WHEN: TODAY, MONDAY, MARCH 1ST 6-9AM ET
WHERE: CNBC'S "SQUAWK BOX"
Following are excerpts from the unofficial transcript of a CNBC interview with billionaire investor Warren Buffett today on CNBC's "Squawk Box" 6AM-9AM ET.
The full transcript of the interview will be posted on buffettwatch.cnbc.com.
All references must be sourced to CNBC.
BUFFETT ON ECONOMY:
QUICK: You know, we have a lot of questions from shareholders that have been coming in and many of them have questions about Berkshire, some very basic things and some very thoughtful ideas that they put through. We're going to get to a lot of those questions through the show, but why don't we start out this morning talking a little bit about where you see the economy. When you sat down and talked to us, I guess it was back in the fall of 2008, you talked about how we were in an economic Pearl Harbor. Where do you see things right now based on all the businesses that you have?
Mr. BUFFETT: Well, we got past Pearl Harbor, but we will win the war, but--and it's going slightly our way at the present time, but the spill-over from the financial panic into the real economy was huge and particularly things like housing had to stop because we had this huge over supply. I--we've got about 80 businesses now, and I get figures on them on a very real time basis. And I would say that there's a few businesses that really have had a fair amount of bounce, in terms of electronic components and that sort of stuff...
BUFFETT ON HOUSING:
QUINTANILLA: Yeah, Warren, I--looking at your letter over the weekend, a lot of various things made their way into the headlines. You talk about some of your construction businesses bouncing along the bottom, as you put it, but you also say that in a year, the worst of our housing troubles may be behind us. Can you sort of elaborate on where you see housing and how that effects the rest of the broad economy?
Mr. BUFFETT: Yeah. Residential construction, we got way ahead of ourselves a few years back. We built more houses than there was true demand for and it was fueled by financing and all that sort of thing. And that just--that--you might call that an inventory correction that's needed. We have to use up that inventory, and we're creating households every day in this country, and those households are going to want places to live. So with housing starts down to 550,000, that chews up the inventory, but it takes time. You know, we build inventory for years, so you don't create--you don't correct the inventory situation in a day or a week or a month, but we are correcting it in a very significant way. We will still have at the high end supply and demand situations way different than if you get into medium-priced and lower-priced houses, and there's a few areas of the country that are going to still be very over built a couple of years--a year from now, but I would--my best guess is that within about a year, for 80 percent of the housing market, you're going to have a reasonable balance between supply and demand. That doesn't mean prices are going to shoot up, but it does mean that houses will be moving and there won't be further deterioration.
BUFFETT ON BANKS:
KERNEN: Thanks. Warren, I read something kind of disturbing over the weekend about what's still on the average bank's balance sheet, that one out of--I think it was one out of 10 dollars earned bad loans or something like that and I'm just wondering whether you describe an economy now that obviously is better, but it's not gangbusters. Do you buy into this new normal idea that it's really going to take a while and that there will be a line drawn during the financial crisis that from there on out for at least 10 years we're going to have sub-par economic growth? Or is this going to be like everything else, and we come back quicker than we thought?
Mr. BUFFETT: Well, it's going to come back a lot quicker than 10 years, Joe, but it--I don't think it's going to bounce back fast. The banks are in better shape than they were a year or two ago. Although a lot of smaller banks have got troubles. They've got particular troubles in commercial real estate. So the FDIC puts out this list of problem banks and that list, we had 140 banks fail last year, we'll probably have more than that fail this year. To put that in perspective, there are about 7,000 banks, so about 2 percent of the banks failed last year. I think that number will be up some this year. It's mainly concentrated in smaller banks that themselves got very concentrated in bad areas of lending, particularly in commercial real estate. But I don't--the banks are in a lot better shape than they were a year, a year and a half ago.
BUFFETT ON COCA-COLA DEAL:
Well I think on balance I like it Muhtar Kent has done a fabulous job with Coke and there's a lot of execution problems in doing anything like that Pepsi will have them and we'll have them at Coke but with Muhtar I feel confident in the fact that it will be carried off right now the bottling business is very different than what is called the concentrate business which is what making the Coca-Cola concentrate gets turned into syrup gets turned into Coca-Cola the bottling business is very capital intensive and have margins the concentrate business is not capital intensive has very wide margins literally Coca-Cola with 5 billion of capital could make 8 or 9 billion pretax just from the concentrate business bottling business is an entirely different business so long-term I like being in the concentrate business much more than the bottling business but the bottling business Coca-Cola has what they call a fountain division which sells direct they have the bottlers anytime they get a new product there's a question of how it comes under the contract that orginally goes back to 1899 it needed rationalization and this move is a big big step towards rationalizing it making it so it is more friendly to the big box retailers of Walmart Costco or somebody like that but there will be some real execution time involved in it and over time we would hope that Coca-Cola would have less money involved in the bottling business because it is a less attractive business
BUFFETT ON HEALTHCARE BILL:
BUFFETT: Well the health situation what we have now is untenable over time call what we are doing now Plan A. Plan A has taken us from 5% GDP to close to 17% GDP and that kind of a cost compared to the rest of the world is ridiculous its like a tapeworm eating at our economic body everything that we've produced for export everything that we compete with that comes imported in this country everything is burying that cost and its a cost to the rest of the world as well and tops around the world you find 10% GDP we have fewer doctors we have a little over 2.5 doctors per thousand much of the world has well over 3 doctors we have 11 nurses per thousand much of the world has far more nurses per thousand we have 3 beds per thousand much of the world has 6 or 7 beds per thousand we have higher infant mortality than many places we have shorter overall mortalities we have a health system in terms of cost is really out of control and if you take this line and you project what's been happening into the future we will get less and less competitive we need something else unfortunately we came up with a bill that really doesn't attack the cost situation that much and we have to have a fundamental change we have to have something that will end the constant increase and medical costs is a percentage of GDP
QUICK: Are you in favor of scrapping this and going back to start over?
BUFFETT: If I were President Obama I would just show this chart of what has been happening this is the tapeworm that is eating American competitiveness and i would say that one way or another we're going to attack cost cost cost just like we talk about jobs jobs jobs that's a tough job we're spending maybe 2.3 trillion dollars on healthcare in the US and every one of those dollars is going to somebody and they're going to yell if that dollar becomes 90 cents or 80 cents but I would try and get a unified say this is a national emergency to do something about this we need to Republicans we need the Democrats we are going to cut off all the kinds of things the 800,000 special people or the cornhusker kickback as they call it or the Lousiana purchase or we are going to get rid of the nonsense we are just going to focus on cost and we're not going to dream up 2,000 pages of other things and I would say as President I am going to come back to you with something that's going to do something about this cause we have to do it
QUICK: Just focus on cost or focus on cost while insuring more people those are two different problems
BUFFETT: I believe in insuring more people but I don't believe in insuring more people until you attack the cost aspect of this and there is no reason for us to be spending17% or there about when many other developed countries 9 or 10 they have more beds they have more nurses they have more doctors they even have more consultations by far we have about 4 consultations per person in the US doctor interaction per year other countries have far more than that i mean we spend a lot of money on equipment here if you want to get the very best if you don't want to spend a million dollars on your life another 3 months you can probably do it better here in the US than any place else but we need fundamental reform and I admire people for tackling this its so tough politically but I would like to see them really get the job done
QUICK: This is different than what you've said when we've talk to you in the past I mean even a couple of months ago when I sat down you said you would vote I believe if it were in front of you
BUFFETT: If it was a choice today between plan A which is what we have now or Plan B what is in front of the Senate Bill I would vote for the senate bill but I would much rather see a plan C that really attacks cost and I think that's what the American public wants to see I mean the American public is not behind this bill we need the American public behind this bill because it is going to have to do some tough things if it doesn't bring down cost significantly and you can say you are bringing down cost by raising a tax over here or improving medicare you can do those things anyway had nothing to do with what's being proposed in the bill if the only choice that i had in the world was the present system or the present bill i would take the bill but I think it'd be far better to ssay cost is it we're going to go back..
BUFFETT ON GOLDMAN SACHS:
BUFFETT: Well I would buy the instrument that we bought we bought a five billion dollar issue preferred with 5 billion roughly of warrents attached I had not been a buyer of Goldman Sachs common stock a month before or six months before but I would buy the instrument that we bought under the circumstances that we bought it and i think that the company has very good prospects but I bought very few investment banking or brokerage stocks over the years this was a situation where they needed money and validation that day and we were the only ones around with that kind of money and so it was an opportunity to buy on favorable terms those favorable terms were justified in the chaos that was going on but i can't buy it today under those conditions
QUICK: But the question maybe points to this idea that Goldman Sachs is now being blamed for every single problem that exists out there including in Greece potentially at this point would you still given the political backlash but into this company own stock be associated with it and do you think it is a fair rap?
BUFFETT: You are right they are going to rewrite Genesis and have Goldman Sachs offering the apple I mean pretty soon but no I feel good about their business prospects I mean it is a very very strong well run business its got a place in the universe and there are fewer bif investment banks around then there were a few years ago worldwide when we did the burlington northern deal they were called in for an advisory opinion they got a 35 million dollar fee i don't like that but they have that sort of market position and its just like Coca-Cola has a big market position goldman sachs has a very strong market position Lloyd Blenkfein you could not find a better manager
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