THIS IS THE FOURTH PART OF A TRANSCRIPT OF WARREN BUFFETT'S SERIES OF LIVE APPEARANCES THIS MORNING (MONDAY, MARCH 3) ON CNBC'S SQUAWK BOX.
QUINTANILLA: And today's not a good day for the greenback, Joe.
KERNEN: Nope. It's a good day to have Buffett on, though, when we're talking about the dollar. As Carl said, this is a special morning for SQUAWK BOX. We're live with Warren Buffett in Omaha, Nebraska, answering e-mails. Just go to cnbc.com. Send them in. We'll still get them. Becky's with Mr. Buffett right now. And I know he has an earpiece in, Becky, probably just heard about where the dollar is.
KERNEN: We're going to talk to him about that, no doubt, at length today.
QUICK: Yeah, that's perfect, Joe. It's a--it's a great stepping off point for this, because when you see this kind of chaos and turmoil in the markets, well, who better to ask than probably the world's most watched investor, Warren Buffett, who's here with us today. And, Mr. Buffett, let's go over some of these exact things. Joe uses this as a perfect jumping off spot. You've made some negative comments about the dollar in the past. You see where it trades right now. What do you think?
BUFFETT: Well, for five years we've talked about it. It--we were following policies which were, in my view, five years ago, were certain to produce a weaker dollar over time. I never know what it's going to do in a month or a year, and maybe I don't know what it's going to do in five years, but I think I know what it's going to do in five years. And we--as long as we force-feed a couple of billion dollars a day to the rest of the world--they take it whether they like it or not, because we buy goods--buy two billion a day more than we well goods to the rest of the world...
BUFFETT: ...the dollar's going to get weaker over time. And the government can talk about how it's in our interest to have a strong dollar, but we're not following policies that lead to that, and it's just a consequence and it'll just continue to be. If you do the same thing over and over again, you're going to get the same result...
BUFFETT: ...and we are doing the same thing now that we were doing two, three, five years ago, and the dollar will weaken in an irregular basis, in my view, for some time to come.
QUICK: Now, you mention all this in the annual letter to shareholders.
BUFFETT: Right. QUICK: You also talk about how you are long the Brazilian real. If you think the dollar's going to get weaker, why aren't you short the dollar at this point?
CNBC has scheduled a one-hour special program on Buffett's unprecedented Squawk Box appearences.
It's called Warren Buffett - The Billionaire Next Door: Face to Face. It will be hosted by Becky Quick and airs tonight, Monday, March 3 at 9pm ET.
BUFFETT: Well, we bought more--we bought companies that have more and more of their earnings in those other dollars. So if we have a company that's earning money in Japan, one or two, in the end, we're earning more dollars than before. But the carrying costs, with low interest rates in the United States and higher rates elsewhere, there's a real carrying cost to maintaining an outright foreign currency position, whereas if we do it through future earning power in other areas, it looks to me like a more intelligent way to do it. But you can make money in, you know, you can make money even with low interest rates here if the--if the--if the spread keeps widening over time. But right now, the Brazilian real was a relatively small position, and I almost did it kind of as a commentary on what was going on because for decades people thought you put your money in South America any place, then you were going to lose it. And the South Americans actually parked their money here. But in the last five years, the Brazilian real has more than doubled against the dollar. If you were a Brazilian, you put your money in dollars you lost half your net worth, and that's continued since the end of the year.
QUICK: But it hasn't stopped you from betting against the dollar in the past. What changed your mind on that?
BUFFETT: Well, we had a positive carry. When we had...
BUFFETT: ...the 22 billion of foreign currency positions, we not only made money because those currencies appreciated, but there actually was a positive carry because of the interest factor on most of the currency. So we were picking up a couple hundred million dollars a year on positive carry. That's gone to a negative carry now, and that makes it expensive to hold certain foreign currency positions. If you want to hold a position in the euro, and you buy a euro out six months, it has to go up for you to break even.
QUICK: OK. We've been talking an awful lot about the economy today, and in the last half-hour, you mentioned that you think we very well might be in a recession. That's the first time I've heard you say that. What gets you to that point?
BUFFETT: Well, I see the figures coming in on all our retail operations, I see what's going on in terms of the wealth of Americans and how they feel about their houses. I see--I see purchasing power declin--obviously, when somebody forecloses on a home, the purchasing power of that family is not going to be very much. I see unemployment increasing a little bit although it's still relatively low. So I just--I think it's clear. What isn't clear is how far it goes.
QUICK: And so--and that's the question. You can't see how far out...
QUICK: ...this lasts, if it's something we pull out of quickly.
BUFFETT: I didn't see it--in '73 and '74, I didn't see how bad things were going to get. I kept buying more as I got worse, but I--if I'd seen in '73 what was going to happen in '74, I wouldn't have bought anything in '73. You can't predict. We don't try and time anything or predict. We just look for where there are good values, and if we find them, we buy them, and if we don't, we don't buy anything.