'Overall things are a little better,' Warren Buffett said Monday of the U.S. economy and Berkshire Hathaway's businesses. 'Business looks decent, it's not galloping ahead.'
Following is the full unofficial transcript of a CNBC interview with Berkshire Hathaway Chairman & CEO Warren Buffett on CNBC's"Squawk Box" today, Monday, February 25th. Video from the interview is available on CNBC.com.BECKY QUICK: All right. Yes. Let's bring in our special guest this morning. Berkshire Hathaway chairman and CEO Warren Buffett joining us-- just after writing his annual letter to shareholders. And-- Warren, this is a big deal.
WARREN BUFFETT: Yeah. Well, Berkshire, you know, has dozens, and dozens, and dozens of companies. And-- when analysts look at it, you know, they wanna go out and figure out, you know, how many boxes of Valentines we sold, you know, in our candy company. And you can get totally lost in terms of looking at the forest by trying to look at every tree. cause some of the trees are flourishing, some of 'em are decaying, and some of 'em are huge and important, and others are more or less twigs.
WARREN BUFFETT: Well, they're big. They're big. And-- both set records for after-tax earnings last year. Combined, they earn-- right around $8 billion after tax. And $8 billion's a lot of money to us. That's a third of our operating earnings. We earn twenty-four-- a large fraction-- of operating earnings last year. $24 billion. And-- those two companies alone earned $8 billion. Now, Berkshire Hathaway Energy also has multiple companies.
BECKY QUICK: All right. Let's talk through a few other questions that have come in from viewers just regarding Berkshire while we're here. Eric LeFante wrote in and said,"Warren, how have you structured Greg Abel and Ajit Jain's compensation now that they oversee dozens of different businesses?" You did point out that you think the business is much better run now that those two are vice-chairmen, each running their own set of companies.
BECKY QUICK: So 6:19 on the East Coast and you're already making friends. Well done. Let's get to another question from the audience. This comes from Brian Chan. He asks,"How are Ted and Todd's performance since they joined about eight years ago?" The money managers who are there."Have they –" Ted Weschler and Todd Combs –"Have they performed better than index? Charlie said recently that most money managers did not add any value compared to an index.
BECKY QUICK: Welcome back to a special edition of Squawk Box. We are live in Omaha, Nebraska with Berkshire Hathaway's chairman and CEO, Warren Buffett. Warren, we're just sitting down with you for the first time since the news last week that Kraft-Heinz put out. There was so much news it's hard to even summarize it all.BECKY QUICK: They came out with earnings that missed expectations. They said,"By the way, it's not gonna get better in 2019.
BECKY QUICK: We had an analyst on last week on Friday talking about what she perceived as the problems with Kraft-Heinz. She said she thinks they're under-investing in the business. I mean, that's kind of been 3G's way, to cut to the bone. And that's how you make this profitable. But she thinks the brands have been under-invested in. Would you agree with that?
BECKY QUICK: Why wouldn't-- if you're sticking with the business and it's 30% cheaper today, why wouldn't you buy more?BECKY QUICK: So you think it was a fair write-down that the market gave it? JOE KERNEN: Good morning. Our top story, President Trump announcing yesterday he would-- delay an increase in U.S. tariffs on Chinese goods. He cited progress in the trade talks and said if it continues, there would be a summit. They would plan a summit at Mar-a-Lago. As a result, stocks in Shanghai surging overnight, up 5.6%. U.S. equity futures at this hour, sharply higher this morning as well, up triple digits. As you can see, up 140 on the Dow Jones. The S&P up about 11. NASDAQ up 38.
JOE KERNEN: I do have great things to talk to you about. I'm worried, I mean, I think you think the market's expensive, Warren. So I want to talk to you about that. I mean, you don't like to say that. And you say long term it's going to be fine. But you've got a lot of metrics you're looking at there, like the-- market cap to GDP or GNP. That-- that looks expensive there, right? I mean, there are things that look expensive, and you're having trouble finding things.
WARREN BUFFETT: No-- no question that, yeah--in this-- in stocks now, you have-- or businesses I should say you have a huge, huge, huge buyer. And-- that's not only-- and companies are eager to buy, too. But you also have private equity. And if, I don't know whether private equity-- it's-- it's flexible because they can call on their partners for more money and all that. But let's just assume that they would have a trillion available. Now, they use a lot of leverage.
WARREN BUFFETT: No, that does count it. I mean, but the $110 billion or something like that, that-- that--WARREN BUFFETT: Yeah, that-- that-- that counts $20 billion. And, you know, I never get right down to $20 billion anyway. But-- but we've got a lot of cash. And we'd love to use it. But we're a private equity firm that's going to borrow six or seven times what they call EBITDA, which I don't use as a metric-- they're gonna pay more than we are.
JOE KERNEN: Okay, Beck. Thanks. We have a lot more obviously coming up. Still have two more hours with the oracle, Warren Buffett. We're going to talk-- a lot more about his biggest holdings and his view on the market-- and the economy and much more, and what the Green New Deal would do for Berkshire Hathaway. I just-- it boggles the mind. We'll see. Squawk Box will be right back.
BECKY QUICK: Oh, oh, of all of-- all the ads? No, me too. I'm glad you g-- that they brought those back. JOE KERNEN: That happens on the show a lot, I know. We don't-- neither one of us get credit where we-- you know, the people forget what we do--BECKY QUICK: It's the heavy lifting. Hey-- Warren, let's talk a little bit about what Joe was just talking about. Joe, stay there because I know you wanted to ask about BYD, that might play into this. The trade talks with China.
BECKY QUICK: Did you think there was a valid reason for amping up these negotiations, for saying,"Hey, hey, hang on a second. We're not getting a fair shake?" WARREN BUFFETT: And-- -- I haven't seen their 10-K yet. I mean-- I wanna get their 10-K as soon as I can. And-- it may be-- it's probably out just about now. And that's the documents you have to read.WARREN BUFFETT: And givin' you some clues about--WARREN BUFFETT: But it's-- - you know, it's—selling -- the equity's selling for about $100 billion. And-- then they have-- they actually have a preferred issue that's $5 billion or $6 billion.
BECKY QUICK: Well-- you-- what we're talking about is state versus state. You're now talking about some new taxation plans that are being-- recommended in Congress, or by specific senators or congressmen-- that are similar to some of those policies that we've seen in the states. I mean, if you just run through it-- Elizabeth Warren with her wealth tax, and anybody over $50 million. AOC, Alexandria Ocasio-Cortez, with her plan to tax anything above $10 million at 70% rate.
WARREN BUFFETT: I've got about four choices, Joe. I mean, let's say I have $80 billion. A) I could spend it all, you know? But even to spend it all, I would have to sell Berkshire stock. So I would incur taxes of, you know, $20 billion or so in spending. So the government would then get 20 if I wanted to spend it all I could – I don't know what in the world I'd spend it on. I can give it all to my wife and then there's no tax.
BECKY QUICK: Welcome back to a special edition of Squawk Box. We are live with Warren Buffett, the chairman and CEO of Berkshire Hathaway in Omaha, Nebraska. And Warren, thanks again for your time this morning. We've talked about a lot of things so far, but we have not gotten your take on the economy to this point. There was just a Federal Reserve report out on Friday that suggested that GDP for 2018 is probably going to come in slightly below 3%.
BECKY QUICK: Jay Powell, the Chairman of the Federal Reserve, is set to testify before Congress on Tuesday and Wednesday of this week. Based on what you've said about the weakness in housing, based on some of the downturn that you saw, did you think he made the right move by signaling a much more dovish take last quarter?
BECKY QUICK: A couple of questions that came in from viewers when it comes to the economy. One is-- T19 control room, Rashad Khan asking:"Do you think the ten-year yields are likely to rise from current levels in the long-run?" I don't know what the long-run is. BECKY QUICK: We're here at the Nebraska Furniture Mart today. And I know that you've talked a little bit before we came on the show this morning just about Rose Blumkin, who founded the Nebraska Furniture Mart. You bring up immigration so I thought maybe now would be a good time to talk about that. She came here from in 1917.
BECKY QUICK: There's one question that came in from-- this is F20, Ahmad Abu Rasheed, who said,"Would a strong and sustained shift to the left in fiscal and economic policy rip away at American business tailwinds moving forward?" BECKY QUICK: Well-- Bernie looks mild compared to some of the candidates who are running to the left of him.BECKY QUICK: There-- there's somebody who wrote in-- this is T13, Ted Waller. This is probably based off a play, off of-- some conversations we've had with Jamie Dimon. But he says,"Do you still consider yourself a Democrat?" If you look at--
BECKY QUICK: All right, we're up against the top of the hour. When we come back, though, we will have Warren Buffett answering more of your questions. We're also gonna get through a lotta the changes in the Berkshire Hathaway equity portfolio. A lot of changes that were just announced and we'll talk through some of those too. In the meantime, take a look at the futures this morning. Things are up across the board.
WARREN BUFFETT: It's his business. It's his business, yeah. I mean, they do not check with me. I sometimes order at the end – well, I do. At the end of the month, I look and see how their portfolio compares to the month before and see what they've done.
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