Omaha, Nebraska: CNBC’s Becky Quick sat down with Warren Buffett, chairman and chief executive of Berkshire Hathaway Inc., on Monday morning. She threw him the day’s business headlines and got him to give his opinion on the news that had come in over the weekend. Edited excerpts:
Timing it right: Berkshire Hathaway’s Buffett says the best time to buy is when business is lousy and adds that he made a killing in 1954. Andrew Harrer / Bloomberg
I brought five-six newspapers to give you a quick quiz off some of these. The funny thing I saw was depending on which paper you pick up, which headline you read, some people say you are very optimistic about the future, the others say you are very concerned. What’s the right take?
Maybe they both have got it right. I am 100% enormously optimistic about the future of this country all the time. I mean there is no way you can bet against America and win.
But in the short term, things are going to be tough for a while and we see no real pick-up in whole variety of businesses we have. I don’t know if they will be doing fine in three months, six months, two years, but I know they will be doing fine in the next five years.
Today (Monday) was supposed to be the day that we would be getting the stress test results. You own stakes in three out of the 19 banks that are going through the stress test—Wells Fargo, SunTrust and US Bank Corp. Do you know the outcome of the stress test results for any of them?
In the past, you have said that you have done your own stress tests.
Yeah sure, we have got our own money in them. We know the business model of two of those three quiet well, the third I don’t know that well.
Which do you know well?
I know US Bancorp, Wells Fargo. I don’t know the business model of SunTrust that well, so I can’t talk about Sun Trust intelligently. I can tell you that US Bancorp and Wells Fargo are extremely strong banks and they have terrific earning power. You couldn’t have better banks virtually positioned than those two for future earnings. Things could get a lot worse and those companies would come through fine.
Does that mean you don’t think the government would make them raise additional funds? Or once things wind up in Washington, you don’t know what’s going to happen?
I don’t know what’s going to happen.
Chrysler is obviously at this point in bankruptcy. What are some of the aftershocks and effects and some of the unintended consequences that could come up in putting Chrysler in bankruptcy and then what happens to GM?
Well, it is tough to be in bankruptcy. If you are not in there very long, then there’s hope for everybody. If they are out in 60 days or something like that, the disruption is less. But it obviously worries dealers, worries consumers. It’s very important for Chrysler to get out of bankruptcy very quickly and that depends on the bankruptcy judge.
We have the jobs data that is coming up on Friday. It is hard to say what exactly happens there if that number falls below 500,000. I believe the estimate would be somewhere between 500,000 and 700,000 jobs that have been stripped from the economy again over that last month. If it is below 500,0000, is it too soon to start celebrating that we are reaching the end?
Yes, it will be too soon. We are not reaching the end yet, but at some point we are going to reach the end. I don’t know when that will be, but I know that the American economy is very slow and at the moment it’s getting slower. That will turn, but I can’t predict when. I hope it’s very soon.
In another story over the weekend, Ron Baron was interviewed. He said that this is the most attractive time of his lifetime to be an investor. Would you agree with that?
I would say it’s among the most attractive. In 1974, the stocks were far cheaper though. Incidentally, the best year the Dow (Jones) and the S&P (Standard and Poor’s) has ever had in my investing lifetime was in the year of a recession—in 1954. So you don’t want to not buy stocks because the business is lousy at that time. That might be the very best time to buy the stocks. In 1954, the Dow was up 50% and the country was in a recession, it was the best year I ever had in my life. I have had other good years in a recession.
It’s a big mistake to say that business is bad, therefore, I shouldn’t buy stocks. That usually is the time to buy stocks, and when everything is wonderful, it is not usually a good time to buy stocks.
The story today in ‘The Wall Street Journal’ about how AIG (American International Group Inc.) is close to the sale of its Japanese headquarters building for about a billion dollars. This is significant because it shows the kind of decline of AIG. You know AIG well, you know Hank Greenberg. What you think about what has happened to AIG in the course of last few years?
It’s a tragedy. It started with the financial products business. They had a black box and the black box delivered little numbers to them that they loved quarter by quarter. And then somebody looked into the black box and they found out that there was a little black hole.
I was there in September when they thought their problems were... $18 billion (Rs89,460 crore today) I think was the exact number...and they had really no concept on how big the troubles were, and it was a huge, huge black hole and they were making bets they didn’t understand.