(intro)
Berkshire is a holding company of sorts.
It owns a large number
of separate businesses
that operate
independently of each other
and, to a great extent,
from the parent company, Berkshire Hathaway.
we have maybe 70,
maybe 80 businesses,
and we ask them
to behave in a way
that doesn't hurt
our reputation
at Berkshire Hathaway,
but they run their own lives.
We have 25 people
in the office,
and if you go back, it's the exact same 25,
the exact same ones.
We don't have any
committees at Berkshire.
We don't have
a public relations department.
We don't have investor relations.
We don't have a general council.
We don't have
a human relations department.
We just don't go for anything that
people do just as a matter of form.
We celebrate this evening
the 20th anniversary of this program
Yes, 20 years ago this program began
Over the 20 years there have been no guests
that have been more interesting and more eagerly anticipated
than Warren Buffett.
His is a fascinating story.
His is a name that is known throughout the world
for his extraordinary success as an investor
and the parallel success of his company,
Berkshire Hathaway.
He has been in the news recently
because he made a major investment in Bank of America.
He also announced a stock buyback
of Berkshire Hathaway shares.
Perhaps the sharpest focus recently
has been on his announcement
that wealthy people should pay more taxes.
President Obama was certainly listening
because he included it in his
list of tax law recommendations.
He called it the "Buffett Rule".
Warren Buffett is in New York and we're pleased to have him at this table
not only because he has been such a wonderful guest for us,
but also because he is a friend of mine.
Welcome.
Warren Buffett: Thank you, Charlie.
Charlie Rose: You've announced recently you're going to buy back,
or started the process of buying back Berkshire Hathaway shares.
Some people were surprised
because you had written in your stockholders letter,
which is now famous,
"I don't do that."
Warren Buffett: Well, I haven't said that.
I have said that you should bu back your shares
only when you think they're selling at a discount
to their intrinsic value.
And since intrinsic value is not a precise figure,
it's a guess.
Charlie Rose: Part of the reason you said that was because
you don't necessarily think
that people buy back shares simply to improve the stock
performance.
Warren Buffett: Sometimes they are trying to prop their stock.
Sometimes they're -- who knows what their motivations are.
There's only one motivation for me.
If I think I'm buying our businesses at a discount,
I think then it helps all the shareholders.
Now I also think you should tell the people before you do that.
Just like if you are my partner,
and I want to buy -- you want to sell out,
if I think I'm buying it from you too cheap
I ought to tell you that.
Now with the stock exchange it sets the price.
And every now and then --
it happened about 10 or 11 years ago,
I thought Berkshire Hathaway stock was selling demonstrably below the value of its businesses.
And we announced we were going
to possibly do it 10 or 11 years ago and then the stock went up right --
Charlie Rose: Right -- so you didn't do it.
Warren Buffett: But this time,
if the market is weak, we could buy a lot of stock.
But what I say is we'll buy the stock
if we think we are doing a favor
for the people who are staying in the boat.
Charlie Rose: Because you think intrinsic value of your businesses,
those that make up Berkshire Hathaway is undervalued.
Warren Buffett: It's higher than the price.
It's clearly higher than the price.
I mean it's not a precise figure
but it's clearly higher than the price.
Charlie Rose: You offered
book value plus 10 percent.
Warren Buffett: I said that is the limit of what we will pay.
The market will determine what we pay.
Yes.
So I mean if the market tanked,
you know, next week we'll say,
Berkshire could be a lot cheaper than that.
And
you know, I'm not propping the price in any way.
But I'm just setting the outer limits of what we will pay.
Because above that,
I probably still think it's cheap but I don't--
I want to be demonstrably cheap.
I want to be doing the shareholders
a favor
by buying --
the shareholders who remain a favor by buying in the stock,
that they are getting.
Charlie Rose: So you have what, $47 billion to $50 billion of cash.
Warren Buffett: It's down some. We've spent some,
Charlie.
But we have plenty of cash we'll put it that way.
Charlie Rose: Is there a limit of how much you always want to have in reserve --
Warren Buffett: Yes.
Charlie Rose: -- in case an incredible opportunity comes up and you can go do it.
Warren Buffett: Yes. We won't go below $20 billion in consolidated cash.
Charlie Rose: Cash, yes.
So you could be prepared
it to spend more than $20 billion to buy back your stock.
Warren Buffett: We can spend a lot of money depending on how long --
over how long a period
because we're earning money all the time.
And as we earn money, the money comes in.
There's no time limit on it,
there is no dollar amount limit on it.
There is this limit in terms of valuation
and there is this limit in terms of maintaining
a given level of cash.
Charlie Rose: It is said that some people think
that the the
asset value of Berkshire Hathaway is close to $130 to $150 a share
for the Class A stock.
Warren Buffett: Yes, closer to $130,000.
Charlie Rose: Right. Of course, $130,000.
Warren Buffett: I don't know what the number is.
I know it's -- I know it's more than 110 percent of the book.
I mean we've got some wonderful businesses.
We're got some that aren't so wonderful.
But
some of the big ones, particularly are really
very, very good businesses.
And they're worth a lot more than they were when we bought them.
Charlie Rose: Why don't you sell those that are not so wonderful.
Warren Buffett: I just don't do it.
I don't do it.
If I have ten kids, one of them is a little slow --
I'm not going to put him up for adoption.
Charlie Rose: So that is the way you feel about these businesses.
Warren Buffett: I do.
Unless they promise to have permanent
losses over time or unless they have major labor problems
and I put that in my annual report for 30 years.
I just,
people come to me to sell
their business to me.
They work hard for me after they sell their businesses,
you know.
Everything doesn't work out perfectly in life.
And I'm not about to dump somebody because, you know,
it's sub-par
If it is a disaster, we have to get out of it.
Charlie Rose: This is a signal
from the Sage of Omaha
that there are not a lot of investment opportunities out there.
Warren Buffett: Well, both segments are wrong.
We actually --
we got the paperwork cleared,
I guess, just yesterday morning.
Charlie Rose: So the process is -
Warren Buffett: So we actually bought some shares.
Now
whether we buy a lot of shares or not will depend on the price.
But
we intend to buy shares,
if the parameters we laid out are correct.
It has nothing to do with what--
you know,
if I live to be 100 and keep my marbles,
I hope I'm still around.
Charlie Rose: Well, in fact, in the last quarter didn't you spend about
$4 billion on stock -- common stock?
Warren Buffett: No. In this,
actually,
yes, September 30th being the current quarter.
The third quarter we spent a net of $4 billion, roughly.
Charlie Rose: And it's been about $8 billion so far this year in terms of --
Warren Buffett: That's about right.
Charlie Rose: -- of buying common stock. Warren Buffett: That's almost exactly right.
Charlie Rose: Which suggests you are buying stock
because you believe in America and you believe in these companies
and you believe --
Warren Buffett: They are American companies.
And they do business, some,
a fair amount abroad but they are American companies.
And incidentally, we are investing $7 billion --
Charlie Rose: You make that point. In terms of infrastructure and --
Warren Buffett: When we buy stock, our own stock back,
we're intensifying our interest
in a whole bunch of mostly American companies.
Our shareholders will own
a greater percentage BNSF (Burlington Northern), a greater percentage of Geico
if we buy back shares.
The pie will be as big but there won't be as many slices.
Charlie Rose: Here is what George Soros told CNBC last week.
That he said,
"Rather than the U.S. slipping into recession sometimes in the future,
I think we are already in it."
Michael Spence and Paul Krugman said there was 50 percent chance of another recession.
You don't buy that.
Warren Buffett: I don't buy it.
I'm looking at 70 some companies and
I will tell you that a railroad carried 193,000 cars last week.
And
I can tell you
in terms of candy sales and jewelry sales -- we've got three different jewelry operations,
four different furniture operations.
Charlie Rose: They're all up.
Warren Buffett: Yes, they're not galloping
but there has been no downturn.
There has been no downturn,