings for Berkshire Hathaway with Warren Buffett and Charlie Munger taking questions from the audience. It goes all the way back to 1994 with a highlight reel for each year. By the way, folks, this is the only place that you can get this complete archive. It's also got 130 hours of searchable video. It's synchronized to 2,600 pages of transcripts that have been painstakingly checked by Alex Crippen who did a phenomenal job of running through and making sure he knew exactly what everything that was mentioned was done. This was done by hand. I'm calling it, instead of AI, AC for Alex Crippen. There are 500 video clips covering scores of subjects plus CNBC interviews, a Buffett timeline and a Berkshire portfolio tracker. If you want to check it out make sure you do it today, it's Warren, you got a chance to take a look at this too. And this came from you giving Steve Burke, our chairman at NBCUniversal, access to 25 years of annual meetings. This is stuff that only Berkshire's been holding onto for this time.

WARREN BUFFETT: Yeah, Steve had suggested it to me a few times. And then he suggested it a little stronger. And it sounded like a good idea. I didn't think it could be done like this. So we just gave him all the annual meeting material. We didn't give the movie because that's got some stuff that we've promised not to put out, you know, but—

BECKY QUICK: You mean with celebrities who have done things.

WARREN BUFFETT: The celebrities come on, yeah. But in terms of the annual meetings, you know, door to – portal-to-portal and everything we had. Everything we had. And even, you know, with university students – anything we had, we gave Steve. And I told Steve, "You can do with it exactly what you want." I mean, I've known Steve a long time. And I thought it'd be an impossible job. But I knew that if it was done, it would be done well. I mean, it blew my mind when I saw it.

BECKY QUICK: I mean, it's been really useful for me just going back trying to figure things out because over the years things kind of blend together when you said what or exactly what you said or if it was you who said it or Charlie who said it. The search function is better than I had anticipated just in terms of being able to look up things. Like maybe I wanted to find out when you started buying shares of Apple. Type in Apple shares and it comes up. And I can even go back, link to the transcript and then click to the video of you saying exactly why you were buying it.

WARREN BUFFETT: Yeah, it'd be more fun for me to just recall what I was saying. The bottom of all. But it's all there. I mean and that's the way it should be. I just love the idea of it.

BECKY QUICK: Great, thank you. And folks at home, if you are wanting to check this out the address, again, is The website is live. We'd love to hear what you think about it too. When we come back this morning, we have much more from Warren Buffett plus we'll be joined for an hour by Berkshire's vice chair Charlie Munger and Microsoft co-founder and Berkshire board member Bill Gates. That is coming up at 8:00 a.m. eastern time. We will be right back live from Omaha, Nebraska.

BECKY QUICK: Andrew, thank you very much. Again, folks, we are live in Omaha, Nebraska. This was the site of the Berkshire Hathaway annual meeting this weekend, the 53rd annual meeting. Our special guest is Berkshire's chairman and CEO, Warren Buffett. And, Warren, thank you again for being with us this morning.


BECKY QUICK: It is fun. I want to talk through the cash hoard that Berkshire has. At the end of the year, you had $116 billion in cash. You told us last week-- that you had spent about $12 to $13 billion in the first quarter. So you were thinking the cash hoard was closer to $100 billion based on some other things that you had potentially bought as well. Okay. So you're spending billions of dollars, but you still have $100 billion. Is-- is that ideal?

WARREN BUFFETT: No. No. It-- it-- it's-- we earn very little on it. But that is-- we will earn a little more this year on it than-- but it's-- it's-- it's just about the world's w-- worst investment except doing something dumb that y-- you're doing for a longer term. And-- but it does give you the ability to move very quickly if something very big comes along. But I would much rather have that number be $30 billion than $100 billion and have that-- the other $70 billion invested in-- ideally in businesses we own but also-- in securities we own. And we did, for example, put out-- I don't know whether it was-- how much was in the first quarter, how much was in April I'm not sure. But-- but we-- we-- we put out 15 or so billion net-- into stocks. And I like that. And-- and it wouldn't-- if I could find 'em and buy 'em in sufficient quantity, if that had been 50 billion, I would have been even happier in the first quarter. Or if we'd bought a $50 billion business. But-- you don't want to let money burn a hole in your pocket either. I mean, we-- we make-- if we buy a business, we buy it to keep. So-- if we pay X for a business or 2X for a business, the business doesn't know, it's doesn't adapt itself to what I'm paying. And it's going to earn the same, and so it – if I make a mistake on purchase price, Berkshire Hathaway lives with that mistake. Forever.

BECKY QUICK: And so, for the rest of us who see you sitting on $100 billion, we think that you think the market looks expensive and that you can't find anything that's worth putting your money into that's better than cash or short-term treasuries.

WARREN BUFFETT: We – we own $170 billion worth of equities. We go up every quarter, and we went up a fair amount in the first quarter. So – no, I would rather own the $170 billion of stocks we have than own treasury bills by a very significant margin. But there are limits to how much I can buy of -- of some of these companies that I like. Usually we quit at 10% almost always. So, no, if you told me I had a choice and I could make a change – if you told me I could make the choice of owning treasury bills, long-term treasuries or common equities, I'd buy common equities, and I-- I was gonna keep it for 10 years or 20 years, I'd do it in a second. And-- we'll get the money in play. We-- we've-- something will happen.

BECKY QUICK: Something will happen meaning a big deal?

WARREN BUFFETT: It could. Yeah. Sure. I could spend it all tomorrow. I mean, I wouldn't spend the whole 100. But I'd-- I-- I-- I-- although if a 100 million-- a $100 billion deal came along that-- Charlie and I really liked, we'd get it done.

BECKY QUICK: You'd get it done by spending it all or by a financing partner?

WARREN BUFFETT: Well, we'd probably have to-- we might borrow 30. 25 or 30. Or we might sell some things. I mean-- but one way or another, we'd get it done if we liked the deal.

BECKY QUICK: There are-- questions that came in from shareholders that I got this weekend. And I-- I-- I didn't get a chance to ask you all the questions that came in. Some of them said, "Is 20 billion still the amount that you feel comfortable holding?" Others asked, "If you've got all this and you're telling all of us to put our money in an S&P index, why don't you put that $100 billion in an S&P index?"

WARREN BUFFETT: It wouldn't be the dumbest thing in the world if we did. But-- that's a lot to move in and out. No index fund would take it, I mean, to start with-- knowing that we would want to-- might want to yank it out-- 50 billion of it out in a week. So we-- we-- we'd almost have to create our own-- index fund to do it.

BECKY QUICK: It wouldn't be hard.

WARREN BUFFETT: Well, it-- it-- it'd be a fair amount. I mean, they're better set up to do it than we are to buy 500 sto-- stocks in the proper proportions and keep an index. But we could create something that was a quasi-index fund. And-- that-- that-- that would have been smarter than what we've done, Becky. That-- that would have been smarter. You know, I mean, I've-- I've-- I've thought about that some. I think-- I think it's a little harder to act when you see something later on if you do have to unwind 500 positions and all. I-- I like to move when I move. So I-- but net, if you told me over the next 30 years that Berkshire would keep it's excess-- that we'd still have 20 billion in-- at least in treasuries-- but-- or treasury bills. But if you told me we were gonna follow-- for the excess money we were gonna follow an index fund policy versus a treasury bill policy, I would say the index fund policy would work well assuming we could execute it reasonably well.

BECKY QUICK: Okay. Let-- let's talk-- about Apple, the-- the place where you were spending the bulk of-- of that cash that you were in the first quarter where you were deploying it. $12 to $13 billion that you put in. That's on top of the, I think $27 or $28 billion you already-- maybe it was 29 billion you already owned in Apple as of the end of the year. That's a big chunk of that $170 billion. It's the biggest stock that you own by far. It already was before you bought these additional shares. 75 million shares. Why?

WARREN BUFFETT: Well-- I should say in the past we had plenty of times when-- when a single stock was a bigger proportion of our total net worth. But in terms of recent times-- well-- it-- it was-- it was-- it was a company I liked, a business I liked very much. And we could buy a lot of it. There are some others that-- that are much smaller companies we just can't buy that much. I might like them equally as well, but I can't put as much money in it. But I clearly like Apple. And-- and we buy up 'em to hold. And-- and we bought about 5% of the company. And-- I'd love to own 100% of it. But that's the test. Would you like to own 100% of a company? If-- if you're gonna by 5%-- we're not buying a stock when we buy Apple in our minds. We're buying 5% of a business. We buy 100% of some businesses. And when they're publicly held, we buy 5%. But we bring the same thinking to it. And-- and--we like-- we like very much the economics of their activities. And we like very much the management, and the way they think, and the way they act.


ANDREW ROSS SORKIN: One of the-- other questions, Warren, that we didn't get a chance to ask-- over the weekend-- was one-- about USG. This is a transaction you-- you've been involved. You've historically avoided-- what are described as hostile takeovers and said you didn't want to be involved in them. This one's a little tricky-- because the US-- in the-- this case of USG, you have effectively backed a company-- that is trying to effectively take over USG. Can you-- can you talk about that a little bit?

WARREN BUFFETT: Yeah. We bought USG first 18 years ago. We made a substantial investment. In 2006, the company-- company had been-- went into bankruptcy twice. And-- and-- and the company faced these huge asbestos claims. And we backstopped singlehandedly, Berkshire did, a one-for-one stock offering, which is very unusual. And we backed with a billion six or a billion seven-- this company c-- coming out of bankruptcy having a one-for-one offering. And-- and then two years later, in 2008-- when the-- the crisis hit and also hit housing, the company found itself needing money again. And-- we put up 300 of the $400 million they needed at that time. And 18 years from the time we bought the first stock and 12 years from the time we in effect bankrolled the company in terms of coming out of bankruptcy, we've never received a dividend. And the stock that we backstopped in 2006 at $40 was selling-- has been selling for less than that. And-- and in general, the-- the earnings estimates, the new products, and that sorta thing-- you know, have fallen short. Now, that happens with companies we own, too. I mean-- business can be tough. But when they received an offer from another company that also had been an 18-year-old shareholder and perf-- perfectly responsible-- building materials company-- that actually competes with our company Johns Manville, this company, they made an offer. And-- the company did not-- we own 30% of USG. (The c-- the company did not call and say, "What do you think of this offer?" Anything of the sort. They just called afterwards and said that their board had unanimously decided that it wasn't in our interest to-- negotiate with them or anything. And-- and like I say, we own 30% of the company. And then the company made a second offer. And-- the German company Knauf. And, again, they were turned down with no negotiation or anything of the sort. So we really felt the directors were p-- probably f-- very fine people. I don't know them. But we felt that they-- they did not represent our interest and that-- and we said that-- we intended to vote against them at the annual meeting. We don't have a candidate of our own or anything like that. But we just think that directors are there to represent shareholders. And-- we do not feel that they were certainly representing us with a 30% interest. And I-- and it's been since then that two proxy advising organizations, ISS and Glass-Steagall -- Glass Lewis, have said that-- they think-- they recommend a vote against these directors as well. And now the company said it's going to negotiate with the-- with-- Knauf. So that's-- that-- that is the situation. We-- that-- that's the first time I think in the 53 years I've been at Berkshire that we've voted against a slate. We withheld our vote at Coca-Cola a few years ago about-- because of a compensation plan. And we voted a time or two against individual issues. Maybe on stock options or something of the sort. But-- but-- but it's just-- it's a question of-- of whether-- the stockholders should determine what-- what they think the value of the company is. All-- all I know is that-- that for 18 years it has not worked out that well. And-- and-- and management has been more optimistic than-- than-- subsequent events-- delivered. And-- and-- we thought they should sit down and negotiate. Warren, another question that came up from a lot of shareholders. We-- we covered it some in the question and answers period on Saturday, but I thought maybe you could go into a little more deal-- detail on it. Just the idea of consumer packaged goods. Companies like Coca-Cola-- which hit a 52-week low last month even though the company came in with better than expected earnings on issues-- and-- and a company like Kraft Heinz, which is down about 35% over the last 12 months versus the S&P being up 11%, it-- it has a lot of people thinking that consumer packaged goods-- don't have as a bright of a future. I-- I think-- Jorge Paulo may have even called them-- saying jokingly that he felt like a dinosaur at the Milken Conference recently. What-- what do you think when you--


BECKY QUICK: --look at these areas?

WARREN BUFFETT: --it's-- they're still very good businesses. I mean, you've got a brand. If you look at the return on tangible assets, you know-- at Coca-Cola, or at Kraft Heinz-- you've got a very good business. It doesn't look as good as it did five or 10 years ago. In other words, There-- there's two reasons I think for that. One is, people are-- seem to me to be a little more willing to experiment with different diets or foods than they were--

BECKY QUICK: Give me. You mean--

WARREN BUFFETT: --five or 10 years ago.

BECKY QUICK: -- Some people would say healthy diets where they won't eat things that are packaged. They think that's bad for them. It's a millennial attitude, too, where they won't buy from the old brands.

WARREN BUFFETT: They're certainly— that's a factor in all of it, I think it may even extend beyond millennials to some degree. People are more-- well, they've gotten used to more change in their life generally. And-- and--and-- so I would say that the-- that there's still a huge loyalty factor. And there's-- but it is not as strong as it was five, or 10, or 20 years ago. And secondly-- there's always been a struggle between the retailer and the brands. I mean, they-- now, the-- you can't-- I mean, that's-- that's built into the American market system. And I would say that the retailers-- and-- and-- and they've-- they've always had private label b-- brands. In some other countries, private labels are much stronger than the United States, for example. And-- and the private label brands are priced below the big brands. And-- the retailer-- every time a retailer meets up with-- a packaged goods-- salesperson, they are arguing for lower prices and better deals. And I would say that their hand-- becomes stronger as the Costcos, and the-- and the Walmarts, and in other countries this other kinda-- as they become stronger-- the struggle can tilt a little bit one way or the other. I think-- I think a few years ago-- I-- I think Costco dropped Coca-Cola. And that's a real test if you want. And-- and-- and of course Sam's Club at that time started pouring it on with more Coke and everything. And-- and-- and that-- Coca-Cola's a pretty strong brand. So that Costco could decide to do that. But if Costco decided to drop a bunch of other brands-- that you could name-- they-- or Walmart decided to drop 'em, I mean-- the packaged good company might feel it more than the retailer would feel it. And they would come to terms faster. It's an-- it's an interesting dynamic. And it has gone somewhat against the packaged good companies. They're still good b-- very, very good businesses.

BECKY QUICK: Is that-- the dynamic between the retailer and the packaged goods companies, is that a pendulum swing that swings back? Or is this--


BECKY QUICK: Or is this a new--

WARREN BUFFETT: No, not necessarily. No, I mean you've got these German discounters coming over here now. And-- each company's got some muscle. And if you've been selling whether it's Coca-Cola, or, you know, whatever food you m-- may have eaten as a kid, or something like that, I mean, you were pounding-- you want the c-- consumer 'cause you gotta win with the consumer in the end. You've gotta have a product that's strong enough that the realer-- retailer has to c-- carry it to some degree and where their private label, even though it's priced below it, does not draw volume away. And if you take-- take Heinz Ketchup, it's very, very, very hard to take share away from Heinz Ketchup. It's hard to take share away from Philadelphia cream cheese, but I could name some other products which are-- w-- where it's easier to take-- share away. And-- the consumer is going-- the consumer votes every day. And some things are affecting the consumer like the feeling that th-- other things are healthier or something of the sort. Price affects the consumer. But just the prevalence and strength of the retailer can affect the consumer, too.

BECKY QUICK: Is that why there's so much pressure for some of these packaged goods companies to get bigger, for-- new deals to come in? Like-- I'm gonna take and wrap up with a lot of products, and then I have more heft against the retailers if they try and turn me around with their friends?

WARREN BUFFETT: You don't-- you don't get-- if-- if-- if Coca-Cola were to buy-- they've got the-- the-- the world's greatest distribution system. So they can-- they can push liquids through that. I don't know whether they could push cream of wheat, you know, or some things through their-- their distribution system. Obviously, a great distribution system is-- is worth an enormous amount. And-- and like I say, Coca-Cola has a great one. Coca-Cola incidentally, you know-- they're selling 5% more liquids. They are selling 100 ounces of liquids per capita in the whole world. 7 billion people are drinking their Coca-Cola product. And they're drinking that at the rate of 100 ounces a year. That's substantial. Leaves a lotta ounces to go. But-- but they are selling more ounces of liquid-- they've got more-- but they've got more brands now. But they are selling than they've ever sold. And it-- it grows year by year. And it's growing. And James Quincey is doing a sensational job on that. And first quarter even showed it. But-- but the-- if you've got a brand that's kind of lost out there or something of the sort, it's hard to get shelf space. And-- the retailer is going to stock what will move. And sometimes that involves price. And what you-- what you want to have is a product the retailer has to have.

BECKY QUICK: There are a lot of subjects that-- that drew some controversy and got a lotta headlines from this weekend-- including some back and forth-- between you, and Charlie, and then Elon Musk. And we're gonna talk about that in just a moment, but I-- I think we need to take a break. So Joe and Andrew, we will send it back to you in the studio. And we'll have more on that coming up in just a moment.

JOE KERNEN: Thanks-- Becky. You got a Wall Street Journal out there, too, Beck? You got one? They –

BECKY QUICK: Right here. What do you want me to look at?

JOE KERNEN: I want Warren to-- he may have already seen this Neil Ferguson-- piece 'cause-- it echoes some of the stuff that-- Warren was saying about this-- this China skirmish that--

BECKY QUICK: Here it is.

JOE KERNEN: --that we're having. Very interesting.

BECKY QUICK: All right. I'm giving it to him right now, Joe, so he can take a look at it.

BECKY QUICK: It's in the op-ed page. He'll read up on it--

JOE KERNEN: Excellent.

BECKY QUICK: --and be prepared.

JOE KERNEN: Excellent. 'Cause-- like-- like-- Mr. Buffett, I-- I think they think that it's something that because of the changing relationship we have-- and things have changed-- since—"Chi-merica" actually came about. And, you know, China's done well. And they need to come into the-- the real world. And maybe we're not wrong to be doin' it this way. That's the thrust of the piece. Anyway-- I would like--

BECKY QUICK: That's a good tease, too. We can talk more about that.

JOE KERNEN: Yeah, I'd like Warren's comments or-- or at least thoughts on that. We'll more from Becky and Warren Buffett-- on the other side of the break. In the meantime, let's get you caught up-- on the markets. We had Katie Stockton on last Thursday. And she was saying still thought the trend would reassert itself positively. And suddenly on Thursday we are down 400 points. Well below 24,000. But it closed up five that day. And then another positive session. And suddenly, we're about 700 points above-- the worst levels after she was on-- as it did reassert itself. There's the futures up 100 this morning-- just about on the Dow Jones. The NASDAQ up about 45. And we're watching oil this morning. Saudis reportedly want $80. And they'd like 80. And they seem to be getting their way-- this time around. The 10-year note, still below 3% though. 2.96 when I looked-- this morning. We'll have-- 2.959 now. And we'll have more Squawk Box-- coming up in a minute with investing legend Warren Buffett when we return.

BECKY QUICK: Good morning, everybody. And welcome back to Omaha, Nebraska, where we are live with-- Berkshire Hathaway's chairman and CEO, Warren Buffett, coming off of the 53rd annual shareholders meeting for Berkshire Hathaway. Warren, again, thank you for your time this morning.

WARREN BUFFETT: Glad to be here.

BECKY QUICK: There are so many things that we wanted to talk to you about this morning. One I've kind of been holding off, waiting to get your comments on is Elon Musk. Elon Musk was brought into the conversation this weekend at the shareholders meeting by a question. And I forget who asked it. One of the shareholders maybe. Bringing up this idea-- or maybe-- maybe it was Andrew. But somebody brought up this idea of-- of moats. Competitive advantages and moats. Elon Musk recently said that he thinks moats are stupid. People--

WARREN BUFFETT: He could give me his.

BECKY QUICK: And-- and that became a subject where Charlie weighed in and said, yes, he's-- he's right that actual moats around castles are stupid. But you guys got into a little bit where you were joking around, saying that-- you'd like to see him try and get into a candy store. He responded this weekend with some tweets, saying, "I'm starting a candy company, and it's going to be amazing. I am super, super serious. It just occurred to me that the plot of Willy Wonka is really messed up. Okay, okay. Just for the sake of argument, what do you wish for in candy? Cryptocandy. Then I'm going to build a moat and fill it with candy. Warren B. will not be able to resist investing. Berkshire Hathaway kryptonite. I'm killin' me. L-O-L." (THROAT CLEARING)


BECKY QUICK: What do you think about all of this?

WARREN BUFFETT: Well, if you look at the leading candy bars, for example, for the last 50 years, I think you'll find Snickers on top. And then you've got M&M's. You've got two types. So they don't combine the peanuts with the-- the other ones. But I think they're number two and four. And, you know-- Hershey's in there at number three or something of the sort. Yeah. I can't take 'em on. I don't th-- I don't think Elon should take 'em on. You know? They have moats. When you go into-- a drug store, a 7-Eleven, or something and you say, "I would like a Snickers bar," and the owner says, "Oh, I've got something-- the Musk Bar at-- at-- at 10 cents off the Snickers bar," you say, "Give me the Snickers." And if he doesn't give you the Snickers, you go across the street and buy the Snickers. Brands-- brands are moats, I mean, obviously. And-- and-- and if you try to-- you know, this-- this-- this product is selling, you know-- to hundreds of millions of people who want Coca-Cola. And if you say, "I'll sell you something for two cents less," or, "I've got some celebrity's name on it, they actually-- Richard Branson tried Virgin Cola in the United States about 15 or 20 years ago. And a million others have been tried. So-- I don't really have the same urge to produce automobiles that he apparently has to produce candy. But I don't-- I don't suggest that he take on Snickers.

BECKY QUICK: You're taking me literally and stepping away from the real story here, which is kinda this war of words between you, and Charlie, And Elon. And I-- I just want-- do you even know Elon Musk?

WARREN BUFFETT: I've-- I've never-- I've never said anything negative about Elon. I mean, you're-- you're baiting me a little bit to do it, but--


WARREN BUFFETT: But-- but I've-- I've never-- you know, I-- I-- people like his car and everything. But-- but somebody mentioned that now he's talking about financing. Something this morning about that. I-- I-- I thought I heard that earlier.

BECKY QUICK: Yes. Well, actually, War-- Andrew just read some headlines where it looked like they may be-- Tesla may be going back to market-- to-- to pick up some additional financing. I'm not entirely sure.


BECKY QUICK: All I heard was the-- all I heard was the headline.

WARREN BUFFETT: That's what I call a counter-revelation. I'm talking-- (LAUGH) you know, because I think it was just a few days ago they said they wouldn't need financing. It-- it-- but, you know, he's-- he's trying something to improve a product. And I-- I salute him for that. And the American public will decide whether it's a success. And-- and-- and it's not easy. You know? So-- it's probably easier to develop a new car than it is to compete with Snickers. But some products have terrific moats. Probably Elmer's Glue does. You know, WD-40. I mean, there you go. You can-- there's just certain things that you are not in-- much inclined to be dissatisfied with and seek-- and I would say that-- incidentally that the the iPhone-- you know, has a terrific moat. I mean, people that have an iPhone-- or maybe have some other phone. But they-- they want to continue with the product that they've got. They-- they want-- they want the new version. It's just easier for 'em now that they've have learned how to do everything, and their life's built around it, and all of that. And moats are very useful. Costco has a moat in people's mind. I mean-- Amazon can raise the price of Prime, you know, 20%. And you can't do that unless you've built something within that image of the Amazon Prime that's based on reality that you're going to get a lot for your money and you're gonna wanna use it. And then you can raise prices $20. But if you're selling-- you know, if you're selling some commodity prod-- product, you can't do that. You need a moat.

BECKY QUICK: You mentioned Amazon. So let's talk about that. Because you did say over the weekend that Amazon is one of the shares that you haven't bought that you wished you had. Are you ever going to buy shares of Amazon?

WARREN BUFFETT: It-- it-- it'll probably be tough. I've probably got so many psychological problems with the fact that I didn't do it that it's very hard to do it. I-- I always-- when I first met Jeff, I-- I knew he was an incredible-- person. And-- and he still encloses his 1997 annual report, which I read at the time, with his current annual report. And he's an extraordinarily clear thinker as well as being a brilliant thinker. And-- and-- and then he-- he connects-- I mean, it-- it's far surpassed anything I would have dreamt could have been done. I mean, 'cause if I had dream it-- if I had really felt it could have been done, I should have bought it then. It-- I knew he would do the most with whatever idea he had. I had no idea-- idea that it had this potential. I blew it.

BECKY QUICK: Another stock that you mentioned over the weekend, saying you-- you should have known it early on-- w-- was Google, Alphabet, the parent companies of Google, because you knew how much they could charge you when it came to GEICO--

BECKY QUICK: Another stock that you mentioned over the weekend, saying you should have known it early on was Google, Alphabet, the parent company of Google.


BECKY QUICK: Because you knew how much they could charge you when it came to GEICO.

WARREN BUFFETT: Yeah, here we were at GEICO, paying them 10 bucks or something for every click. I mean, you – 10 bucks. 10 bucks. And no cost to goods sold. I mean, and it produced results for us. That's why we paid them the money. So I had seen the product work. And I knew the kind of margins. I mean, I always said it's great to find something that costs a penny, and sells for a dollar, and is habit forming. This doesn't cost anything. And it's very useful. I mean, if you're looking up auto insurance on GEICO, you know, you've got an interest in auto insurance. I mean, it's a very directed way of talking to people. So the real question in my mind, I'd seen all of this to before I used to play bridge on all of this. And what I didn't know was whether there'd be more entrants. I didn't know enough about technology to know whether this really was the one that would stop the competitive race and all that. But I should have gotten Google, too.

BECKY QUICK: You say that Silicon Valley and a lot of the things that happen there is not really your field of expertise. But you've been around, and you've seen how a lot of things happen. Particularly with how Washington can have an impact. The reason shares of Apple were down earlier this year was in part because of the iPhone, but probably also in part because the FANG stocks overall were under pressure because of Facebook, the trouble it got into, the potential for regulators coming into this arena. What do you think broadly about some of these regulatory issues, some of these privacy issues or do you even consider it?

WARREN BUFFETT: Well, no, I think about that. But basically I like good news that isn't – or bad news that isn't going to last. And I'm saying that is one of them. But, I mean, bad headlines don't bother me. I mean, I had bad headlines when I bought that stock right after two or three months after Pearl Harbor and knew it was going to have bad headlines for a long time. So, I am not worried about – we've made the most money when there's been some temporary bad news. I mean, over time. Now, you got to be sure it isn't permanent or something of the sort. But if people get excessively worried about, you know, people changing their tastes and what they drink, they're going to drink 64 ounces of something or other. And carbonated soft drinks have lost share. They gained share just steadily for I don't know how many years, practically forever. But then – but bad news does not scare me.

BECKY QUICK: Just to put a finer point on that though, the regulatory issues concerning the FANG stocks, you think that's just a temporary headline where maybe there's much ado about nothing here? Or are you not sure?

WARREN BUFFETT: The regulatory issues on which?

BECKY QUICK: On Facebook.

WARREN BUFFETT: Oh no. I think that's – no, that's important. That's important. I mean, if you – 60 Minutes had two different ones. They had one back on October 8th. And then they had one a couple weeks ago that illustrated the effect of – well, the fellow said Facebook won the election for Trump. The fellow who managed their operation in the last election out of San Antonio, and has been appointed the head of their committee for 2020. And he – it's a very interesting episode. I mean, they really knew how to target everybody in the country basically with things that would appeal directly to them. And that could not only affect them in encouraging the followers to come bring out the vote, but it could suppress votes. And, I mean, they had – Facebook embedded – the fellow used the term embedded there. I mean, so it's a very, very important issue. And I think probably Congress has just begun to scratch the surface of it.

BECKY QUICK: What's different with what the Trump campaign did than what the Obama campaign did four years earlier where they were using Facebook and were kind of seen as, like, these technology wizards for figuring it out?

WARREN BUFFETT: Yeah. Well, they took a first step. And then – I don't blame anybody for doing it. And but my guess is they thought they were doing it as well in the Democratic campaign in 2016 as the Republicans were. But the Republicans were technologically—

BECKY QUICK: Advanced. Yeah.

WARREN BUFFETT: Yeah. Yeah. And Obama was advanced for 2012. I mean, the trick is to convince people. But the trick also is to get your vote out. And then the trick which is not – which is really tricky and is very counter-democratic is to suppress the other guy's vote.

BECKY QUICK: And you think that's the type of thing that will get regulators' attention or it will make Congress pay more attention?

WARREN BUFFETT: Oh, a lot of things in privacy will get it. You know, I am – people impersonate me, you know.

BECKY QUICK: Yeah, Joe does it very well.

WARREN BUFFETT: Well, but he's doing it to a very sophisticated audience in your case. But if somebody impersonates me on some website and says something I say, I may even be all over the world. It isn't me. No, this has brought a lot of new issues that are important issues out. And we're just in the early stages.

BECKY QUICK: Okay. We're going to talk more about this and many other things. We'll send it right now though back to Joe and Andrew in the studio.



ANDREW ROSS SORKIN: Becky, we will be coming back to you in just a little bit. We have that question from Alex Ohanian, by the way, Becky, which we're going to have to ask at some point.

BECKY QUICK: Oh, good.

ANDREW ROSS SORKIN: In just a little bit. But we will get back to them in Omaha get their thoughts on China and whether or not a trade war is on the horizon. And don't forget today we're introducing the Warren Buffett Archive, the world's largest collection of Buffett speaking about business, investing, money, and life. It includes 25 full annual meetings going back all the way back to 1994. We have a highlight reel for each. Plus, CNBC interviews, a Buffett timeline, and a Berkshire portfolio tracker. Be sure to check it out. It is very cool. "Squawk Box" returns in just a moment.

BECKY QUICK: Good morning again, everybody. We are live from Omaha, Nebraska, the site of the Berkshire Hathaway annual meeting. Our special guest this morning is Berkshire Hathaway's chairman and CEO, Warren Buffett. And Warren, so many things that we've talked about this morning and over the weekend. One issue is just the economy. And I know you told us last week a little bit about it, that it does feel like things have improved a little bit. Things have picked up steam. I just wonder why you think that. What numbers you see. What are the things that kind of run through your head in determining the Berkshire economic index.

WARREN BUFFETT: Yeah. I see a lot of numbers. And I get them pretty fast. I mean, and business is generally pretty strong. I mean, you could look at railroad car – anybody can look at railroad car loadings, for example every week. They come out on Wednesday. And you can see them by category. 22 different categories. And I think Matt Rose may have mentioned the other day that 18 of the 22 are up and overall they're up. And they're carrying stuff because people are buying stuff. They're adding inventory. And you see it and you're seeing some inflation connect with some of this. But you see it in some building materials. We've seen it particularly in electronic components. We have an operation – most people probably don't even know anything about called TTI. And it carries close to a million different types of electronics. I mean, you can order any one of a million items from us. They're very small. But people buy them because they're using them. And, you know, we have a hard time filling orders in that business. And that's kept getting stronger now for a year right up to what we're talking here. So we're seeing pretty good business most places.

BECKY QUICK: The jobs number on Friday had some people speculating that we can't get much lower in terms of an unemployment rate. That it's hard to find bodies to fill the jobs that are opening. Do you experience that?

WARREN BUFFETT: Well, that's absolutely true. I mean, we have a lot of jobs. We have – if you want to be a carpet installer, you can make very good money because there's a shortage of people that know how to install carpet. And we can teach you to do it. It takes a little while. But that's a very good job. And our home builders— and you've read about this elsewhere – but we have, in addition to having a manufactured housing operation, we have a site build operation as they call them. And we're in Denver, and Austin, Texas. Various places. And we have a hard time getting people for certain of the construction trades. And, again, we're actually funding a school in Denver – we probably have other participants doing it – just to teach people jobs that can pay them 50 or $60,000 a year. And no, there's – employment is tight in some areas. There's no question about it.

BECKY QUICK: What do you do? Do you end up having to pay more than 50 or $60,000 a year? I'm just trying to find out how inflation gets started.

WARREN BUFFETT: Well, the market system in the end, if a resource is scare – whether it's human or otherwise – if a resource is scare, the price will go up. And probably – we are seeing prices moving now in some areas and less resistance to those prices in recent months.


WARREN BUFFETT: This is not an explosion of World War II scarcity or anything like that.

BECKY QUICK: No. No, but I—

WARREN BUFFETT: But it's definitely going in that direction, Becky.

BECKY QUICK: And then you wonder where that gets us in terms of inflation that the Fed would start to see and potentially act against. And there are so many people who are trying to figure that out.

WARREN BUFFETT: Yeah. And I don't – I see all these figures, and I don't change one thing I ever do in terms of buying something. I've never changed an activity based on a headline in my life that I can remember, or an editorial opinion, or even the facts we get. I'm aware of them. And I like to know them. But it's going to be a different news year – we're going to own the company a year from now or five years from now. But I can tell you, I mean, if you're a policy center adviser or a member of the Fed board, I would be – I've got a responsibility then in terms of these figures. And I'm trying to steer them to some degree.

BECKY QUICK: But it may not have affected or impacted a decision on whether or not you were going to by a business. But it does impact your valuation, expectations in terms of looking at stocks versus bonds or stocks versus something else. You've told us on this program that inflation acts as a weight on stock valuations. And when interest rates are so low –

WARREN BUFFETT: It should push up interest rates over time.


WARREN BUFFETT: And it's very easy to talk about having a 2% goal. But it's another thing to keep it from going – once it starts in either direction, we don't know how well that'll work.

BECKY QUICK: Let's talk about something that Joe alluded to earlier. And-that's China and Trade. Not just with China. With Mexico--

WARREN BUFFETT: Yeah, the world.

BECKY QUICK: --with NAFTA, other things that are happening. But our delegation just returned from China over this weekend. This is Steven Mnuchin, the treasury secretary, Wilbur Ross, Lighthizer. All of them-- coming back. And now we have to wait and see. We have to-- figure out if Trump's tough talk will start paying dividends-- and improved trade relations or if it-- pushes us the other direction and leads us potentially into a trade war. What do-- you think happens? By the way, here's a tweet from the president. I believe this was Friday night. "Our high-level delegation is on the way back from China, where they had long meetings with Chinese leaders and business representatives. We will be meeting tomorrow to determine the results, but it's hard for China in that they have become very spoiled with U.S. trade wins."

WARREN BUFFETT: Yeah. Well, the answer is I don't think we will have trade wars because-- of significance. We will have trade movements. But--in terms of the old fashioned thought of a trade war where-- you just keep piling it on-- I don't think that happens. It's counter to the interests of us. It's counters to the interests of China. It's counter to the interest of every country in the world. I mean, the world thrives on trade. We would not have the economy, nor would China, nor would the rest of the world have the economic wellbeing that they have without a lot of trade. And incidentally in 1970, we exported and imported exactly the same amount. It was about 5% of GDP. So our exports have grown to 11 and a fraction percent of GDP, which is a huge number now. I mean-- but the imports have-- there's about a three-point gap or thereabouts. And-- there will always be people trying to get edges and all of that sort of thing. But in the end-- China and the United States have a common interest in something very big. And then we have-- a less-than-common interest in some things around the edges. It-- we will-- the world will not do something stupid over time in trade.

BECKY QUICK: Joe, did you want to jump in here? I know this is-- an issue you've been following very closely.

JOE KERNEN: It just-- I would just a little. I mean, the and I think Warren probably read this piece. But it is amazing when this alliance or whatever you want to call it between China and the United States started back in 2001, it was a different world. And-- China really was supplying cheap labor and cheap goods. And we were benefiting from that with low inflation. It kept our interest rates low. But the article, the Neil Ferguson article, points out China, no longer an emerging market. And they're looking more and more like us in terms of their economy, and consumers, and everything else. And-- at this point, it only makes sense that the trade deficit has to come down. And that's something that's not-- you know, it-- it's not unrealistic for the United States to be asking for that at this point. And China shouldn't be shocked that-- the-- and should probably make some concession. Warren, last week-- we went back and forth. We said China has more to lose. China said we have more to lose. And we went back and forth with that rhetoric. But the simple fact remains I think right now 4% of China's-- exports go to the United States. Less than 1% of our e