CNBC News Releases

CNBC Exclusive: Liz Claman Interviews Warren Buffett, Berkshire Hathaway Chairman & CEO, Live at the Company's Annual Shareholder's Meeting in Omaha, Nebraska on "Squawk on the Street"  (Transcript Included)

Jennifer Dauble

In a CNBC exclusive interview, Berkshire Hathaway Chairman & CEO Warren Buffett discusses succession, railroads, the newspaper business, Newscorp's bid for Dow Jones & Company, private equity, China and the markets, among other topics.

DATE: Monday, May 7th
NETWORK: CNBC
PROGRAM: "Squawk On The Street"
TIME: 9:30 am ET

Transcript below. All references must be sourced to CNBC.

MARK HAINES: THANK YOU RICK SANTELLI. THAT TIME OF YEAR AGAIN WHEN INVESTORS FROM ALL OVER THE WORLD CONVENE IN WHAT MAY SEEM LIKE THE MOST -- IT'S HOME TO INVESTING ICON TO WARREN BUFFETT. WE'RE TALKING ABOUT OMAHA NEBRASKA WHERE I WAS ONCE 35 YEARS AGO. I ASSUME IT'S CHANGED. THE BERKSHIRE HATHAWAY ANNUAL SHAREHOLDER MEETING IS GOING ON.= LET'S GET STRAIGHT TO LIZ CLAMAN INSIDE COMPANY'S HQ AND SHE HAS A SPECIAL GUEST.

LIZ CLAMAN: MARK IT IS NOT FOR JUST THE GREAT STEAK. YOU HAVE TO COME BACK TO OHM HASM HAH. I KNOW YOU AND I HAVE -- OMAHA. YOU AND I HAVE BEEN WATCHING THE SEA CHANGE. BERKSHIRE HATHAWAY DRAGS IT OUT AN ENTIRE WEEKEND OF FESTIVITIES AND MEETINGS AND QUESTION-AND-ANSWER SESSIONS, BUT IT IS NOT OVER. THE BOARD OF DIRECTORS MEETS TODAY IN OMAHA. I WAS ABLE TO CORRAL WARREN BUFFETT THE CHAIRMAN AND CEO OF BERKSHIRE HATHAWAY ON HIS WAY UP TO THIS BOARD OF DIRECTORS MEETING. THANK YOU VERY MUCH FOR LETTING ME GRAB YOU FOR A MINUTE HERE.

WARREN BUFFETT: MY PLEASURE.

LIZ: APPRECIATE IT. WHAT IS THE NUMBER ONE THING THAT'S GOING TO BE ON THE AGENDA THE BIG THING FOR BOARD OF DIRECTORS AT BERKSHIRE TODAY?

BUFFETT: EVERY TIME WE MEET THE BIGGEST THING IS WHAT HAPPENS AFTER I'M NOT HERE. SO WE TALK ABOUT THE CANDIDATES FOR SUCCESSOR. WE'VE GOT THREE TERRIFIC ONES. WE KNOW WHICH ONE IS THE NUMBER ONE. BUT I GO THROUGH THE SITUATION EVERY TIME WITH THE DIRECTORS THEY ASK A LOT OF QUESTIONS.I TELL THEM ABOUT THE THREE, ANDWE TALK IT OUT, AND THEN THEY TALK IT OUT WHEN I'M NOT IN THE ROOM ALSO.BUT WE ALWAYS SPEND A THIRD OF OUR TIME OR HALF OF OUR TIME ON THIS THAT.

LIZ: YOU ARE TALKING ABOUT THREE FOR THE CEO CANDIDACY. BUT THE CIO THE CHIEF INVESTMENT OFFICER CANDIDACY WHICH YOU ALMOST PRESENTED TO THE WORLD AS AN OPPORTUNITY TO BE AN APPRENTICE. IS THAT JUST GOING TO BE ONE CANDIDATE OR MORE THAN THAT?

BUFFETT: ALTHOUGH THERE WILL BE A NUMBER OF CANDIDATES AND THERE WILL PROBABLY -- WE COULD VERY EASILY HIRE MORE THAN ONE AND THEN SEE HOW THEY PLAY OUT OVER TIME GIVE THEM EACH A BLOCK OF MONEY TO RUN FOR A FEW YEARS AND LOOK AT WHO MIGHT SCALE UP THE BEST BECAUSE THAT'S THE REAL THING. THERE'S A LOT OF PEOPLE CAN RUN A BILLION DOLLARS WELL OR TWO BILLION BUT THEY HAVE TO BE ABLE TO RUN 100 BILLION WELL. IT COULD BE BE TWO OR THREE TO SPLIT THE JOB UP.

LIZ: IT COULD TAKE FOUR PEOPLE TO REPLACE YOU?

BUFFETT: WE'VE GOT ONE PROPOSAL FROM A 4-YEAR-OLD. MAYBE A 4-YEAR-OLD COULD REPLACE ME OR BETTER YET A CAVEMAN COULD REPLACE ME, BUT THERE COULD BE SEVERAL PEOPLE IN THE INVESTMENT JOB. THERE WILL BE ONE CEO OBVIOUSLY.

LIZ: WHEN WILL WE KNOW?

BUFFETT: WE MAY NOT KNOW -- WE MAY NOT HIRE ANYBODY FOR CLOSE TO A YEAR. I MEAN, WE'VE GOT 700 APPLICATIONS. WE'LL NARROW IT DOWN TO 20 OR 30. I WILL TALK TO A LOT OF THEM. IT COULD TAKE UP TO A YEAR TO PICK TWO OR THREE.

LIZ: I WANT TO WHIP THROUGH A COUPLE OF THINGS EVERYTHING FROM INVESTMENTS TO THE MARKETS WHICH I KNOW YOU HATE TO COMMENT ON BUT I WILL STILL BOTHER YOU ABOUT IT. YOU RECENTLY MADE A BIG INVESTMENT IN THREE RAILROAD ONE WHICH WAS BURLINGTON NORTHERN YOU DECLINED TO SAY THE OTHER TWO. ARE YOU READY TO TELL US THE OTHER TWO?

BUFFETT: NO, BUT I APPRECIATE THE TRY.

LIZ: WHAT REALLY FACTORED INTO YOUR DECISION TO INVEST IN RAILROADS?

BUFFETT: WELL, THE RAILROAD INDUSTRY HAS GOTTEN A LOT BETTER. IT WAS A TERRIBLE BUSINESS 30 YEARS AGO. I MEAN REALLY TERRIBLE BUSINESS. IT'S NOT A WONDERFUL BUSINESS NOW BUT IT IS A LOT BETTER I WAS VERY SLOW TO RECOGNIZE. THAT I SHOULD HAVE BOUGHT THEM A YEAR OR TWO AGO. IT BECAME CLEAR TO ME THE COMPETITIVE DYNAMICS IN THE RAILROAD BUSINESS HAD CHANGED FROM WHEN I LAST THOUGHT ABOUT THEM WHICH WAS TOO LONG AGO.

LIZ: HOW MUCH DID HIGHER GASOLINE PRICES FROM THE TRUCKING INDUSTRY PLAY INTO THAT INVESTING DECISION?

BUFFETT: IT HELPS THE RAILS. WHEN OIL GOES UP, IT HURTS TRUCKERS MORE THAN IT HURTS THE RAILS THE RELATIVE COMPETITIVE POSITION FAVOR IN THE RAILROADS.

LIZ: YOU LOVE NEWSPAPERS. YOU WERE IN EARLY BOUGHT THE BUFFALO NEWS YEAR AGO BIG INVESTMENT IN THE WASHINGTON POST RECENTLY SO MUCH MERGER AND ACQUISITION NEWS PARTICULARLY NEWSCORP'S BIG BID OF $60 A SHARE FOR THE "THE WALL STREET JOURNAL" AND DOW JONES INC. WHAT DO YOU THINK OF WHAT'S GOING TO HAPPEN THERE, AND WOULD YOU CONSIDER EVER MAKING A PLAY FOR DOW JONES?

BUFFETT: IT WOULD BE EXTREMELY UNLIKELY THAT BERKSHIRE WOULD EVER DO ANYTHING, BUT IT WILL BE UP TO THE BANCROFT FAMILY AND JIMMY OTTOWAY WHO HAS ABOUT 6% OF THE VOTES HE'S REQUESTED HIMSELF QUITE VIGOROUSLY IN THE LAST DAY OR TWO HE AND HIS SON I BELIEVE. THE FAMILY WILL MAKE THE DECISION. RUPERT WOULD LOVE TO HAVE IT, YOU KNOW, BUT IF THE FAMILY DOESN'T WANT TO SELL, THEY DON'T HAVE TO SELL.

LIZ: YOU SAID RUPERT MURDOCH IS ONE GUY WHOSE CHECK WON'T BOUNCE.

BUFFETT: HIS CHECK WON'T BOUNCE.

LIZ: CERTAINLY HIS BID ALONE MADE THE STOCK JUMP CONSIDERABLY HIGHER. BUT YOU HAVE ALSO TALKED ABOUT HOW IMPORTANT IT IS TO HAVE AN OWNER THAT UNDERSTANDS THE PRESTIGE OF SUCH A BUSINESS.

BUFFETT: YEAH, IT HAS AN APPEAL BEYOND ECONOMICS TO MANY PEOPLE. UNDOUBTEDLY TO UNDOUBTEDLY UNDOUBTEDLY TO RUPERT BUT THERE ARE PEOPLE AROUND THE WORLD WOULD SALIVATE TO OWN THE "THE WALL STREET JOURNAL."

LIZ: HOW ABOUT YOU?

BUFFETT: THE ONLY THING I COULD DO ANYTHING IS IF I DECIDED TO DO IT INDIVIDUALLY WHICH IS VERY UNLIKELY. I DON'T DO ANYTHING FOR BERKSHIRE THAT'S UNECONOMIC. I DO SOME THINGS FOR MYSELF THAT ARE UNECONOMIC.

LIZ: LET'S TALK ABOUT THE PRIVATE EQUITY WASH OF CASH. AN OCEAN OF IT. WHAT WOULD SLOW THAT DOWN? A LOT OF PEOPLE SAY IT IS A TRAIN THAT ISN'T STOPPING AT THIS POINT.

BUFFETT: IT IS A BIG TRAIN. THERE'S A LOT OF PUSH BEHIND IT, AND THE URGE TO START THE NEXT PRIVATE EQUITY FUND IS SUCH THAT IF SOMEBODY HAS A 20 BILLION FUND, NOW THEY WANT TO GET THE MONEY OUT FAST BECAUSE THEY CAN'T START ANOTHER FUND AND START COLLECTING FEES UNTIL THEY GET THIS ONE INVESTED, AND THE MEASUREMENT PERIOD IS LONG. THE INVESTORS ARE LOCKED UP FOR A LONG PERIOD OF TIME, AND YOU DON'T REALLY SEE HOW THE DEALS WORK OUT UNTIL TWO, THREE, FOUR YEARS, SO I DON'T SEE IT COMING TO A QUICK END AT ALL. I THINK THERE'S A LOT OF MOMENTUM BEHIND THIS.

LIZ: YESTERDAY DURING THE PRESS CONFERENCE YOU SAID THAT IT DOESN'T NECESSARILY WORRY YOU BUT IT MAKES YOU THINK THAT SOMEBODY CAN JUST GO TO THE CORNER OF BROAD AND WALL AND SETONE UP AND PUT ON A SANDWICH BOARD AND SAY I'M STARTING A FUND AND PEOPLE ARE GIVING THEM MONEY.

BUFFETT: IT IS PRETTY EASY TO DO. SOME INSTITUTIONAL INVESTORS PARTICULARLY WITH LOTS OF MONEY THINK THAT IF SOMEBODY PUTS ON A SHIRT INSTEAD OF SAYING SUPERMAN IT SAYS HEDGE FUND OR IT SAYS PRIVATE EQUITY THAT IT MAGICALLY TRANSFORMS THAT PERSON TO EARN ABOVE AVERAGE RETURNS ON CAPITAL OF COURSE IT DOESN'T, BUT RIGHT NOW PEOPLE ARE IN THE MOOD TO BELIEVE.

LIZ: PEOPLE ARE BELIEVING IN THE STOCK MARKET. MARK HAINES WAS JUST SAYING WE HAVEN'T SEEN THIS AT LEAST FOR SOME PEOPLE IN THEIR ENTIRE LIFETIME THESE RECORD LEVELS. IS THIS A TRAIN THAT SOON STARTS TO AT LEAST SLOW DOWN? WHAT WOULD DO THAT IN

BUFFETT: I HAVE NO IDEA WHAT THE STOCK MARKET WILL DO. BUT THE STOCK MARKET IS NOT -- I DON'T LOOK AT THE STOCK MARKET AT ALL AS RIDICULOUSLY OVERPRICED. IF YOU TOLD ME I EITHER HAD TO BUY A 20 YEAR BOND OR MAKE A 20 YEAR INVESTMENT IN THE STOCK MARKET, I WOULD RATHER BUY THE STOCK MARKET. IT'S NOT CHEAP, BUT IT IS NOT RIDICULOUS.

LIZ: U.S. DOLLAR, DO YOU STILL OWN IT? ARE YOU STILL MAKING INVESTMENTS IN IT?

BUFFETT: WELL WE HAVE LOTS OF THINGS IN U.S. DOLLARS BUT WE HAVE GONE MORE INTO EQUITIES THAT EARN THEIR MONEY IN OTHER CURRENCIES OR A GOOD BIT OF THEIR MONEY, SO WE HAVE DIVERSIFIED SOMEWHAT THE SORT OF INDIRECT INCOME STREAM WE HAVE FROM THESE VARIOUS BUSINESSES THAT WE OWN PIECES OF. NOW, COMPANIES LIKE COCA-COLA WE'VE HAD RIGHT ALONG WE'VE ALSO BOUGHT SOME STOCKS THAT ARE DOMICILED AROUND THE WORLD AND THAT -- WHERE THEIR PRICES ARE DENOMINATED IN OTHER CURRENCIES. IT IS NOT A HUGE MOVE. IT IS NOT OVERWHELMING OTHER INVESTMENT CRITERIA, BUT IT'S A FACTOR.

LIZ: THE WEAKNESS OF THE DOLLAR, IS THAT SOMETHING THAT YOU THINK ABOUT AND SAY THIS IS EVENTUALLY GOING TO COME HOME TO ROOST?

BUFFETT: WELL, I THINK IT POSES PARTICULARLY POLITICAL PROBLEMS DOWN THE ROAD IF WE KEEP RUNNING CURRENT ACCOUNT DEFICITS LIKE WE HAVE BEEN, THAT WILL LEAD IN MY VIEW OVER MANY YEARS TO A WEAKENING DOLLAR, AND I THINK IT WILL ALSO LEAD TO SOME POLITICAL PRESSURES.

LIZ: YOU OFTEN SPEAK WHEN YOU TALK ABOUT POTENTIAL ACQUISITIONS THAT YEAH, YOU ARE OKAY WITH THE BIG FISH, BUT YOU WANT A BIG WHALE. THAT YOU WOULD LOVE TO MAKE A BIG ACQUISITION.WHAT'S HOLDING YOU BACK?

BUFFETT: FINDING ONE. I WOULD LOVE TO. I'VE GOT AN 800 NUMBER OUT THERE. YOU OR ANYONE ELSE COULD CALL IN AND JUST GIVE ME AN IDEA ON IT. IT IS HARD TO FIND BIG DEALS. WE ARE COMPETING AGAINST PRIVATE EQUITY. WE'RE COMPETING AGAINST OTHER CORPORATIONS, SO IT'S GOING TO BE -- YOU KNOW, IT IS NOT EASY TO FIND A REALLY BIG DEAL, BUT IT'S ALWAYS SOMETHING THAT KEEPS ME EXCITED, KEEPS ME COMING DOWN TO THE OFFICE, KEEPS THE JUICES FLOWING.