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Watch CNBC's full interview with Berkshire Hathaway CEO Warren Buffett

CNBC Television・110 minutes read

Warren Buffett emphasizes long-term investments in stocks as businesses, discussing the impact of factors like the coronavirus and low interest rates on the market. He shares insights on Berkshire Hathaway's performance, succession planning at Geico, and his views on politics, capitalism, and market strategies.

Insights

Warren Buffett advises viewing stocks as businesses and focusing on their long-term outlook, emphasizing the importance of understanding the businesses behind stocks before investing.
Buffett highlights the impact of low bond yields on stock value, expressing continuous belief in buying stocks for the long term, and discusses Berkshire Hathaway's net buying of stocks and significant cash reserves available for future investments.
Buffett discusses the impact of the coronavirus on businesses, highlighting supply chain disruptions and the challenges posed by the outbreak on global economic growth and major events like the Olympics.

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Recent questions

What does Warren Buffett advise about stocks?
Focus on long-term outlook and view as businesses.

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Summary

00:00

Warren Buffett's Long-Term Investment Advice

Warren Buffett, Chairman and CEO of Berkshire Hathaway, released his 55th annual shareholder letter.
This is the 13th year of the "Ask Warren" show in Omaha, where people can ask questions after reading the shareholder letter.
Buffett advises viewing stocks as businesses and focusing on their long-term outlook.
He emphasizes that short-term market fluctuations should not deter long-term investment decisions.
Buffett highlights the importance of understanding the businesses behind stocks before investing.
He discusses the historical performance of stocks versus bonds and the impact of retained earnings on stock value.
Buffett mentions Edgar Lawrence Smith's book on stocks and bonds, emphasizing the power of compound interest.
He explains the current scenario where stocks offer better value than bonds due to low bond yields.
Buffett expresses his continuous belief in buying stocks for the long term, regardless of impending troubles.
He mentions Berkshire Hathaway's net buying of stocks and the significant cash reserves available for future investments.

13:44

Buffett predicts American business growth in 20-30 years.

Warren Buffett predicts that American businesses will be far better in 20-30 years.
The stock market's unpredictability in the short term is acknowledged by Buffett.
Coronavirus has impacted businesses like Dairy Queen franchises in China and Apple.
Supply chain disruptions due to coronavirus have affected various businesses unexpectedly.
Buffett mentions the cyclic nature of businesses like the candy industry.
The US economy is slightly softer than six months ago, with various factors influencing it.
Buffett discusses the impact of tariffs and coronavirus on business performance.
Buffett owns stakes in major airlines, with Delta being the largest position.
Berkshire Hathaway has reduced its position in Wells Fargo due to regulatory constraints.
Buffett emphasizes the impact of low interest rates on banks and the economy, highlighting the unprecedented global negative interest rate scenario.

28:43

Impact of Interest Rates, Berkshire Hathaway Success, Coronavirus

Interest rates have a significant impact on various financial aspects, affecting pensions, savers, and the federal debt.
A rise in interest rates could lead to a substantial increase in expenses, especially for the federal debt.
The current low-interest rates benefit the national budget by keeping interest costs low.
Conglomerates have faced criticism historically, but Berkshire Hathaway operates differently, focusing on business reasons rather than stock manipulation.
Berkshire Hathaway's decentralized management structure allows subsidiaries like Geico and BNSF to excel independently.
Geico has shown remarkable growth under Berkshire's ownership, becoming a major player in the auto insurance market.
Burlington Northern Santa Fe has improved but not as much as some other railroads, potentially due to the precision scheduling railroading method.
The coronavirus outbreak has led to significant disruptions globally, impacting supply chains and economic growth.
Uncertainty remains regarding the long-term effects of the coronavirus outbreak, with potential implications for major events like the Olympics.
Monitoring the situation daily and reporting facts accurately is crucial to managing the impact of the coronavirus outbreak.

43:44

Global Pandemics: Challenges, Vaccines, and Investments

In the past, pandemics have caused significant devastation, with up to 50 million deaths globally in previous outbreaks.
The current pandemic's novelty poses challenges due to the lack of natural immunity in populations.
The virus's behavior in warmer weather remains uncertain, with hopes that it might diminish but no guarantees.
Developing a vaccine is a lengthy process, with experts suggesting it may not be available for some time.
Bill Gates and the Gates Foundation are actively involved in combating the pandemic, focusing on global health initiatives.
Berkshire Hathaway's structure and potential value if split up are discussed, with tax implications affecting any potential breakup.
Warren Buffett emphasizes the importance of Berkshire's unique shareholder base and long-term investment approach.
Buffett's faith in Berkshire's directors and commitment to philanthropy guide his decisions on the company's future.
Buffett's views on bank stocks are positive, highlighting their profitability compared to other securities.
Despite occasional missteps by banks like Wells Fargo, Buffett remains confident in the banking sector's long-term prospects.

58:26

"Lessons from Wells Fargo and Geico"

Wells Fargo faced implications of three billion dollars, prompting the need to address outstanding issues.
Charlie Munger emphasizes the importance of prevention over cure in tackling problems immediately.
Wells Fargo's initial issue involved creating numerous phony accounts, questioning the profitability of such actions.
Poor incentive systems can lead to unethical behavior, as seen in Wells Fargo's case.
Delayed response to problems can lead to disastrous consequences for shareholders.
Geico's CEO succession plan faced challenges due to the lack of a suitable replacement for Bill Roberts.
Todd Combs, with a background in insurance, was appointed to oversee Geico's operations temporarily.
Geico's focus is on managing correlated risks with proper rate setting in the insurance business.
Todd Combs' role at Geico involves managing a significant investment portfolio and serving on the board of JP Morgan.
Berkshire Hathaway's performance compared to the S&P 500 has been affected by its size, but it remains a safe long-term investment.

01:13:32

Warren Buffett on Berkshire Hathaway and Politics

Warren Buffett mentions that Berkshire Hathaway is their third largest business.
Buffett discusses his plans for his estate to hold onto Berkshire shares until a certain pattern emerges.
Buffett expresses his support for the Democratic Party but mentions voting for Republicans in the past.
Buffett talks about his views on Michael Bloomberg and Bernie Sanders as potential candidates.
Buffett reveals his stance on capitalism and politics, mentioning his support for Bloomberg.
Buffett discusses his agreement with some of Sanders' intentions but not all of his plans.
Buffett expresses his disagreement with Sanders' proposal to give 20% of company stock to employees.
Buffett talks about the impact of Sanders' plans on the economy and his support for the Earned Income Tax Credit.
Buffett addresses concerns about the market if Sanders wins the Democratic nomination.
Buffett discusses the impact of the coronavirus on the market and Berkshire's stock buyback strategy.

01:28:25

Munger and Buffett on Earnings, Borrowing, Boards

Charlie Munger, Berkshire Hathaway vice-chairman, discussed EBITDA earnings at a shareholders meeting for The Daily Journal.
Munger and Buffett do not believe in GAAP earnings, emphasizing the stock market's influence on reported earnings.
Munger is described as an exceptional partner by Buffett, with a keen mind and valuable insights.
The pair closely follows and discusses economic and political developments, particularly focusing on uncertainties like global borrowing trends.
Buffett questions the logic of lending money to the US government at low rates amidst inflation concerns.
The duo emphasizes the importance of buying good businesses at reasonable prices, considering the current high premiums for acquisitions.
Buffett highlights the risks of borrowing money under lenient terms, leading to potential economic vulnerabilities.
Buffett stresses the significance of board members representing shareholders' interests and the challenges of ensuring true independence on boards.
Buffett criticizes the notion of some board members being labeled as independent while receiving substantial compensation and lacking true independence.
Buffett underscores the importance of considering compensation in evaluating board members' independence and decision-making.

01:44:08

Larry Fink on Sustainable Investing and Cryptocurrencies

Larry Fink believes sustainability and climate integrated portfolios offer better risk-adjusted returns.
Sustainable investing is not a primary consideration when buying stocks for the portfolio.
Cryptocurrencies are viewed as lacking value and not producing anything tangible.
Bitcoin's value is questioned as it relies on future buyers for profit.
Berkshire Hathaway does not invest in cryptocurrencies or ETFs.
Kroger was purchased by one of Berkshire Hathaway's managers.
Kraft Heinz is advised to pay down debt while maintaining the current dividend.
Brands like Coca-Cola have stronger market presence than private labels.
Gregg and Ajit play a significant role in Berkshire Hathaway's succession planning.
Berkshire Hathaway is not interested in loaning money to Boeing or acquiring PG&E due to complexity.

01:59:24

Berkshire Hathaway's Flexible Headquarters in Omaha

Warren Buffett discusses the flexibility of Berkshire Hathaway's headquarters in Omaha, revealing they only use 1/4 of the 15 floors and haven't committed to a long-term lease, showcasing their adaptable approach to future needs and growth.

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