Warren Buffett | Charlie Rose | September 30, 2011

Transcript

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Summary

Warren Buffett discusses his recent investment in Bank of America, his decision to buy back Berkshire Hathaway shares, and his opinions on the state of the economy and tax policy. He also shares his thoughts on the European debt crisis and the need for government and corporate reform.

Questions & Answers

Q: Why did Warren Buffett decide to buy back Berkshire Hathaway shares?

Buffett explained that he would only buy back shares if they were selling at a discount to their intrinsic value. He believes that buying back shares at a discount helps all shareholders and shows that the stock is undervalued.

Q: What determines the price at which Berkshire Hathaway will buy back shares?

Buffett stated that he offered to buy back shares at book value plus 10, but the market will ultimately determine the price. However, he mentioned that he wants to set an outer limit on what they will pay to ensure that the stock remains a good value for shareholders.

Q: Does Warren Buffett believe the intrinsic value of Berkshire Hathaway's businesses is higher than the stock price?

Buffett confirmed that the intrinsic value of the company's businesses is clearly higher than the stock price. He mentioned that while intrinsic value is not a precise figure, it is considerably higher than the current stock price.

Q: How much cash does Berkshire Hathaway have for potential investments or share buybacks?

Buffett stated that they have around $47-50 billion in cash, which is down due to recent spending. However, he mentioned that they will not go below $20 billion in consolidated cash reserves to ensure they have enough for any future opportunities.

Q: What is Warren Buffett's perspective on the housing market and its impact on economic growth?

Buffett believes that the housing market will turn around when the number of new households exceeds the number of new houses being built, bringing the inventory into balance. He mentioned that this will lead to a drop in the unemployment rate and contribute to full economic recovery.

Q: How does Warren Buffett view the current state of the economy and the possibility of another recession?

Buffett disagreed with the idea of another recession and cited positive signs, such as increased sales in industries like candy and jewelry. While he acknowledged that home construction is weak, he believes that once the housing market improves, the economy will recover significantly.

Q: Why did Warren Buffett invest in Bank of America despite its difficulties?

Buffett explained that he believes in the management of Bank of America, and while they made mistakes during the financial crisis, they are working to solve them. He expressed confidence that the bank will overcome its current challenges, although it may take time.

Q: What is the Buffett Rule, and why does Warren Buffett support it?

The Buffett Rule refers to the idea that wealthy individuals should pay a higher percentage of their income in taxes. Buffett supports this rule because he believes it is crucial for everyone to participate in the necessary sacrifices to reduce the deficit and ensure fairness in the tax system.

Q: How does Warren Buffett view the role of business and corporate taxes in economic growth?

Buffett emphasized that he believes in the fundamental strength of American capitalism and its ability to generate growth over time. While he acknowledges the need for some level of taxation, he also thinks it is important to strike a balance and ensure that those who can afford to pay more do so.

Q: How does Warren Buffett see the European debt crisis affecting the global economy?

Buffett expressed concern about the European debt crisis and the potential consequences for the global economy. He mentioned that European countries need to either come closer together or separate and abandon the euro. While he believes Europe will eventually recover, he emphasized the importance of taking action before it's too late.

Takeaways

Warren Buffett's perspective on various economic and investment topics provides valuable insights. He highlights the importance of buying back shares at a discount to intrinsic value, the need for tax fairness and increased contributions from the ultra-rich, and the potential risks of the European debt crisis. Buffett also emphasizes the importance of government and corporate reform to address political dysfunction and promote economic growth. Overall, his viewpoints demonstrate a long-term and pragmatic approach to investing and economic issues.