Warren Buffett: People Focus Too Much On The Short-Term | March 3, 2014 | Summary and Q&A

Summary

In this special edition of Squawk Box, Warren Buffett, the legendary investor, answers questions about the economy, the markets, and more. Topics discussed include the situation in Ukraine, Buffett's investment strategy, the performance of Berkshire Hathaway's holdings, the Keystone pipeline, and the minimum wage.

Questions & Answers

Q: What is Warren Buffett's macro view on the markets?

Buffett doesn't give much credence to macro views when making investment decisions. He believes in buying businesses and stocks based on their individual merits, rather than macro factors. He cites an example of buying stocks during World War II, when macro factors were unfavorable, but the stocks were cheap.

Q: Has Buffett made any rare mistakes, such as stepping outside of his circle of competence?

Buffett admits that his level of understanding of certain companies, like IBM, is not as high as his understanding of companies like Wells Fargo or Coca-Cola. He acknowledges that there is a transition happening in IBM's business, and while the financial performance has been good, there have been some challenges with revenue trends. Overall, Buffett feels good about owning IBM stock.

Q: Is Berkshire Hathaway considered a systemically important financial institution (SIFI)?

Buffett has heard nothing from the people in charge of determining SIFI designation. He doesn't believe Berkshire would be categorized as a SIFI due to its size and liquidity. He also mentions that derivatives play a minor role in Berkshire's portfolio and are already being wound down.

Q: Is Buffett supportive of raising the minimum wage and tying it to inflation?

Buffett has thought about the minimum wage for 60 years and sees both sides of the argument. While he would like to have people paid more, he also wants to ensure as many people as possible are employed. He believes increasing the earned income tax credit is a better way to address income inequality, as it puts more money in the pockets of low-wage workers without negative effects on employment.

Q: Does Berkshire Hathaway employ many minimum wage workers?

Buffett mentions that very few of Berkshire's 330,000 employees make minimum wage.

Q: What are Buffett's thoughts on the rail industry, specifically Burlington Northern Santa Fe (BNSF)?

Buffett believes the future of railroads, including BNSF, is very good. Rail transportation is cost-effective for moving heavy goods over long distances and is also more environmentally friendly compared to highway traffic. He mentions that BNSF has benefited from the shale boom and expects the railroad business to be profitable in the long term.

Q: Is Buffett concerned about the wealth gap and income inequality?

Buffett acknowledges that the market system, while great for producing goods and services, leaves more and more people behind as it becomes more specialized. He believes a very rich country should address this issue and suggests increasing the earned income tax credit as a way to put more money into the pockets of low-wage workers.

Takeaways

In this video, Warren Buffett shares his insights on various topics ranging from the stock market and investment strategy to minimum wage and income inequality. Buffett emphasizes the importance of evaluating individual businesses and stocks based on their merits, rather than macro factors, when making investment decisions. He also highlights the success and potential of Berkshire Hathaway's holdings, such as IBM and Burlington Northern Santa Fe. Additionally, Buffett discusses the pros and cons of raising the minimum wage and suggests that increasing the earned income tax credit may be a better solution to address income inequality. Overall, Buffett's advice is grounded in his long-term perspective and belief in the value of businesses and equities.