2019 年度「问巴菲特」专访

BECKY QUICKAll right. Yes. Let's bring in our special guest this morning. Berkshire Hathaway chairman and CEO Warren Buffett joining us-- just after writing his annual letter to shareholders. And-- Warren, this is a big deal. It's something that the investment community-- kind of waits on and-- sees as a must-read because you spend so much time actually it yourself--

WARREN BUFFETTYeah, too much.

BECKY QUICKWhen do you start writing the letter?

WARREN BUFFETTWell, this one I--started very earlier-- very early because I had one section in mind. It turned out to be the last section when I talk about the American tailwind. I probably wrote that in-- late summer. And-- then I work around different sections. But-- it-- takes a long time. I am not a first draft writer.

BECKY QUICKWell, for people who have been reading this for a long time, this letter was markedly different than you've written for the past three decades or so. Because at the top, the opening of every letter-- in the past to this point has been-- Berkshire's percentage change in book value--

WARREN BUFFETTRight.

BECKY QUICK--as the measure that you thought was most important. This time, you kinda stripped it out and said, "It's not the most important metric anymore for a couple of reasons," one of which Berkshire has changed so markedly. But also-- you just think it's-- not gonna be the way that you'll be measuring things in the future.

WARREN BUFFETTNo, it's not-- the more relevant-- figure at least over time. Not in any one-year period. But basically it's market value. Because we have become overwhelmingly an operating company. And we hope to become even more so than-- a company that-- really have a lot of stocks and bonds. So-- I've-- actually talked about that in previous reports. I wouldn't have wanted to quit in a year where I got clobbered by the one I was dropping with adopting one that made me look good. So-- I actually included 'em both in. And it was a good year to-- make the transition. And-- you said it's different. It-- I've always had the image that I am talking to my sisters. I have two sisters. They're both-- Berkshire's pretty much their whole investment. They're smart. They're not active in business. So-- they're not reading about it every day. But I pretend they've been away for a year and I'm reporting to them on their investment. And then this year because we may be repurchasing shares, I tried to have the vision that they were talking to me about whether they should sell their shares and I was explaining to them exactly how I would look at it if I were in their shoes. So-- it's, "Dear Doris and Bertie," at the start and then I take that off at the end. But I'm talking to them. And I'm trying to talk to 'em in a manner where if-- you know, they're practically entirely in Berkshire and if they were thinking of selling some, here's what I'd want 'em to know before they made a decision.

BECKY QUICKTo do that, you used-- a new-- description for--coming up with it this time, which was the idea of having five groves. You being maybe a timber company and having five groves that Berkshire's really invested in. You broke down-- and looked at each of them on a case-by-case basis. One being the-- non-insurance businesses that Berkshire owns. Another being the equities-- bunch that you have. The final one's the insurance companies, but you also have treasuries and cash that you're holding. What am-- oh, and then businesses that you own part of, not all of—

WARREN BUFFETTRight, jointly.

BECKY QUICK--would be the five groves. That's pretty interesting. How'd you come up with the idea of just the groves? Because it is something that-- somebody who's not so steeped in business can get their head around pretty easily.

WARREN BUFFETTYeah. Well, Berkshire, you know, has dozens, and dozens, and dozens of companies. And-- when analysts look at it, you know, they wanna go out and figure out, you know, how many boxes of Valentines we sold, you know, in our candy company. And you can get totally lost in terms of looking at the forest by trying to look at every tree. cause some of the trees are flourishing, some of 'em are decaying, and some of 'em are huge and important, and others are more or less twigs. So I thought I would group the assets in a way that was logical and where you could sorta figure out-- the valuation that you might attribute to that particular grove. And-- I think it's a lot better than trying to describe-- 80 or 90 businesses with three hundred and-- what? Close to 390,000 employees. I mean, we're in one of the businesses right now. And this is a very interesting business. But we've got Jordan's in Boston. We've got Star in Houston. We have RC Willey. And to go through every one and tell 'em about the latest store we opened and it's much better just to look at 'em in groups because they make sensible groups.

BECKY QUICKTo that point, this is the Ask Warren show, and we have gotten a lot of questions that have come from viewers, some from Berkshire shareholders, others from people who are just longtime watchers. I'd like to bring up a question that comes from-- Marcelo P. Lima . He-- writes in, and I think this comes from Twitter, "Mr. Buffett, in your letter you note that some of Berkshire's trees are diseased and unlikely to be around in a decade. Which ones do you have in mind, and how do we prevent healthy trees from joining them?"

WARREN BUFFETTYeah, well-- I did say that. And-- but I would not name the ones that have major problems just from a morale standpoint. With the we're gonna keep running 'em. And-- but they-- we have companies that are on the downswing as well as on the upswing. And-- it would be-- it just-- it would be very tough. And-- the ones that are, as I call it, diseased, they're a very, very, very small part of our earnings. You'd-- gain nothing analytically, and you'd have a hundred people go to work today feeling, you know, "Well, we might as well give up," or something of the sort. So I don't like to name 'em specifically, although you could probably figure some out by-- looking at our list of companies. There's-- some companies are just in the wrong industry. I mean, you know-- if you made-- you know, whatever it may-- well, even making televisions in this country, I mean, that was a hot industry, you know-- when I was young. And-- we don't do it anymore. We sell a lot of 'em here at our store, but-- so I would not like it if I were working at Company X and-- my boss had just got through saying, you know-- "You're in decay."

BECKY QUICKYou do name some of the big redwoods that you consider to be-- essential to the grove though. I--think you said that-- Berkshire Hathaway Energy and the railroad, Burlington Northern Santa Fe, are two of the biggest redwoods that stand in the groves.

WARREN BUFFETTWell, they're big. They're big. And-- both set records for after-tax earnings last year. Combined, they earn-- right around $8 billion after tax. And $8 billion's a lot of money to us. That's a third of our operating earnings. We earn twenty-four-- a large fraction-- of operating earnings last year. $24 billion. And-- those two companies alone earned $8 billion. Now, Berkshire Hathaway Energy also has multiple companies. But the BNSF Railroad is just one big railroad.

BECKY QUICKLet's talk about that operating profit number. It was $24.8 billion. But on a gap basis, what you're now focusing on, it was $4 billion. And that comes because of an accounting change that came into play this time around. It was $20.6 billion paper loss on your investment holdings that you now count back in from the huge amount of securities that you own and then also the $3 billion write-down on Kraft. You go out of your way to emphasize again that you don't think people should be looking at these gap earnings even though you're reporting them that way.

WARREN BUFFETTYeah, we say the same-- well, that's the final gap earnings. The $24.8 billion also are gap earnings, but they're operating earnings. And-- I think they were-- we had outside tailwind on that. But-- they were 41% greater than any year we've ever had on operating-- earnings. But-- beyond that, we have this large portfolio of stocks and also the write-down on Kraft-Heinz. But mainly it was the portfolio of stocks. And-- we've made a lot of money over-- in stocks over time. But there's been years-- when we've lost money, too. And I-- tell the shareholders that-- that we expect-- to make money on stocks over time. We haven't got the faintest idea what years we'll-- be up or down. And then they changed the rule last year so that unrealized-- gains or losses are recognized through gap income. That had not been true-- for dozens and dozens and dozens of years before. So that changed our figures. But I-- that's why I explain-- that's why I tell Doris and Bertie what's happened in accounting during the year as well as the business.

BECKY QUICKBut you should point out this time it was a decline of more than $20 billion. There will be quarters where you'll see a huge upswing. And you don't think people should pay attention to the upswing either –

WARREN BUFFETTNo. Absolutely not.

BECKY QUICKThat these are just fluctuating numbers.

WARREN BUFFETTNo, no. They should pay attention to how we do over ten years in the stocks we own. But actually the way the rule works now, every minute it's recorded earnings, it's mark to market. And we're buying stocks that in some cases we will hold ten, twenty, maybe even longer years. And those companies are retaining earnings. They're reducing the number of shares. They've got a lot of things going for them. And I would, you know, I have bet a lot of money. We had $173 billion of equities at year end. And I love having those. And they will make us money over time. But I have no idea what they'll do in the next year or two.

BECKY QUICKAll right. Let's talk through a few other questions that have come in from viewers just regarding Berkshire while we're here. Eric LeFante wrote in and said, "Warren, how have you structured Greg Abel and Ajit Jain's compensation now that they oversee dozens of different businesses?" You did point out that you think the business is much better run now that those two are vice-chairmen, each running their own set of companies.

WARREN BUFFETTYeah, our proxy will be out very soon. Shows what they received. I think unless there's some calendar quirk or something like, that they will have each received $18 million last year. And the base salary is a high percentage of that. And then a bonus is discretionary with me. But they're doing a fabulous job.

BECKY QUICKBonus is discretionary just based on—

WARREN BUFFETTBased on how I wake up in the morning, yeah.

BECKY QUICKOn that same sort of—

WARREN BUFFETTThat may be the only one you'll read about like that in our proxies.

BECKY QUICKThere's another question that comes in regarding Greg and Ajit that says – this is from Rational Walk. A suggested question on Monday. "Given that Abel and Jain are not only responsible for running most businesses but also vice-chairmen, shouldn't they be up on stage along with Charlie at the annual meeting? Many of us would like to hear from them."

WARREN BUFFETTYeah, well, you will hear from them more in the sense that they will be up front with microphones ready to take on any questions that come. You know, it's not going to be that many years where the two of us are up on – and they will be up on the stage when we rearrange the format. And rearranging the format means rearranging me and Charlie to some degree. But it's logical for them. And I hope lots of questions get directed to them at the annual meeting because we'll feed them into them. I should mention one thing about their comp. There's this rule, and I may not be giving it to you exactly proper, but there's a rule for public companies that you get to deduct only a million dollars unless – for compensation – unless the excess is tied to some formula. So everybody pays, you know, you can be running the super company of all time, and they tend to range the base salaries so they're a million or $2 million and then call the rest something that qualifies under the IRS where they get the deduction for it.

BECKY QUICKI didn't know that's—

WARREN BUFFETTOh yeah. Oh, believe me. Every company knows it. And their employment consultants know it and everything. So you have all these salaries, but then they have something that makes it very easy for them to make a lot more money. And that money is deductible whereas I don't think what we pay in the way of excess – I think it's over a million – is deductible. But, I mean, it would be a joke. And so we are paying them a fair amount of money, I believe, that's not deductible, whereas at almost any other company you see, they're designing it so that it is deductible.

BECKY QUICKI always wondered why base level—

WARREN BUFFETTThe base salary is – yeah, it's ridic –

BECKY QUICK$775,000 or million dollars. I didn't know that's why.

WARREN BUFFETTI mean, it's so transparent. But it makes everybody feel good. They passed it, I don't know, ten or twenty years ago. And immediately everybody, "oh, we just had this revelation that now that you're really only worth a base salary of a tiny amount," you know? And it came to be about designing something like this. You know, and I said, "You know, it's just a joke. I mean, we're not going to pay them a million dollars a year." So, you know, they've got huge responsibilities. So you will see a little different situation. I think the bonus I give them that I think it was 16 base and two bonus. I think the two is probably deductible.

BECKY QUICKSo 6:19 on the East Coast and you're already making friends. Well done. Let's get to another question from the audience. This comes from Brian Chan. He asks, "How are Ted and Todd's performance since they joined about eight years ago?" The money managers who are there. "Have they –" Ted Weschler and Todd Combs – "Have they performed better than index? Charlie said recently that most money managers did not add any value compared to an index."

WARREN BUFFETTYeah. The first few years, each of them they came at a slightly different time. Maybe a year to a year and a half or something. Different times. And they got well ahead of the index, and they got paid compensation. Now, they got paid so it came in thirds, so that it could be clawed back – two thirds of it if they'd missed the second year and so on. Overall, they are a tiny bit behind the S&P each by just almost the same margin over the same time.

BECKY QUICKOver the entire period?

WARREN BUFFETTOver the entire period. And the entire period's a little different for both of them. They now manage about $13 billion each. They've done better than I have. So I—

BECKY QUICKWell, that's a good measuring stick.

WARREN BUFFETTYeah. So no, it isn't a measuring stick. But I mentioned it because if I don't, somebody else will. So, you know? They also – both of them – have done an incredible amount of work in terms of acquisitions, and Todd in particular on our medical venture. Anything at Berkshire – we made an arrangement with Lee Enterprises in terms of managing our newspapers. Ted handled all that. I mean, you know, he got my approval on it, but a million details. And they both have contributed all kinds of ways to Berkshire. But it has been a tough time to beat the S&P. But that's the deal we've got with them. And they've got a small carry-forward of deficiency to make up. I mean, they had some clawed back earlier. They made pretty good money for a few years. Substantial. Some of it clawed back because of the three-year put-back arrangement. And then now they've got a small carry-forward.

BECKY QUICKOkay. Another question that came in—

WARREN BUFFETTBut they've done better than I have, Becky.

BECKY QUICKTony Dickinson writes in "What changes should we expect from GEICO with the transition from Tony Nicely to Bill Roberts? And how do they approach leadership differently?"

WARREN BUFFETTThey're two peas in a pod on that. I mean, they've worked together so long. They're so compatible. They have the same feelings about GEICO. I mean, nobody can quite match GEICO's – Tony's feelings about GEICO, but there's just no change. I was at a meeting of GEICO that they had maybe forty of their top executives. And everybody went around, introduced themselves, and gave the length of time they'd been with GEICO. I think the shortest time any one of those people said was 19 years.

BECKY QUICKWow.

WARREN BUFFETTGEICO grows its own.

BECKY QUICKWe are here at the Nebraska Furniture Mart, and we're going to talk more about a story I think you have from Mrs. B., Mrs. Blumkin, the founder of Nebraska Furniture Mart, coming up a little bit later. Right now, we're going to take a quick commercial break. When we come back, we were also going to talk to Warren Buffett about the big drop in Kraft-Heinz shares on Friday. We'll talk about the markets, we'll talk about the economy, and much more. Right now though as we head to that break, let's take a look at the biggest pre-market winners and losers in the Dow. Welcome back to a special edition of Squawk Box. We are live in Omaha, Nebraska with Berkshire Hathaway's chairman and CEO, Warren Buffett. Warren, we're just sitting down with you for the first time since the news last week that Kraft-Heinz put out. There was so much news it's hard to even summarize it all.

WARREN BUFFETTYeah.

BECKY QUICKThey came out with earnings that missed expectations. They said, "By the way, it's not gonna get better in 2019." They revealed that there's an SEC investigation taking place into accounting. They wrote down the value of the brand by just over $15 billion. Were you surprised by any of this news? What did you think of what happened? 'Cause the street was surprised. The stock was down over 30%.

WARREN BUFFETTYeah. Well, I may have learned a week or ten days before about something -- like the SEC investigation. I'm not-- I'm not on the board, but Greg's on the board. And I talked to Greg. And Greg had been talking a lot to the head of the audit committee. And he's a terrific guy. Jack Pope. But the write-down-- I do my own write-downs in my mind. So I was not surprised by that, although-- the accounting firms look at write-downs a little differently than I do. But I would not argue with 'em on it. And I can give you some math that would substantiate it. I've been watching-- I was wrong in a couple ways on Kraft-Heinz. But the-- I think we talked the GLIDE luncheon time about the packaged goods brands losing some ground against the retailers.

BECKY QUICKWas that just over a year ago?

WARREN BUFFETTSix months ago. The GLIDE-- well, the packaged goods companies are always in a struggle with retailers. My-- our family had a grocery store for a hundred years. And we-- then we didn't have much bargaining power. But the really strong brands, they can go toe to toe with Walmart, or Costco, or whomever it may be. But the weaker brands tend to lose out. Now, the interesting thing about Kraft-Heinz is that it's still a wonderful business in that it uses about $7 billion of tangible assets and earns $6 billion pretax on that. So on the assets required to run the business, $7 billion-- they earn $6 billion-- roughly after depreciation pretax. But we and certain predecessors, but primarily we, we paid $100 billion more than the tangible assets. So for us, it has to earn on $107 billion, not just on the $7 billion that the the business employs. And we don't have a way-- it would be a wonderful if we had a way to deploy another $7 billion and earn $6 billion, but it isn't there. So I think that when you're going toe to toe with a Walmart, or a Costco, or maybe an Amazon pretty soon and-- you have a modestly good brand, maybe one where the trend's a little against it or something like that, you know, you've got the weaker bargaining hand than you had ten years ago. The really classic situation is this if you think about it, Becky. Heinz was started in 1869. So it had all that time to develop various products, particularly ketchup, things like that. The Kraft part of it's a little more murky, but it goes back to C.W. Post in 1895. Those companies have brought all kinds of brands out. All kinds. You know 'em. You had 'em when you were a kid. You have 'em now, some--

BECKY QUICKRaisin Bran, sure.

WARREN BUFFETT--some of 'em. They've been distributed worldwide through tens and hundreds of thousands of outlets. They've had hundreds of millions...they spend a fortune on advertising. And their sales now are $26 billion. Costco introduced the Kirkland brand in 1992, 27 years ago, and that brand did $39 billion last year whereas all the Kraft and Heinz brands did 27-- $26 or $27 billion. So here they are, a hundred years plus, tons of advertising, built into people's habits and everything else, and now Kirkland, a private label brand, comes along and with only 750 or so outlets does 50% more business than all the Kraft-Heinz brands. So house brands, private label, is getting stronger. It varies by country around the world, but it's bigger. And it's gonna keep getting bigger.

BECKY QUICKOkay. A couple of questions on it. First of all, does that mean you overpaid?

WARREN BUFFETTWell, we did overpay. We didn't overpay for Kraft. I mean, for Heinz--

BECKY QUICKFor Heinz.

WARREN BUFFETTWe bought that originally. It was a 50-50 deal. It was private. And--

BECKY QUICKA 50-50 deal with 3G.

WARREN BUFFETTPardon me?

BECKY QUICKWith 3G.

WARREN BUFFETTYeah, with 3G. We had two stockholders. And then we overpaid for Kraft. And we wrote down $15 billion of that. And that-- you know, and that's the CPAs' work-- way of looking at it. Actually, the markets marked it down more than that. And probably quite properly. The thing to remember is-- you know-- you know how the stock doesn't know you own it. You pay $10 for a stock, it goes to $8, and you think, "If it ever gets back to $10, I'll sell it." You know, and if it goes up $20, you say, "I can take-- sell half of it and take all my money out." All those things are nuts. But in business, if we paid $7 billion for Kraft, which is all it takes to run the business, it would still earn the same amount as if we paid the $100 billion premium. The stock-- the business does not earn more just because you pay more for it. And we not only-- after buying Kraft, everybody started speculating about the things we'd buy. So the prices of everything went up. And then on top of it we paid large premiums for it. And we misjudged it.

BECKY QUICKI hear what you're saying about the house brands and the competition from places like a private label brand that Costco puts out. But what about just millennials' changing habits? How much of it is that younger consumers don't want the brands that their parents and grandparents wanted?

WARREN BUFFETTThere's some change in habits. But if you think about it, people don't really change their habits that much. If you try to think of the billion-dollar brands that have been created in food and they're private label, there's very few billion-dollar brands being created in food. Some have did it in yogurt probably. You know? But you don't really see-- that has not been a huge change. Physical volume hasn't changed much. The ability to price though has been changed. And that's huge.

BECKY QUICKWe had an analyst on last week on Friday talking about what she perceived as the problems with Kraft-Heinz. She said she thinks they're under-investing in the business. I mean, that's kind of been 3G's way, to cut to the bone. And that's how you make this profitable. But she thinks the brands have been under-invested in. Would you agree with that?

WARREN BUFFETTI don't think so. But that's hard for me to tell. But see-- well, I was on the board. I mean, I saw lots of innovation on different products. And you saw them advertised to some extent. I do not think, but I don't know this for sure. But I think if you take the ten largest food companies, I think in innovation-- they've tried a lot of things. But how many things work? If you look Kellogg and General Mills and go up and down-- Coca-Cola, I mean, how many new products really become big? You read about 'em and all that. But take Heinz Ketchup. You know, it's got 60% of the ketchup market. It's got higher percentages in other parts of the world. And it's a very, very, very strong brand. Philadelphia Cream Cheese is a strong brand. But other brands are weaker. And you are right certainly that in certain categories, maybe in a Kool-Aid, or Jell-O, or something like that-- you know, they go back 75 years or something. And there's some secular trend against that. But that isn't the key. I mean, they cut costs not in innovation, or in product quality, or anything like that. They just took it out of SG&A basically. Now, they may have made a mistake in terms of working-- I shouldn't say "they." We may have made a mistake in terms of trying to push hard against certain of the retailers and finding out that we weren't as strong as we thought they were-- we were.

BECKY QUICKLet's go to one of the questions from viewers because we got a lot of questions related to--

WARREN BUFFETTSure.

BECKY QUICK--Kraft-Heinz. This one's number T5. Someone named J.C. Dominguez wrote in, "Is this the type of incident and time when you buy more Heinz? Or do you pull the plug?"

WARREN BUFFETTOh, we don't pull the plug on them. We've never sold a share of Kraft-Heinz. And if we sold or bought, it has to be reported within two days. So we wouldn't be able to do anything significant. But it isn't our style. We are the partners with 3G on it. And so we have exactly the number of shares we had before. And I guess I should never say never-- at age 88 in terms of what somebody else might do. But I can tell you I have absolutely no intention of selling. I've got absolutely no intention of buying.

BECKY QUICKWhy wouldn't-- if you're sticking with the business and it's 30% cheaper today, why wouldn't you buy more?

WARREN BUFFETT'Cause it isn't worth as much.

BECKY QUICKSo you think it was a fair write-down that the market gave it?

WARREN BUFFETTWell, at 35-- you've got a billion, 200 million shares out. So that's $42 billion for the equity. And we own $30 or $31 billion. So the whole company is selling for $71 or $72 billion. And as I mentioned, it has about $6 billion of operating income. Now, for $6 billion, would you pay a lot more than $72 billion where it doesn't look like it's going to be going up for a while? Maybe even-- well, they said it was gonna go down in 2019. You know, there are other things I think where you get more for your money and better prospects. Not that I regard the prospects for Kraft-Heinz as terrible. I may be-- I would-- if I had to bet one way or another, I think people will eat more of our products this year than last year.

BECKY QUICKBut if you see better places to deploy money, why don't you sell?

WARREN BUFFETTWe-- well, A) we can't as a practical matter move around tens of billions of dollars that easily. But beyond that I mean, if we're working with a million dollars or $10 million, would I have a position in it? No. You can move around with a million or $10 million. And Ted and Todd can move around reasonably well with $13 billion. But that can be difficult. $173 billion, I mean, you dance like an elephant. Not like some guy on Dancing With the Stars.

BECKY QUICKWe have a lot more questions that have come in regarding the partnership with 3G and 3G's style of doing things, but we'll get to that in just a little bit. In the meantime, we have to take another break.

WARREN BUFFETTOkay.

BECKY QUICKWhen we come back, we do have much more from Warren Buffett, including his thoughts on Berkshire's Apple stake, what he thinks about the markets, too. Right now though as we head to a break, let's take a look at Friday's S&P 500 winners and losers. This is a special edition of Squawk Box, live from Omaha, Nebraska. We are speaking to Berkshire Hathaway chairman and CEO Warren Buffett. The economy, the markets, trade talks, and much more. Find out where the legendary investor is putting his money to work and what he has his eye on this year.

JOE KERNENGood morning. Our top story, President Trump announcing yesterday he would-- delay an increase in U.S. tariffs on Chinese goods. He cited progress in the trade talks and said if it continues, there would be a summit. They would plan a summit at Mar-a-Lago. As a result, stocks in Shanghai surging overnight, up 5.6%. U.S. equity futures at this hour, sharply higher this morning as well, up triple digits. As you can see, up 140 on the Dow Jones. The S&P up about 11. NASDAQ up 38. We're not that far from some new highs. Pretty amazing. Right now, let's get back to Becky Quick in Omaha with Warren Buffett. And, you've got important things to talk about. I don't know if you've talked about March Madness yet, Beck. But, you know, he--

BECKY QUICKNope, we have not.

JOE KERNEN--he-- he--

BECKY QUICKDo you want to jump in with that?

JOE KERNENWell, no. We can at some point. But, you know, he always, like, offers up these things. Like, they sound attractive. You-- but, you know, you could win something, and he never pays off. Ever. Anything. I mean, last year I think it was-- I think it was to get to the-- what--

BECKY QUICKIt's because nobody wins.

JOE KERNEN--to get to the Elite 8 or something. Let's think about a way where--

WARREN BUFFETTNo, no, we-- we always -- we always have a sure winner, Joe. Last year, it-- it's true the favorites got knocked out early. But-- but we did split-- there's a $100,000 consolation prize for whoever does the best. Now, that got split eight ways last year. But-- but the year before, we had five people that came within one game and just to the last games of-- of winning the million-dollar prize. Now, if they'd won the million, they would have had to have split it if all five had won it. But there's a million-dollar prize. And we're going to do it again this year. And we limit it to employees of--

JOE KERNENI know.

WARREN BUFFETT-- of Berkshire. But close personal friends of mine who have a brick also may be entitled to enter. I don't know.

BECKY QUICKJoe, he invited you to enter last year, and you didn't do it.

JOE KERNENNo, no. No, we were doing other things where-- where-- depending-- let's do it again this year, Warren, with—with the Creighton versus Xavier thing. Because they both have losing sort of records, and they-- they're-- they're not doing quite as well. Although Creighton just beat Georgetown. And yesterday, Xavier just beat-- Villanova. I don't know if you saw. It was pretty good. So let's do something there, and let's-- let's see. There's a NetJet card I could think about. I don't know what the payout—

WARREN BUFFETTWell.

JOE KERNEN--is gonna be, but let's see who goes further.

BECKY QUICKYou can get another brick.

JOE KERNENYeah, exactly. If I'm lucky--

WARREN BUFFETTI get-- I get 30 s-- I get 30 seconds on the program versus a NetJet membership for you. Is that it?

JOE KERNENKind of.

WARREN BUFFETTI'll tell you what I'll do. I'll let you name the bet, and I will let you name the stakes. And-- and-- we'll go from there.

BECKY QUICKWhoa.

JOE KERNENReally?

WARREN BUFFETTThis is the honor system, Joe.

JOE KERNENYou know--

WARREN BUFFETTYeah.

JOE KERNEN--okay, let's do that.

BECKY QUICKNow, you're talking his language.

JOE KERNENBut, you know, he's very crafty and very smart. Like, he-- he sent me a NetJet card. It had my name on it, but it was absolutely useless. It was like-- you know, it was like-- I used it as a luggage tag. It was-- it wasn't worth anything. And--

BECKY QUICKWell, you said-- you said NetJet card. You didn't say it had to work for flights.

WARREN BUFFETTThat's a starter card. That's a starter card, Joe. We've got big things planned for you.

JOE KERNENI do have great things to talk to you about. I'm worried, I mean, I think you think the market's expensive, Warren. So I want to talk to you about that. I mean, you don't like to say that. And you say long term it's going to be fine. But you've got a lot of metrics you're looking at there, like the-- market cap to GDP or GNP. That-- that looks expensive there, right? I mean, there are things that look expensive, and you're having trouble finding things. So-- you know, you need to be honest with us about that.

WARREN BUFFETTThe market—

JOE KERNENIs it really expensive?

WARREN BUFFETTJoe, if-- it depends on interest rates. We've talked about that before. If you tell me that 3% long bonds will prevail over the next 30 years, stocks are incredibly cheap. Because even-- you know, I mentioned that Kraft-Heinz earns $6 billion on $7 billion in tangible assets. Even if you pay $70 billion and you earn $6 billion on it, that's better than having $70 billion on it and 3% government-- interest rates govern everything. And-- and if there were a way to short 30-year bonds and own the S&P for 30 years, I would give you enormous odds that the S&P is going to beat 30-year bonds. Now, we've had this period of extended long-term low rates not only here but around the world. And now, it looks like we're not going to jack them up very fast. So, we may be in a new world, the world that Japan entered back in 1990. And if so, stocks will, when we look back on it, will look very cheap. But, you know, this has not been the history of the United States, to have these continued low interest rates. So, I -- there's no-- if I-- if I had a choice today for a ten-year purchase of a ten-year bond at whatever it is or ten years, or-- or buying the S&P 500 and holding it for ten years, I'd buy the S&P in a second.

BECKY QUICKWell, that-- that brings us to a question that a viewer wrote in. This is T-67. @PiyushPant says: "From the annual report and the 13F, it looks like Berkshire was the least active in the public markets in the quarter when the stocks were the cheapest. You also did fewer buybacks in the fourth quarter when Berkshire was cheaper. Was taking the foot off the gas in the fourth quarter a conscious decision?" And based on what you just said-- we got all these signs that-- that looked like the Fed was not going to be raising rates in the fourth quarter, too. So why wasn't that a buy signal for you?

WARREN BUFFETTWell, I-- I thought stocks were a buy in the fourth quarter, just like they did in the third, and second, and first quarter. But sometimes we have other things in mind, too, that may use a lot of money. And sometimes they work out, and sometimes they don't. But-- but--

BECKY QUICKWait. Does that mean you were holding your cash in case a deal came through?

WARREN BUFFETTWe had at least one deal possibly. It wasn't very large. And, so, we-- I like stocks in the fourth quarter. But-- I like-- I would like buying a business even better.

BECKY QUICKIs that still--

WARREN BUFFETTAnd incidentally, I-- I did say in the annual report that we expect to be buyers-- net buyers of stocks in this year. We have not been net buyers, I should point out. I mean, the market's gone pretty much straight up. I still think stocks are more attractive, but I have trouble buying it when every day it's up.

BECKY QUICKThe deal that you just mentioned, is that potentially still on the books?

WARREN BUFFETTNo.

BECKY QUICKSo it's not--

WARREN BUFFETTI don't think-- I don't think it is. No.

BECKY QUICKIs it a deal here in the United States?

WARREN BUFFETTYeah, "Is it bigger than a--" yeah.

BECKY QUICKIs it bigger than a breadbox--

WARREN BUFFETTI-- I just-- I'll-- I'll give you a hint. It's on this planet.

BECKY QUICKSo, you went out of your way in the letter to say that you do think buying businesses outright is more expensive, even though you don't think stocks are too expensive here.

WARREN BUFFETTNo-- no question that, yeah--in this-- in stocks now, you have-- or businesses I should say you have a huge, huge, huge buyer. And-- that's not only-- and companies are eager to buy, too. But you also have private equity. And if, I don't know whether private equity-- it's-- it's flexible because they can call on their partners for more money and all that. But let's just assume that they would have a trillion available. Now, they use a lot of leverage. They call themselves private equity, but they're really private debt, you know, to a great extent. But that trillion might buy as much as, say, $3 trillion of assets if it's leveraged with $2 trillion of debt. Well, the total stock market is something like $30 trillion. And if you take the top five companies, you knock another-- or six companies, you knock four or five-- $4 trillion off that. So you're down to something where the buying power of private equity plus just the normal buying power from companies that want to get-- it's just a huge amount of competition.

BECKY QUICKWhen you start looking around, is that-- do you think the private equity companies are overpaying for this? Or can they--

WARREN BUFFETTWell, I think they'd--

BECKY QUICK--make it work?

WARREN BUFFETT--rather not. I mean, they obviously want to make the best deals they can. But they are in a game that is so much more competitive than it was for them. If you go back to a 1970s when. you know, when-- leveraged buyouts started, which are the same thing they're doing now but the name kind of lost its appeal there at some point. But the deals you could make then were enormously more attractive than the deals you could make now.

BECKY QUICKLet-- me ask you one more question that came in from a viewer. You've-- you've kind of answered this, but there-- may be a little more to the answer. This is T-84, for the control room. Nic writes in: "Why didn't a large acquisition happen for Berkshire during the fourth quarter 2008 selloff? Are you anticipating a much bigger decline in the market?" Or was-- I guess maybe it was the timing of it. Maybe it was so quick.

WARREN BUFFETTYeah. Well, there, too, in-- in 2008, for example, we were going to buy Constellation Energy. We ended up buying the stock and making some money on it. But-- but that was part of a deal. When Constellation fell apart, and it was in the fall of 2008, both-- I was watching the tape. Dave Sokol was watching what was going on. And we practically called each other at the same time. And he was on a plane with Greg to Baltimore.

BECKY QUICKGreg Abel?

WARREN BUFFETTYeah. That day. And-- and we contracted to buy it. So we-- we were-- we were ready to buy that. And we-- we tried on other things. And we-- but-- but we participated in marketable securities big time at that point, too, as you know. We spent-- I think we spent $16 billion in three weeks where-- when nobody else was spending anything.

BECKY QUICKWhen was that? What--

WARREN BUFFETTWell, between about September 15th and October 7th or 8th. And then we already had another $3 billion committed to the Dow, which was not going to get taken down until later on. So we went through our cash pile pretty fast. Too fast actually.

BECKY QUICKYou have a huge cash pile right now though. What is it--

WARREN BUFFETTWe have a huge cash pile.

BECKY QUICK$112 billion?

WARREN BUFFETTYeah, we're-- yeah, we're--

BECKY QUICKAnd that doesn't even count the other $20 billion in cash-like--

WARREN BUFFETTNo, that does count it. I mean, but the $110 billion or something like that, that-- that--

BECKY QUICK$113 billion, whatever it was, yeah.

WARREN BUFFETTYeah, that-- that-- that counts $20 billion. And, you know, I never get right down to $20 billion anyway. But-- but we've got a lot of cash. And we'd love to use it. But we're a private equity firm that's going to borrow six or seven times what they call EBITDA, which I don't use as a metric-- they're gonna pay more than we are. And, you know, as I said, we-- we pay too much for cap-- if you pay too much for something, it doesn't accommodate you by earning more money to make you look good. It-- it earns what it earns. And if we'd paid-- if we'd paid $10 billion less for Kraft, it would have still earned the same money, you know, basically.

BECKY QUICKRight. This is a question that comes in. This is F-7, control room. Doug Wofford writes in: "Warren, when you come across bad news on a holding, for example Kraft-Heinz, can you share the sequence of criteria you use to determine if the stock is on sale and buy or a bust and to sell? What really concerns you as-- as what is in-- what-- as to what is in back of a dip?"

WARREN BUFFETTYeah, the stock market is there not to instruct me. It's there to serve me. So if it if there's bad news and the stock goes down, the question is in my-- I have is-- is the long-term valuation changed? And-- you know, there was-- well, there was certainly bad news at GEICO when we bought it, for example. But there was bad news in American Express when I originally bought it back in the '60s. It was the investment partnership I ever made. So what you like is bad news about a fundamentally good business. And then you going to make sure that it's still a fundamentally good business. But, no, bad news on a good business. We're better off because Apple stock is down significantly from where it was four or five months ago than if it stayed there. Apple will probably-- they may not, but they have said they're going to down to cash neutral. They could do it either by acquisitions, or dividends, or repurchases. And my guess is it'll be mostly repurchases. They are about $130 billion away from cash neutral now. If the stock were at $200, it would buy 650 million shares. If it's at, you know $150, you buy close to 900 million shares. We're way better off, you know, if it's at a lower price when they're repurchasing shares. Our partners are selling out to us, and they're selling out cheaper than otherwise. The worst thing that can happen from our standpoint with Apple is that it sells at $230 or something like that because we don't like buying as well at that sort of price.

BECKY QUICKWe have a lot more to talk about with Apple. There are a lot of questions that came in from shareholders on that, too, or from viewers on that. But we are coming up towards the top of the hour. And to make sure that we make this a good business, Joe, I'm going to send it back to you right now.

JOE KERNENOkay, Beck. Thanks. We have a lot more obviously coming up. Still have two more hours with the oracle, Warren Buffett. We're going to talk-- a lot more about his biggest holdings and his view on the market-- and the economy and much more, and what the Green New Deal would do for Berkshire Hathaway. I just-- it boggles the mind. We'll see. Squawk Box will be right back.

BECKY QUICKThis is a special edition of Squawk Box live from Omaha, Nebraska. We are speaking to Berkshire Hathaway chairman and CEO Warren Buffett. The economy, the markets, trade talks, and much more. Find out where the legendary investor is putting his money to work and what he has his eye on this year.

JOE KERNENPlus, all of this morning's headlines and market-moving news as the second hour of Squawk Box begins right now. All right, Warren Buffett's annual letter to shareholders released-- over the weekend. Let's get to-- Becky Quick. And at some point you gotta find out if he has a favorite-- did he vote in the Geico contest? Does he have a fa-- I-- the cavemen are still my-- politically incorrect and--

BECKY QUICKOh, oh, of all of-- all the ads? No, me too. I'm glad you g-- that they brought those back.

JOE KERNENAnd did you notice-- ask Warren if he's noticed, all these other insurance companies that used to be so serious, they're all tryin' to do comedy now. There's-- one where a guy has these stupid-- he's ridin' a bike and he's got these disgusting calves that they-- they're all doin' comedy 'cause it worked so well for Geico.

BECKY QUICKWarren?

JOE KERNENHas he noticed--

WARREN BUFFETTThe camel, I think, is winning-- the contest--

BECKY QUICKOh you know, I liked him too--

JOE KERNENIs it?

BECKY QUICK"Mike, Mike, Mike, Mike, Mike."

WARREN BUFFETTYeah, the camels-- yeah, it-- well, I was back at Geico ten days ago and the camel was running while I had--

JOE KERNENYeah-- you should win some type of--

BECKY QUICKI- get that.

JOE KERNEN--of mad-- you know, Mad Men or advertising m--

BECKY QUICKMad Men.

JOE KERNENYou-- singlehandedly-- you know, turned that into-- you know-- people need to do that. If-- I mean, Geico-- what the heck is a Geico? It's a government and m-- you know, it woulda gone nowhere, but you ramped up all that ad spending and look at it now. So I mean, you-- really-- it's sort of a -- they owe you, the whole advertising industry.

WARREN BUFFETTI'm-- Joe, I-- am so glad that you remembered that I was the one that came up with the idea of Geico-- the Geico-- I-- the gecko. I mean-- people--

JOE KERNENThat lizard--

WARREN BUFFETT--people at Geico seemed-- people at Geico misremember that entire-- they think it was their idea, and I remember I sketched that little--

JOE KERNENIsn't that the way it is--

WARREN BUFFETT--guy out and said, "Why don't we try the g--" I thought it was crazy--

JOE KERNENThat happens on the show a lot, I know. We don't-- neither one of us get credit where we-- you know, the people forget what we do--

WARREN BUFFETTYeah, I know that. Yeah, well our day'll come--

BECKY QUICKIt's the heavy lifting. Hey-- Warren, let's talk a little bit about what Joe was just talking about. Joe, stay there because I know you wanted to ask about BYD, that might play into this. The trade talks with China. How big of a deal is that? What have you seen on your companies, on your investments?

WARREN BUFFETTWell, I see the monthly reports from the companies come through, and-- a fair number-- you know, not in insurance at all obviously, but-- a fair number of 'em are-- the tariffs have had some impact. Now we're talkin' 10% tariffs-- and they-- a number of 'em say if it get-- if it were 25% there'd be some big adjustments. Some of it the suppliers have swallowed over in China. -- some we split with 'em, but it's-- it pushes prices up. I mean, there's just-- there's no question about that. But it hasn't had a big effect at 10%. A number of 'em told me at 25%, I mean, the world changes. You either get a lot more money for your product, or you source it differently, or you do something.

BECKY QUICKSo are you relieved to hear of the deadline being extended, being pushed off? That March 2 it's not all gonna go to 25%

WARREN BUFFETTWell, I'm relieved at the idea that there's still some chance that sense will prevail. I-- the-- it is bad for China, it's bad for us-- if we get into some kind of a trade war. And---- you know, negotiations are tough and something like this is-- a big deal to both-- both countries. And to some extent you're playing a game of chicken and-- because it hurts both countries. And I generally think when two very smart countries have something very important at stake they'll end up making rational decisions. I mean, I've been figuring that way with the Russians ever since-- you know, the nuclear bomb. The-- even though you get all kinds of tensions and-- people generally figure out what's best for themselves, and the best thing for both China and the United States is to work out something-- sensible that both sides can live with.

BECKY QUICKDid you think there was a valid reason for amping up these negotiations, for saying, "Hey, hey, hang on a second. We're not getting a fair shake?"

WARREN BUFFETTWell, I think we haven't been getting a fair shake to some degree. But I think we can sustain-- I mean, to some extent-- the United States can do things that no other country can do. So-- as I think number of smaller countries, for example, if they wanna run trade surpluses with us, I mean, and the-- and it strengthens their economy, it doesn't hurt us that much. I mean, I think we've got a role to play in the world that way, but I don't think we can be Uncle Sap either.

BECKY QUICKJoe, you have some breaking news?

JOE KERNENYeah, out of-- General Electric-- breaking to a lot of us that-- realize GE had-- this much money-- tied up in biopharma. The company General Electric is selling its biopharma business to Danaher-- kind of interesting-- Danaher for $21.4 billion, and $21 billion of that will be in cash. GE says it's gonna use the proceeds-- to reduce leverage-- strengthen its balance sheet. It expects the deal-- to close during the fourth quarter-- of this year. And it-- there's a lot of-- you know, there's a lot of comments about how-- you know, from Culp about how this-- is in keeping with their plan to-- reduce leverage-- strengthen the balance sheet-- and-- all the other things. The deal-- Danaher meanwhile sees the deal adding $0.45 to $0.50 to adjusted earnings per share in the first full year and-- instead of us talkin' about this-- Becky, me or you, I guess-- we should get Warren's-- comments on what he thinks of this move--

BECKY QUICKLet's do just that. And I do wanna bring up-- this is something, Warren, that we got viewer questions about too, randomly. GE-- control room T102, Brian Savage wrote in, "Mr. Buffett, given the recent turmoil of GE do you believe Larry Culp is the right man for the job? And if you could advise him what would you inform him he should do? Lastly, if he is the guy why haven't you invested in a company like GE given your current funds?"

WARREN BUFFETTYeah. Well, I think he should sell-- the medical operation for $21.4 billion to Danaher. I mean, that sounds-- I-- think that-- that GE should deleverage. No great insights there. I-- they believe the same thing, I'm sure. So-- they just-- they owe-- they owe more money than they should at present, and they should sell assets to some degree, not in a fire sale at all. And this is not a fire sale price. So I-- applaud what they-- what was just announced And-- I met Larry had a terrific record-- at Danaher, at-- and-- you know, we are a big customer of GE, we are a big supplier of GE. You know, I've had some connection with the company for decades, and they did call us in 2008 when they needed money. And-- so-- I think all America's cheering for GE, but I'm certainly one of those that is cheering.

BECKY QUICKHave they called you more recently?

WARREN BUFFETTWell-- I've talked to them off and on over the last year or two, but I've said the same thing, pretty much-- is what I'm saying right here.

BECKY QUICKJoe, you have other questions on this front?

JOE KERNENNot so much-- on that. I got a lotta things obviously that we wanna talk about. And I guess Warren probably does know GE pretty well. I-- does he have-- I'd like a little more color to his comments on GE. He probably doesn't wanna do that. What do you-- what's your expression? What do you say? "You--criticize by-- just generally, but you praise by--"

BECKY QUICK"By category--"

WARREN BUFFETT"Criticize by category, praise by name," yeah. But--

JOE KERNENYeah, yeah, yeah. So I-- guess I can't get you to just slam GE--

WARREN BUFFETT--I-- have not read-- I-- have not read their 10-K--

JOE KERNEN--or Immelt or anything, huh--

WARREN BUFFETTNo, no. No, you'll never get me-- you'll never get me to do that. no--

JOE KERNENWhat a mess though right

WARREN BUFFETTAnd-- -- I haven't seen their 10-K yet. I mean-- I wanna get their 10-K as soon as I can. And-- it may be-- it's probably out just about now. And that's the documents you have to read.

JOE KERNENA lotta stuff, its up about 50% from the lows, I guess--

WARREN BUFFETTAnd givin' you some clues about--

JOE KERNEN--more, huh?

WARREN BUFFETTYeah--

JOE KERNENMore than that, yeah?

WARREN BUFFETTBut it's-- - you know, it's—selling -- the equity's selling for about $100 billion. And-- then they have-- they actually have a preferred issue that's $5 billion or $6 billion. Most people don't even know about that. And then they have-- they had-- you know, something over $100 billion of debt. I'm consolidating GE Capital, but I think that's the way to look at it. And they've got-- they've got a couple of very good businesses. So-- but-- they were-- they were overleveraged and they've gotta reduce the leverage, and-- clearly they're doing it.

JOE KERNENI mean, you could write a check for that--

BECKY QUICKWarren, there's a question that comes in f--

JOE KERNEN--Warren. You could write a check for that, Warren, if you really liked it.

WARREN BUFFETTThat-- that's true.

JOE KERNENIt's true that you could, but you won't be. Okay. I'll-- just-- paraphrase

BECKY QUICKThere's a question that came in from a viewer-- and I ask this because we're talking about GE and it's one of many companies that's looking at unfunded pension liabilities, potentially down the road. This is T54 control room, Brian Bannon writes in, "How do you see the unfunded pension liabilities across the United States affecting our economy over the next ten years?"

WARREN BUFFETTWell, if you're talking about the corporate sector-- the unfunded liabilities have been working their way down because all the new companies don't go for defined benefit plans. So you've got-- you know, if you take the four or five largest companies in the United States they don't-- they don't have defined benefit plans. We have bought a number of older companies. So we have-- we have a fair number of companies with defined benefit plans. We wouldn't start any defined benefit plans. But that-- it's not a huge problem in corporate America. I mean, you have a Sears in the pension benefit guarantee, court gets involved. But-- and there'll be others. But-- - it's way less of a problem than it was ten years ago or 20 years ago. In the public sector, you know, it's a disaster. And-- you know, some of the-- it's interesting to me when they talk about these relocation problems, you know, and New York and Amazon, all that sort of thing, you know-- I-- if I were relocating into some state that had a huge unfunded pension plan I'm walking into liabilities. 'Cause I mean, who knows whether they're gonna get it from the corporate income tax or my employees-- you know, with personal income taxes or what. But that-- that liability isn't gonna-- you can't ship it offshore or anything like that. And those are big numbers, really big numbers. And they may come--you can delay a long time. I mean, they-- you're getting pushed maybe somewhat. But the politicians are the ones that really haven't attacked it in a good many states. And when you see what they would have to do-- I say to myself, "Why do I wanna build a plant there that has to sit there for 30 or 40 years?" 'Cause I'll be here for the life of the pension-- plan-- and they will come after corporations, they'll come after individuals. They-- just-- they're gonna have to raise a lotta money.

BECKY QUICKI mean, when you say that the states that come to mind, having not looked at those statistics in a while, would be Illinois and New Jersey at the top of the list.

WARREN BUFFETTWell, as I say I praise by name and-- criticize by category.

BECKY QUICKWell, let's talk about the decision of Amazon to say, "Forget it," to a second headquarters in New York City. We were with Charlie Munger on that day. This was-- February 14, just-- a week and a half ago. We were with Charlie Munger the day that announcement came out, and Charlie had some pretty-- firm comments on it. He said he thinks it's crazy that states like California and others are basically driving the rich people out. What do you think about it?

WARREN BUFFETTWell, I-- heard Charlie on that, and as he says They-- don't have kids. They don't--" and-- a good many of 'em are charitable, they tend to get the things that are around them. And they don't use the services-- nearly as much relative to their taxes that they pay as the average person. And they-- so they use the hospitals. No, I obviously-- well, a state like Florida which has no income tax attracts a lotta rich people, you know? And--- in Texas-- you know, when people - relocate there, the fact that-- that-- there's no income tax-- is a real factor. And-- I don't know about those two states specifically, but I have a feeling that their retirement plans are in pretty good shape compared to the old industrial states. You get legacy liabilities when you move in. Nebraska's in very good shape-- that-- for a long time-- that we've really been against the state having any debt. Now we're all about leasing some.

BECKY QUICKWell-- you-- what we're talking about is state versus state. You're now talking about some new taxation plans that are being-- recommended in Congress, or by specific senators or congressmen-- that are similar to some of those policies that we've seen in the states. I mean, if you just run through it-- Elizabeth Warren with her wealth tax, and anybody over $50 million. AOC, Alexandria Ocasio-Cortez, with her plan to tax anything above $10 million at 70% rate. Bernie Sanders with his estate tax going up to 77%. If those policies are enacted on a national basis do you see that same sort of trading off where people would potentially leave the United States? What do you think about these plans?

WARREN BUFFETTWell, that's an interesting question. I would say this: If tomorrow everybody in the world had a chance to make a one-time change in where they lived, two billion families all over the world, only time they're gonna get the chance to make the change, but they will get transported free to any country they wanna go their family, and have citizenship. What do you think's gonna happen tomorrow?

BECKY QUICKA lot of people coming to the United States.

WARREN BUFFETTA lot of people are going to come to the United States. Very few people are going to leave. North Korea might have a small decrease in population. I mean, the point is, I mean, this is an incredible country. And it's true that right now we're raising $3.3 trillion and spending probably $4.3. We're about to have a debt – a deficit of about $1 trillion in a very good year in the cycle. I mean, year of prosperity, and that's 5% of GDP, and that's probably more than – you could actually take a 2% to 3% deficit and not have the ratio of debt to GDP growth. Five in prosper shares, we're out of whack on that. So we, you know, you can cut spending, you can raise taxes. But I would say that the wealthy are definitely undertaxed relative to the general population.

BECKY QUICKBut your answer to that – that was almost a dodge of the question. I mean, if these policies drive out the wealthy people, sure. If you got your choice of where to go, everybody would want to come to the United States. But would the wealthy people do that if we changed our tax structure?

WARREN BUFFETTWell, I think most of the people that have – the rich people, Mark Rich being one of them. I mean, they leave because they – in this case, I mean, he's leaving before the feds pick him up. And I don't think if you offered most of the rich people – if they were sane anyway – and you said "If you stay we're going to take half your net worth, and if you leave, you can take it all with you," and you're 88 years old like me, am I going to leave the United States? You know, I could move – South Dakota has no state income tax, Wyoming has no state income – so we've got two states that border Nebraska. Nebraska has a 7 and a fraction percent state income tax. If Iowa, which is right across the river, had no income – I wouldn't move. I mean, now, I think people want to come here. I think if you made that offer I made the United States, there'd be more people come to the United States than anyplace else. And they would come if the deficit was $1 trillion or $1.2 trillion. I mean, this is the land of opportunity.

BECKY QUICKBut do you think they're good policies? Do you think they're good tax policies?

JOE KERNENWarren, you're making a decision to leave all your money to the private sector in terms of charities. And because you think – I assume you think – maybe it'd be better spent there than by the government. Isn't it possible that it's just not the right idea to just – what's already a bloated, you know, what some people would think, a bloated entity – address the spending side of things. Or else maybe you ought to reconsider if you think the government is so good at spending money, why leave it all in the private sector? Go ahead and give it all to the government and let them do it. You seem to have an idea that it's better treated if you do it philanthropically.

WARREN BUFFETTI've got about four choices, Joe. I mean, let's say I have $80 billion. A) I could spend it all, you know? But even to spend it all, I would have to sell Berkshire stock. So I would incur taxes of, you know, $20 billion or so in spending. So the government would then get 20 if I wanted to spend it all I could – I don't know what in the world I'd spend it on. I can give it all to my wife and then there's no tax. I could give four million people $20,000 each and there'd be no – well, there'd be no tax on it as long as I give make gifts to separate people up to $20,000 I can do it, and there's no tax. One thing you could do, the estate tax is the wealth tax. I mean, in theory you get taxed on wealth on the estate. Now, you're allowed to give to charity 50% cash, 30% appreciated stocks and have it deductible from your income. They let you essentially deduct all the gifts of wealth at death. So you could have a limitation that you could only give 50% to philanthropy and treat it the same way actually as if you're giving away from income during your life. There's a lot of things you can do with the tax law. I mean, the tax – and I think that one way or another, when the forms for a hundred have gone from $93 billion to $2.7 trillion since 1982, the market system, as it gets more specialized, will give more and more to the top people. If we were back in 1800 and we were all working on farms, you'd probably be worth a little more than I am because you'd work harder and be stronger. But the top person working on a farm would be worth one and a half to maybe two times what the bottom person was. But as we get more and more specialized, the guy that's the best in knocking out some other guy that weighs 200 pounds is, you know, is worth $30 million a fight. Now, he's worth $30 million a fight because somebody invented television and Cablevision. As we get more specialized, the rich will get even richer. And the question is: how do you take care of the guy who's a wonderful citizen and father, you know, may have died at Normandy or something, but he just doesn't have market skills? And I think the earned income tax credit's the best way to address that question. And that means probably some more taxes – it should mean some more taxes for guys like me, and however you come at it I'm fine with.

BECKY QUICKOkay. We'll continue this conversation. Obviously inequality's a big issue and it's something that's already roiling politics in Washington at this point.

WARREN BUFFETTYeah.

BECKY QUICKWe can talk more about that in just a little bit, but Joe, we'll send it back to you because I think we need to take a break, too.

JOE KERNENWe do. All right, coming up thanks, Becky. A recap of this morning's market headlines, including GE's deal with Danaher. It's a big one. Plus much more from Warren Buffett. Stay tuned, you're watching "Squawk Box" on CNBC. Breaking news out of GE, which we told you about earlier. The company's selling its biopharma business to Danaher for $21.4 billion, $21 billion of that in cash. GE says it's going to use the proceeds to reduce leverage and strengthen its balance sheet. Expects the deal to close during the fourth quarter of this year. There you can see Danaher is sharply higher on the news as well. On adjusted earnings it will add to Danaher's results, $0.45 to $0.50 in the first full year, although on a reported basis it will cut EPS by $1.15 to $1.20. GE will still have a go forward health care business of $17 billion-- because some of the-- the health care portfolio of GE isn't going. Pharmaceutical Diagnostics will remain-- with-- with GE. Danaher's going to borrow some-- issue some debt, use cash on hand-- to make-- the acquisition, which-- is part of Culp's—strategy to reduce debt, strengthen the balance sheet, and reduce the leverage of General Electric, which is now up almost 12% on the news. And remember, it was down, I think it broke under 7 briefly in its most recent tough sliding that we saw at the end of last year. But-- so if you base-- 7% as the low you're all the way back to almost 12%. So big move if you were able to buy GE right at the lows. In a major deal-- in the drug sector, Roche is buying Spark Therapeutics for $4.3 billion, about 140-- $114 a share for Spark. That was 122% premium, the Friday closing price. Spark working on treatment for hemophilia and Huntington's Disease. Already has one drug on the market to-- treat a rare genetic condition-- that causes blindness. When we return much more from Warren Buffett and Becky Quick in Omaha. We will be right back after a quick break.

BECKY QUICKWelcome back to a special edition of Squawk Box. We are live with Warren Buffett, the chairman and CEO of Berkshire Hathaway in Omaha, Nebraska. And Warren, thanks again for your time this morning. We've talked about a lot of things so far, but we have not gotten your take on the economy to this point. There was just a Federal Reserve report out on Friday that suggested that GDP for 2018 is probably going to come in slightly below 3%. What do you think the economy is doing right now, just based on your businesses, based on the receipts you see, the companies that you track that you have major purch-- major shares in?

WARREN BUFFETTRight now-- just based on the monthly statements I get, and some cases I get other data in between, but, overall things are a little better. I mean, the rate of-- the rate of improvement has tapered, but it certainly hasn't flattened. Now, that could change next month. And—and home construction, has been disappointing. But most of our businesses-- I've seen other figures on retail that are strong and-- you know, including Walmart's. But I would say our retail figures in January were not strong. But January's a peculiar month. That can be affected a lot by weather, although any retailer will always blame things on the weather. I-- no, right now things look fine.

BECKY QUICKWhen you say it's-- it's a little better that's relative to when? What's your comparison period?

WARREN BUFFETTWell, I'm-- I'm saying that if it developed as I see in January and February for the whole year, I think we would probably beat our $24.8 billion, but that would depend on insurance profits because it could swing either way, they are--

BECKY QUICKOf your operating profit that you just reported?

WARREN BUFFETTThe operating, yeah. Yeah. So -- business looks-- looks decent. It's not galloping ahead, and the tariffs having a little effect at 10%. If they went to 25% they would change things quite a bit. And I do see some more inflationary things. But, no, I don't see anything to be alarmed about at present. But incidentally--

BECKY QUICKWhat inflationary signals --

WARREN BUFFETT--if you told me GDP would be down this year we'd still be doing the same things, pretty much.

BECKY QUICKWhat inflationary signs do you see at this point?

WARREN BUFFETTWell, we just-- as I get the reports from the companies they say, 'These raw material costs are going up.' And, now oil being down helps us. I mean, that's the basis for a lot of raw material costs. But overall, there's more cost pressure.

BECKY QUICKYou mentioned that housing has been weaker. Home building, that you've seen that.

WARREN BUFFETTHome building.

BECKY QUICKWhy do you think that is?

WARREN BUFFETTIt's puzzling because, you know, before 2008, you know, we were running higher-- well-- I mean, the one obvious answer-- you expect-- you expect household formations to go way down in a recession, and we had a bad one. But, you had this big trend-- from home ownership to renting so that, you know, that's probably changed by five percentage points. Well, five percentage points, when you talk about 125 million households, or six million houses are people that are living in rental units rather than houses. So that configuration has really changed. And I would've thought it would've turned back as people got the jobs back and all of that. But-- single family construction is really-- I think it's been quite weak compared to what you would expect after ten years of recovery and with the stock market, you know, quadrupling from the lows and unemployment at 3.7%. People are just making different choices.

BECKY QUICKJay Powell, the Chairman of the Federal Reserve, is set to testify before Congress on Tuesday and Wednesday of this week. Based on what you've said about the weakness in housing, based on some of the downturn that you saw, did you think he made the right move by signaling a much more dovish take last quarter?

WARREN BUFFETTYeah. I don't second-guess him at all. I think he's a terrific choice for Federal Reserve Chairman. He actually was at the Treasury in 1991 when Solomon was in trouble, and I saw him make a lotta very good decisions for the United States government. He is a smart man and he's-- he's very levelheaded, and he-- but he understands both business and economics, and I don't think you could have a better chairman. So-- I will never second-guess him.

BECKY QUICKI know you don't make a lot of investing decisions based on what the Federal Reserve chief or anybody else is saying, but what would you be interested in hearing from him this week? What-- what might-- what might you be listening for?

WARREN BUFFETTWell, I read what he says but it doesn't affect anything we do. It just doesn't. I mean, it doesn't affect it in investments or in, you know, the amount of money we're going to spend on the railroad this year, in energy or anything. We're plowing ahead always. We always spend more than our appreciation. And we know the country is going to make lots of progress over time and we don't think we're smart enough to jump in and out as to when the time is.

BECKY QUICKA couple of questions that came in from viewers when it comes to the economy. One is-- T19 control room, Rashad Khan asking: "Do you think the ten-year yields are likely to rise from current levels in the long-run?" I don't know what the long-run is.

WARREN BUFFETTYeah. Well, I'm amazed that ten years into a recovery, or nine years into the recovery, ten years from the panic-- I'm amazed that rates worldwide are what they are. This is not classical economics to have trillions and trillions of dollars still at negative interest rates with the world doing really very, very well. I don't know-- you know, I don't understand it. I don't think the economists really understand it. I mean-- they got to explain it somehow. But the real question for stock investors are-- are these rates more or less a new normal? And people who thought the Japanese rates in 1990 couldn't possibly stay where they were, you know, that turned out to be suicide for the people that shorted Japanese bonds and so on. We live in a world that wasn't described in classical economics.

BECKY QUICKDo you think it's because of the experimentation) by central banks around the globe?

WARREN BUFFETTWell, I think the central banks did what they had to do after 2008 and 2009. In fact, I think Europe was a little late doing it. But when Draghi finally said, 'We'll do whatever it takes,' the only one that can say that is central banks. And I think central banks behaved very well post the recession.

BECKY QUICKYou've mentioned twice this morning how we could potentially be in a situation like Japan where these interest rates stay at these incredibly low levels. Will it work out better for us than it has for Japan?

WARREN BUFFETTWell, the answer is I just don't know. But Japan also has a declining population and no energy resources. And, we're a different case than Japan.

BECKY QUICKWe're here at the Nebraska Furniture Mart today. And I know that you've talked a little bit before we came on the show this morning just about Rose Blumkin, who founded the Nebraska Furniture Mart. You bring up immigration so I thought maybe now would be a good time to talk about that. She came here from in 1917.

WARREN BUFFETTYeah. She came over here on a boat from Yokohama and she landed in Seattle. And I've got the manifest of the boat in here, and I've got her entry papers. And she-- and-- she couldn't speak a word of English. The Red Cross got her to Fort Dodge, Iowa, where her husband was. She spent two years there, couldn't pick up the language there. So they decided to come to Omaha where there were some Russian Jews and they would feel at least they had-- a home of sorts. And she sold used clothing and did various things, had four children. And 15 or so years later she'd saved $2,500, and you're in what was-- became the largest home furnishing store in the country, except we now have a larger one in Texas. But in the 50-somethingth largest market she took $2,500 and turned it into the largest home furnishing store. And the punchline is that she couldn't read or write. And I've got a contract here that we signed. This is what I came out with. I typed this up in 1983, August 30--

BECKY QUICKIs that two pages?

WARREN BUFFETTYeah, it's-- it's really just one page. I mean, this is a signature page here. And that's her signature at the top, and as you can see it's just a scrawl. And we did not get an audit, we did not look at the property records to see-- I just said, "Mrs. B, do you owe any money?" And she says, "No." And that was it. You know, and we--

BECKY QUICKHow much did you pay?

WARREN BUFFETTWell, at that time we bought-- we rearranged things within the family some. So we in effect bought 80% at a value of $60 million-- on 100% basis. But we had-- but we just-- we shook hands and-- I felt like I had the Bank of England on the other side. And then she went on to work until she was 103. If any of my managers are out there listening that's sort of a yardstick we use now on retirement. And was a marvelous, marvelous woman. And when-- never went to school a day in her life. And when the family sat down for dinner they sang God Bless America before eating. Yeah. It-- you know, it's an incredible story.

BECKY QUICKWarren, in the annual letter this year you write about the American tailwind. What--

WARREN BUFFETTWell, as I pointed out in there, I-- on this March 11 in a couple weeks it'll be 77 years since I bought my first stock, and I paid $114.75 for three shares of Cities Service Preferred. But if you had bought-- if you'd been a pension fund and you put $1 million into the S&P 500 at that time and reinvested it during my investing lifetime, that-- that $1 million would've turned into $5.3 billion. You would've gotten-- for every dollar you put in you've gotten over $5,000 without ever reading a headline, an annual report. You didn't have to know accounting, you just had to believe in America. And you didn't have to pick the right stock, you just picked America. And if that isn't a tailwind-- it's more like a hurricane. I mean, it is-- American business has done incredibly well, and America's done incredibly well. And-- you know, I go back and I point out that there were two 77-year periods before that, and that takes us back to George Washington getting inaugurated. And there wasn't anything here then. And now you have $108 trillion of household wealth in the United States. You know, we've got something that works, and that framework-- wasn't that we were working harder, wasn't that we were smarter, but we had a framework that unleashed human potential. And just think of that, three 77-year periods, one of which I experienced. And you couldn't help but-- all you had to do was believe in America and-- you got very, very-- we didn't have to read the newspapers-- nothing. You didn't have to pick a stock.

BECKY QUICKThat worked the last 77 years, but there's a question that came in, T29. This is from Scott Baker. "With so many people in the S&P index funds is it still market neutral and the best investment vehicle for most people?"

WARREN BUFFETTYeah, I think it's the best investment-- because most people don't know how to pick stocks. And-- most of the time I don't know how to pick stocks. I mean, it's-- it is not an easy game. And by definition people are going to do average. I mean, if you take everybody in aggregate, and if half of 'em are paying big fees and jumping around and paying brokerage commissions, the other half have to do better. And-- no, it is-- as I've told people in-- and my widow will I've instructed-- the trustee to put 90% in an S&P 500 index fund and 10% in governments, just so that-- just for a feeling of security. But-- there's been no better bet than America. There's been nothing like it.

BECKY QUICKThere's one question that came in from-- this is F20, Ahmad Abu Rasheed, who said, "Would a strong and sustained shift to the left in fiscal and economic policy rip away at American business tailwinds moving forward?"

WARREN BUFFETTYeah, well, my dad thought, you know, communism was coming in the '30s and, you know, he was very anti Roosevelt. All my life I've been hearing half the country say that the other-- the person favored by the other half wins, things are gonna go to hell. And so I pointed out in my discussion, I've lived under 15 presidents; 14 of 'em I've invested under. I didn't invest under Hoover, I was a little young then. But seven were Republicans, seven were Democrats. I mean, it-- after this last election in-- in 2016 my-- most of my friends were for Hillary and they thought, "You know, sell stocks. You know, dig a cave, do whatever it might be." And I told 'em they're crazy. You know, it-- you do not wanna have a political view in investing. And most people put it through a political prism, they just can't keep their politics out of it. They can keep their religion out of it but politics, they just have to look through those glasses. And if you d-- if you've done that, if you've been a staunch Republican or a staunch Democrat through these 77 years you'd a missed out on a lotta the party.

BECKY QUICKWhat about now when the parties are-- kind of in flux? Donald Trump was not a typical Republican, and Bernie Sanders now looks like he's leading the way in some of these polls, he wasn't even a Democrat until recently. He's a socialist his whole life who just caucused with the Democrats.

WARREN BUFFETTWell, he was-- interesting candidate in 2016 because I would-- you know, he came close, and I would say that 90% of the people who voted him hadn't heard of him two years earlier. That's really unusual. It's given hope to a whole lot of other people who are entering this time. When you look at what Sanders did, when you look at what Trump did-- a lotta people look in the mirror now and say, "Wow, you know, that could be me." So Sanders, the big appeal I think he had was he came-- he had unusual authenticity. I mean, they all wanna seem authentic, and they are authentic in a certain way. But they do move around as the polls come in and their advisors come in. You had the feeling when you listened to Bernie that he was saying exactly what he believed. You can agree with him or not, but that's a very appealing--characteristic in a candidate. It may not be enough to carry anybody to victory, but it is an-- it makes people notice you. They-- really do know, to some extent, whether you believe what you're saying when you're out there on the stump. And-- Bernie really-- he really did hate billionaires and the campaign financing. I mean, he was talking authentically, and he's still talking authentic-- I- mean, I'll absolutely give him that.

BECKY QUICKDo you agree with his policies, or his proposed policies--

WARREN BUFFETTWell, I agree with certain things that make him mad. I don't like the campaign finance laws, and I also think that the inequality gap has widened and will continue to widen-- unless something is done about it. But I also believe that the most-- important single thing is to have more golden eggs to distribute around-- so I don't wanna do anything to the goose that lays the golden eggs. And we've had the goose that lays more and more golden eggs over the years, unbelievable in this country. So we've got something that works in terms of the market system, in terms of turning out lots of goods and services people want. The question is, what happens to the person who's a decent citizen, doesn't have market skills? And we can solve that. A rich family can handle if they've got six children and one of 'em isn't as good in the market, is just good in every other personal quality. They take care of him. And we've got $60,000 of GDP per capita in the United States. That's six times what it was when I was born in real terms. So we can take care of people and we should. But we shouldn't screw up the market system.

BECKY QUICKWell-- Bernie looks mild compared to some of the candidates who are running to the left of him.

WARREN BUFFETTWell, that's-- have people seen it or-- I would work for him.

BECKY QUICKThere-- there's somebody who wrote in-- this is T13, Ted Waller. This is probably based off a play, off of-- some conversations we've had with Jamie Dimon. But he says, "Do you still consider yourself a Democrat?" If you look at--

WARREN BUFFETTI'm not a card-carrying Democrat, but I never have been. I've voted for a fair number of Republicans, I've given money to Republicans. I-- am not-- Bob Strauss called me one time because he wanted me to handle finances in Nebraska. He said, his first question, "Warren, are you a card-carrying Democrat?" I said, "No, I'm not, Bob." I-- mean, I don't think either side has an edge in virtue or anything of the sort. I mean, I think that they have different views on things and I think that-- that by the time they get in politics they sorta stake out their positions, although they move 'em in a period like this when they think it may help to be further left. You see people that-- that sort of-- had a new vision all of a sudden-- because they saw how it worked for Bernie. But no, I will vote for more Democrats than in the last 30 years I've voted for more Democrats than I've voted for Republicans. I was president of the Young Republican in 1948 at the University of Pennsylvania. I ran for delegate to the Republican National Convention in 1960. The only office I've ever run for.

BECKY QUICKWhen we were just out with Charlie Munger he said he didn't think much of too many politicians, but he did like what Mike Bloomberg did in the city of New York. What do you think about Bloomberg as a potential candidate, and what do you think about Howard Schultz potentially running as a third-party candidate?

WARREN BUFFETTWell, I-- won't answer you on most questions, but I'll answer you on political-- I would-- if-- Mike Bloomberg announced tomorrow that he was a candidate-- I would say I'm for him. And-- I think he would be-- I think he would be-- a very good president. And-- I mean, he and I disagree on some things, but I think that-- he knows how to run things, I think that he's got the right goals for America, he understands people, he understands the market system, and he understands the problems of people that don't-- that fall into the markets. And I-- he-- you know, I-- would have no trouble-- being for him. I-- Howard Schultz-- if he-- well, he-- well, he says he's gonna run as an Independent. And if he ran as an Independent he-- I think he would take votes away from any Democrat, including-- Bloomberg if he were running. So I think it would be-- a real mistake for him to run. And that-- I-- think generally third-party candidates, they're gonna hurt one side or the other. And they're more likely to hurt the side that they actually favor because they're closer to that view, and so they pull more people away that--- would otherwise, you know, go to the second-best with that view. So I-- hope no third-party candidate runs that pulls any significant amount of votes. I mean, there'll always be-- a couple people that file. But I think the third-party candidates are-- can thwart actually the will of the people.

BECKY QUICKAll right, we're up against the top of the hour. When we come back, though, we will have Warren Buffett answering more of your questions. We're also gonna get through a lotta the changes in the Berkshire Hathaway equity portfolio. A lot of changes that were just announced and we'll talk through some of those too. In the meantime, take a look at the futures this morning. Things are up across the board. Dow futures up by about 137 points after it looks like the tariff deadline is put off. S&P futures up by about 12, the NASDAQ up by 41. And we will be right back with this special edition of Squawk Box. All right, let's get back to our special guest, Berkshire Hathaway chairman and CEO Warren Buffet, who's sitting down with us after just coming out with his annual letter to shareholders and, last week, just filing the 13F that showed what positions you've been moving around in the stock market as of December 31st. And Warren, there were a lot of questions that were raised by that. And I just want to run through some of the holdings, some of the changes, that were registered and get your take on why. First off, Apple. You trimmed 3 million shares to 249.5 million shares of Apple. And that caught a lot of people by surprise. They were wondering if you were selling.

WARREN BUFFETTNo. The one other fellow in the office, one of the two, had about 6 million or 7 million shares. He had it before I did. And he works with a limited amount of money, $13 billion, roughly. So if he wants to buy something, he needs to sell something. I want to buy something, I've got cash around to do it. So he sold about 3 million shares, I believe, cut it in half, roughly, to buy something else. And I didn't. I've never sold a share.

BECKY QUICKSo this was not even a conversation you had with him, I take it. This is either Todd or Ted, you're not going to say who.

WARREN BUFFETTIt's his business. It's his business, yeah. I mean, they do not check with me. I sometimes order at the end – well, I do. At the end of the month, I look and see how their portfolio compares to the month before and see what they've done.

BECKY QUICKThis generated a lot of questions from viewers, and let's go to one, T14. Jedi Markets wrote in, "If you loved it," meaning Apple, "undervalued at $200-plus and a $1 trillion valuation, why would you sell any this past quarter?" You've answered it already. You didn't sell it.

WARREN BUFFETTYeah. And incidentally, I've never paid $200 for any stock in Apple, anyway.

BECKY QUICKWhat'd you start buying, at $160 or something? Was that—

WARREN BUFFETTWell, no, I think—

BECKY QUICKOr average, the average—

WARREN BUFFETTThe average cost is about $141 or something like that.

BECKY QUICKOkay. There was a question that also came in from Rick Saffaraz. This is T90. He said, "Do you plan on adding to your Apple position throughout 2019?" And I just want to also bring up a tweet from Jim Cramer. He tweeted, back on February 5th, "Doesn't Apple trade like Berkshire is back buying?" I spoke with Cramer about it. And he said, "Look. I don't know anything. It's just, all of a sudden, the stock's really picking up. It's almost as if…" So are you interested at lower levels?

WARREN BUFFETTLook, I'm always interested in lower levels in a number of stocks we own. There's some where we really can't go over 10%. And generally, I don't like to go over 10%. Because it complicates life quite a bit. With banks, it actually throws us into the bank holding company you know. There are stocks that I would buy that we own nine-and-a-fraction percent, and I actually may be selling a little bit, because they're repurchasing their shares. And I don't want to drift over 10%. But Apple I don't see myself selling. Every – the lower it goes, the better I like it, obviously.

BECKY QUICKI mean Apple is not one of those 10% stocks. Don't you own about 5% of the shares?

WARREN BUFFETTAbout 5%.

BECKY QUICKSo is this a situation where you have been buying, since it became so much lower at the end of December?

WARREN BUFFETTIt's been back to where – it may have briefly, very briefly, got there. But if it were cheaper, we'd be buying it. We aren't buying it.

BECKY QUICKThere was another question that came in. This is T91, from Umar Zubair, who said, "Apple decelerated share repurchases from around $20 billion in the third quarter to around $8 billion in the fourth quarter, just when the stock price went down by about 30%. In fact, Apple repurchased zero shares in December of 2018, when the stock hit a 52-week low. What are your thoughts on Apple's repurchase deceleration?"

WARREN BUFFETTWell, Apple has said, publically, that their – and they've repeated it – that their goal is to reach what they call a cash-neutral position, where their debt is roughly equal to the cash. I think that would take $130 billion or so to get there. But of course, they could make some acquisitions. On the other hand, they're earning a lot more than their dividends. So that number goes up. Mentally, I say to myself, we're very likely – and a lot of things could change this with them. And the lower the price goes, the better it gets. But they should be at 4 billion shares, probably, in maybe three years. And so our five percent would become something over six percent at that point. And I like that prospect. And then we might buy some ourselves. Who knows? It depends on the price. But they will buy a lot more stock, if it's cheaper than if it's higher. And you know, it's just simple math. We're better off, if, in the next three years, Apple is cheaper.

BECKY QUICKYou loaded up on financials in the fourth quarter. You added to your stake some JP Morgan, Bank of America, Bank of New York, PNC, and U.S. Bancorp. And six of your top-ten holdings, I believe, are banks, at this point. Why so much emphasis on the financials?

WARREN BUFFETTThey're very good investments at sensible prices, based on my thinking. And they're cheaper than other businesses that are also good businesses by some margin. And a couple of those we own nine-and-a-fraction percent of. And I don't like to go to 9.9%. Because that means the next quarter, maybe, I have to sell some. So I—

BECKY QUICKBecause they buy back.

WARREN BUFFETTI try to leave myself a year, two years of repurchases. But Bank of America's been particularly aggressive on buying in stock. Brian Moynihan has done such a good job running that company, since he took over. I mean, he was the most-underestimated bank executive in the country. And he is everything he said he would do. He's done it, and he's beat it. And he sets tougher targets all the time for himself. And he's been smart about repurchasing shares.

BECKY QUICKJP Morgan is a relatively new stake. You had 35 million in the third quarter and that was a new stake. You raised it to 50 million – or 50.1 million shares, I should say, in the fourth quarter. Is that your purchase?

WARREN BUFFETTYeah.

BECKY QUICKBecause for a long time, you held it in your own portfolio. Why now?

WARREN BUFFETTI've still got a little bit. But that goes back years and years and years, yeah.

BECKY QUICKSo why JP Morgan now?

WARREN BUFFETTWell, the better question is, why we were so dumb about not buying it earlier? And the answer, I was dumb not buying it earlier. But it's a very well-managed bank. And banks are – you can find a bank like JP Morgan and Ernst, maybe 15%, maybe 17%, even, on net tangible equity. A business that earns 15% or 16% or 17% on net tangible equity, that's incredible in a world of 3% bonds. I mean, just imagine that you had a deposit account with JP Morgan that they made a mistake and they gave you 15% on it. And they couldn't redeem it. What would you sell that account for? You wouldn't sell it for 100 cents on the dollar. You wouldn't sell it for 200 cents on the dollar. You wouldn't even sell it for 300 cents on the dollar. You have an FDIC-guaranteed instrument that would now be at 300 cents on the dollar. If it was 15% on equity, you'd be earning 5% on it, which is way better than treasuries. Now, if on top of that, your deposit allows you to let your interest compound to some extent, now, that instrument becomes even worth way more. Because if you have an instrument that could compound at 15% for ten years and use the added capital, that's worth way more than three times tangible equity at current interest rates, way more. So you know, a lot of things can happen that change that equation around. And the banks, like all other American – almost all other American business – got a big plus last year with the new tax bill. I mean, corporations benefitted a lot, including Berkshire, and including the banks. That can be taken away, you know? So but on the other hand, the FDIC, now, has gotten a reply. There were special FDIC charges on the big banks. They ended here, recently. Because the FDIC has $100 billion in it now. That money has all come from the banks. The U.S. government has not put any money in the FDIC. People think that you know, that somehow, the FDIC is financed by the government. It's guaranteed by the government. But the FDIC was started in, I think, January 1, 1934. And I think, one time, it borrowed temporarily. But it doesn't have a dime of government money in it. That money – and now, they've got $100 billion in there. And the banks are much better off. Because that fund takes care of the bank here and there that goes broke. Incidentally, last year, was no bank in the United States, no FDIC bank, went broke. That's the first time in a long time.

BECKY QUICKLet me slip in one more question, before we take a break. Oracle. That was a stake that you suddenly popped up in the third quarter, that Berkshire had $2.1 million – $2.1 billion of Oracle shares at the end of the third quarter. It went to zero at the end of the fourth quarter, which it's really unusual to see a technology company creep into the Berkshire holdings like that. And it's even more unusual to see it flushed out so quickly. Was that you?

WARREN BUFFETTYeah. And Larry Ellison's done a fantastic job with Oracle. I mean I've followed it from the standpoint of reading about it. But I felt like I didn't understand the business. Then, after I started buying it, I felt I still didn't understand the business. I actually changed my mind in terms of understanding and not in terms of evaluating it. I think, I mean, Oracle is a great business. But I don't think, particularly after my experience with IBM, I don't think I understand exactly where the cloud is going. You know, I've been amazed at what Amazon has done there. And now Microsoft is doing it as well. So I don't know where that game is going.

BECKY QUICKThat leads us to F4, which is a question from a viewer named Mark Hall, who said, "With IBM bouncing back, how do you feel about getting out?"

WARREN BUFFETTI'm glad – we got out at a lot higher prices than this.

BECKY QUICKAnd then finally –

WARREN BUFFETTBut I'm not knocking what they're – you know? But the whole market's come back. And the market's at a high. And that doesn't mean – I don't mean it's at a high, and then it's going down, subsequently. I mean that it's just higher than it's been you know, for well, really, ever. I mean, when we met here ten years ago, the Dow – the S&P was at 666 and within a day or two of when we got together. And you know, and people thought America was washed up. And you know, they were afraid of America. And what's happened? Quadruple in ten years. How many quadruples do you get in your life?

BECKY QUICKRight. Okay, we're going to take a quick break right now. Joe, we'll send it over to you.

JOE KERNENAll right. Thank you. Coming up much more from the oracle, Warren Buffet and this big ass Warren Buffet show we got. As we head to break, though, here's President Trump, tweeting this morning, "Oil prices getting too high. OPEC, please relax. Take it easy. The world cannot take a price hike. Fragile!" He also tweeted about Spike Lee, believe it or not and some Spike's comments yesterday. Checking crude prices, we're going to see a 2.5% drop this morning. That's pretty funny, pretty interesting, after the president tweeted. Anyway, down 2.5% on WTI. "Squawk Box" will be right back. Welcome back to Squawk Box. Futures continue to trade up triple digits, 140 now on the Dow Jones. The S&P will be back above 2,800, if it were to close where it is right now. Indicated premarket up 12. NASDAQ indicated up 41. Coming up, we have much more from our special guest, Warren Buffett. We'll talk about some of Berkshire's biggest holdings right after the break, so don't go anywhere. We'll be right back.

BECKY QUICKWelcome back, everybody. We have a special guest today, Berkshire Hathaway Chairman and CEO Warren Buffett. We've spent a lot of time this morning talking about the annual report, the economy, the markets, some of the individual stocks that you've been buying and selling. But Warren, what we haven't spent much time talking about, and we've mentioned it briefly, was just this idea of what happened with Amazon and looking for a second headquarters-- in choosing New York, initially, and then saying, 'Forget about it,' once they saw the backlash that came up. You're a company that has never really shopped around for deals like that. What do you think of companies that do get special deals from states?

JOE KERNENWell, I have actually helped Nebraska a few times, when the governor or somebody's asked me to call a company. And everybody does it. I mean, say-- it-- it's just -- I mean, it is a competitive game, on locations. But it-- it can be a little irritating, in a sense, when you're already here, and you're employing thousands of people, and they want to give special incentives to somebody who is and-- and which they haven't give you-- to be -- and in some cases, to be your competitor. I mean, it-- you know, Amazon's going to compete plenty in New York, regardless. But I mean, Amazon's-- it's going to affect, negatively, the business of many, many, many companies in every state, including New York. As Jeff Bezos says, you know, 'Your gross margin is my opportunity.'

BECKY QUICKDoes that mean you think New York was right to turn down the deal or kind of second guess the deal that they had originally--

JOE KERNENYeah. Well, that-- that's what happened, is they—they both got to the altar, you know? And then the dowry was changed, in a sense. I don't know all the details. But and you're-- you're in a tough position, if you're a company negotiating with public officials. Because the public officials really can't, necessarily, be the last say, whereas, the company, if the CEO says that you got a deal, you've got a deal. And on the public side-- you know, there's a city council that has to ratify, a mayor, or something of the sort. So it's unequal that way. Now, our experience in New York and Buffalo has been t-- fantastic. I mean, Geico went there. We got 3,000 people, and the community's help, and Governor Cuomo's help. I mean, just generally, it's been very, very, very good for us. But I think, if you're going to have a bad marriage-- it's better to find out before -- before they pronounce you man and wife than after. You still-- they're both hurt a little bit by the fact that it went there. I mean, the-- it makes think-- people think twice about doing a deal, where the community may get upset about you for one way or another, or that the politicians can't deliver on it. And it-- from Amazon's standpoint, I mean, they-- it hurts them a little, too, not-- not in a great, big way for either one. But it's no plus to have things fall apart. So you really, as much as possible, you want to have that sort of thing sealed before. But you need labor unions. You need political figures. I mean, a lot of things can tank it on the public side.

BECKY QUICKYou know Jeff Bezos-- very well. In fact, you're working with he-- with him and with Jamie Dimon on this healthcare initiative between the three companies. Can you give us an update on where things stand right now?

JOE KERNENWell, we've got a terrific fellow, Atul Gawande-- running it. It is a long, long-term-- process. And-- and when we get through, we have to not only have-- a better medical service, and I think we've got a lot of great things about our medical system. But it is costing us now, 18% of GDP, up from 5%. And it is a tapeworm. And if any other cost in America had gone from 5% to 18%-- federal taxes have stayed quite constant around 18% for 40 or 50 years. Same time, medical's gone from 5% to 18%. Now, a little double counting there, because Medicare's in it. But-- so we've got to stop the cost situation. But what we're hoping to find is something that will not only do a better job for our employees, but have them feel better about it and stop the ascending rate. Because, you know, every point you chew up of GDP comes out of something-- comes from somebody else. I mean, there are only 100 cents in the dollar. But it's a very long-term. I mean, it's-- and-- and we'll get something done. The probability is, you know, I mean, it-- we're-- we're trying to change a $3.3 billion indus-- $3.3 trillion industry, I'm sorry, that really, for the people participating in it, they feel pretty good about it. I mean, the-- the people getting the $3.4 trillion. The hospitals are not happy. The PVMs are not happy. The drug I mean, they-- you know, they may complain a little. But the people that are getting the $3.4 trillion are not screaming, 'Change, change, change!'

BECKY QUICKRight. We will have more of our conversation with Warren Buffett. Still have a half hour to go in this show. When we come back, we're going to talk a little bit more about his thoughts on Kraft Heinz and his partnership with 3G. Right now, though, as we had to a break, take a look at the U.S. equity futures. This morning, things have been up across the board. Right now, it looks like the Dow futures are indicated up by about 142 points above fair value. S&P futures up by 12. The NASDAQ, up by 41. Special edition of Squawk Box back after a quick break.

JOE KERNENWelcome back to Squawk Box on CNBC. Live from the Nasdaq MarketSite in Times Square. In case you missed it earlier, GE is selling its biopharma business to Danaher for $21.4 billion. The majority of that, in fact, $21 billion, in cash. GE says it will use the proceeds to reduce leverage and strengthen its balance sheet. Expects the deal to close during the fourth quarter of this year. Both companies have-- the shares in both-- benefitting nicely from the announcement, with GE up 15%. It's been a long time since we've seen that, almost back to '12. Danaher indicated up almost 6%. Right now, let's get back to Becky Quick, in Omaha with Warren Buffett. I'm telling you, Becky, they-- you know, the big 'Ask Warren,' show doesn't get nearly as much play and accolades as 'The Big Ass Warren show,' I mean, really. It just-- it just doesn't. This is a big deal.

BECKY QUICKI explained that to Warren--

JOE KERNENIt happened again.

BECKY QUICK--in this last break--

JOE KERNENIt happened again. It happened again. People-- people said--

WARREN BUFFETTI-- I'm tr--

JOE KERNENYeah, they--

WARREN BUFFETTI'm trademarking the name, Joe.

JOE KERNENThat just sounds really--

WARREN BUFFETTYeah, you're infringing on my-- you're infringing on my trademark.

JOE KERNENYou know what? I wouldn't be surprised. You did that on break. You did that on break. He tr-- he-- he trademarked that on break--

BECKY QUICKHe-- did. He also said, "It's better than being called the dumb-ask Warren show.

JOE KERNENYeah, yeah, that's right, or the jack-ask Warren show. You're right. It's--

WARREN BUFFETTYeah. Maybe we'll get into why that name is appropriate in this.

BECKY QUICKOh, speaking of, you know what I'm g-- I'm coming to next--

WARREN BUFFETTYeah, I-- I know.

BECKY QUICKAll right, let's get back into-- the serious business with Warren Buffett, our special guest today, b-- Berkshire Hathaway's chairman and CEO. And-- and Warren, I mentioned, before the break, we'd be talking about Kraft Heinz again.

WARREN BUFFETTRight.

BECKY QUICKPeople watching that, because you own 26.7% of Kraft Heinz. It came out with a lot of bad news on Thursday, with its earnings missing, with an SEC investigation being unveiled, with a write-down of the brands, and by the way, management saying, on the call that they didn't anticipate things would necessarily get better in 2019, although they do see improvement in 2020--

WARREN BUFFETTYou forgot to mention, we cut the dividend.

BECKY QUICKOh, I forgot about the dividend. You're right. I-- forgot to mention that. Let's just get to one of the questions we have from a viewer, T63. This is Rich @BeforeDad: "What are your thoughts on Kraft Heinz, following all the current news? And what is your biggest concern, regarding Kraft Heinz's future?"

WARREN BUFFETTWell, we have some very, very strong brands at Kraft Heinz. And as I pointed out earlier, the company earns about $6 billion, pretax, but after depreciation, not after amortization, but after depreciation, earns $6 billion on $7 billion of tangible assets. It's a fabulous business. It's-- in terms of return on tangible assets, I mean, this is a great business. We're sitting here in the first year mark. But, returns much higher at Kraft. It's much higher than it is at JP Morgan. It-- it's much-- it-- you know, you-- you go up and down the list. There's very few companies that are earning $6 billion on $7 billion of tangible assets. But we paid $100 billion more than the tangible assets in buying. And, we over-payed in in Kraft. I don't think we over-payed in Heinz. And we borrowed money that related to projections that have not been met. We earned a lot of money. But we were paying out a lot of money. So we had very little in the way of retained earnings to reduce debt. So our debt of $31 billion is higher than we projected originally to rating agencies and so on. And-- we need to bring it down. Andit comes down very slowly, I mean-- unless you sell- sell properties. I mean, even if you cut the dividend from 250 to 160, that's $1.1 billion a year. But on $31 billion, you'll go the right direction. But there's a lot of -- there's real debt to be reduced.

BECKY QUICKA lot of people wrote in and had questions about your partnership with 3G. 3G were your partners in the Heinz deal and then with the addition of Kraft, as well. Let's go to T61. This is from James Shanahan: "Mr. Buffett, how would you characterize the relationship with 3G today? Would you still consider additional deals with 3G?"

WARREN BUFFETTYeah, I consider Jorge Paulo and-- and his associates. But my primary contact's been with Jorge Paulo Lemann-- over the years, first meeting him on the Gillette board. And I think he's an absolutely outstanding human being. And-- but a year ago, he pointed out that the game had changed, in terms of brands. And he gave a talk at some Forbes event or someplace. And that was a full year ago. And six months ago, I told you, on, you know, the Glide thing, that brands-- it's not as-- packaged goods are not as good a business as they were. The really strong brands are. But, you know, we've learned that over the last few years, as the struggle between the retailers and the brands has shifted toward the retailers. And that's why Kirkland is a big-- a very, very big brand. Walmart's going more to private label. There are some big forces on the other side. If you've got a good-enough brand, you know, you can-- you can-- you can also call your terms. Costco dropped Coca-Cola some years ago. They brought them back.

BECKY QUICKDo you see that ever shifting? Or do you think that the-- the game is going to be this way, weighted towards the retailers, except for the biggest brands?

WARREN BUFFETTIt certainly looks like, particularly with the addition of Amazon to the picture, I mean, when you-- when you have Amazon and Walmart fighting, it's a little bit like the elephants fighting, you know, I mean, the mice get trampled. And, I don't see-- I certainly don't see the retailers' position getting weaker. I mean, you have Aldi coming in and stronger. It just-- and you got-- Walmart's done a very, very, very good job. You had McMillon and-- but he carries around that list of the ten top retailers of the past and--

BECKY QUICKFrom every decade.

WARREN BUFFETTTo sort of remind-- yeah, to remind him, you know, that it-- it's hard to stay on top. And-- but now, you've got two very-- and a lot of other players, too, but two particularly strong players that have got their foot to their floor and-- and, to some extent, will be pushing their own brands.

BECKY QUICKIn terms of the partnership with 3G-- if the situation has changed, according to both Jorge Lemann, Jorge Paulo Lemann, and to you, if-- brands are not as strong as they used to be, and as you've said in the past, it's gotten really much more expensive to try and look at any of these other consumer packaged-goods companies and, potentially, buy them, does that mean the whole 3G formula has kind of been upended? And is it really difficult to make it work, if you can't go out and buy another company and then cut costs?

WARREN BUFFETTYeah, well, the acquisition-- just don't work as well. I mean, for one thing, the prices got pushed up. And-- you know, anything almost-- almost anything, at a price, can be good, not everything. But anything, at a certain price, can be bad. I mean, if you-- if you pay too much, you pay too much. And-- it doesn't-- that doesn't change. And if you borrowed a fair amount in conjunction with it, it takes a while to-- turn around. I-- do not see-- well, we're not in a position-- to buy additional brands. And I-- have not thought it made sense-- as we've seen both prices change and the competitive position change, somewhat. I still like the businesses we have-- very much. I'll be happy to be in Kraft Heinz five years from now or ten years from now. I'm certainly happy to be Jorge Paulo's partner. He's a terrific human being-- and very smart on business. But-- you can say that we both-- misjudged the retail versus-- brand fight, as to-- who would be gaining ground on the other.

BECKY QUICKWatching what happened to shares of Kraft Heinz on Friday, after all that news came out, after the market closed on Thursday-- I mean, the stock was down 30%. And I think, for Berkshire alone, that was a loss of about $4 billion on top of your $3 billion share of the $15 billion write down. I know you wrote, in the annual meeting, or the annual letter, about how-- there are days, because you have such a big portfolio, $173 billion in stocks, there are days, with market volatility being back, that you see a swing of plus or minus $4 billion on certain days.

WARREN BUFFETTRight.

BECKY QUICKI know you're like Dr. Spock. You're completely emotionless, when it comes to dealing with market moves. But is there any part of you that gets a little queasy, when you see that you've lost $4 billion in a day?

WARREN BUFFETTNot in the least. No. I mean, it makes me-- assuming I like the business. It depends which ones they are. But overwhelmingly-- during the fourth quarter that things were going down, A, they were buying out their own stock. So I'm actually making money that day, you know, without laying out a dime. And then secondly, I can buy more of some, although a lot of 'em, I've got that 10%-- problem with. But I-- mean, there are certain stocks I would've kept buying, except I was bumping up against-- the 10%. But no, I-- mean, if you paid X dollars a pound for hamburger yesterday, and you go in today, and now, it's at 80% of X, maybe you have a little hamburger left in your refrigerator or something. Do you tear your hair out over that? Or do you say, "My God, you know, this is terrific. The price is cheaper"? What-- else in the world don't you like to buy cheaper than you're paying the day before?

BECKY QUICKThat's a fair point--

WARREN BUFFETTIf you're gonna-- if you're gonna keep buying it.

BECKY QUICKThat's a very logical way of looking at things, (LAUGH) very rational way. Hey, Joe has a question, too. Joe--

JOE KERNENSo Mr. Spock, mister. Dr. Spock is that whacky guy that--

BECKY QUICKOh, Dr. Spock.

JOE KERNEN--tthat wouldn't console his--

BECKY QUICKOh, right. He's the baby guy.

JOE KERNENThat-- that said, "Let the kid cry all day."

BECKY QUICKI finally said something that got your attention.

JOE KERNENNo. No, I actually wanted to ask about-- I wanted to ask-- that-- I was just talking about Dr. Spock with my-- he was-- I don't know. He was-- I don't know if you would just let kids cry forever. I think you need to-- anyway.

BECKY QUICKNo. No way--

JOE KERNENNo, you can't. You can't. That guy was whacko. I'm tryin' to--

BECKY QUICKNo.

JOE KERNEN--explain Freud, too, another one.

BECKY QUICKI agree.

JOE KERNENAnyway--

BECKY QUICKGood luck with that.

JOE KERNENCan I ask-- quickly about that 60 Minutes ad, just some philosophical questions, Warren--

BECKY QUICKOf course, yeah, yeah.

JOE KERNENSo the basic thrust of this piece yesterday, on electric cars, was that-- at least the way I read it is, in this country, I think we're starting to feel like, maybe, the subsidies that Tesla gets aren't really a good way to do things, necessarily. And-- over in China, they seem to be going the other way, where they are gonna subsidize this. It's almost a state-run enterprise, how much they're subsidizing electrical vehicles. As a result, the thrust of the piece was, by 2025, they're gonna be doing a couple of million, 3 million, 4 million electric vehicles. We're gonna be stuck down under a half million. Is that what we should be doing here, do-- in your view? Or--is there a reason you're invested over there, in electric vehicles, rather than here? I mean, is that the way to do it? Should we be subsidizing it completely here, in the U.S.? Or-- do market forces-- allocate capital better?

WARREN BUFFETTMarkets are better, generally, Joe. I mean, you know me. I'm-- but that doesn't mean all the time. There are certain-- but markets are better. I think-- I actually think electric cars-- I think you're gonna have a lotta people pushing electric cars, in the United States, even though the subsidy is going away. I think it goes away at 200,000 units or something like that. And-- Tesla's hitting it and so on. But-- so I think electric cars are-- very much in America's future and-- I think, much sooner than autonomous driving. But I-- listen, I'm all for the Chinese doing what they're doing. I mean, in- terms of the-- in terms of the planet, and you know, it's a good thing. So I-- cheer 'em for doing it. I don't think we'll need to do it, in the United States. I think--

JOE KERNENBut you're invested over there. You're not--

WARREN BUFFETTI'm-- I'm--

JOE KERNEN--invested here, right?

WARREN BUFFETTOh, we bought the BYD ten years ago. And Charlie called me up and said, "Buy this." And this-- that is totally Charlie's position. And-- it's done fine. And-- he keeps in touch with the management and all of that. I-- that is not something that-- that-- I could not tell you, within 20%, what the price of BYD is. I don't look at it.

JOE KERNENOkay, so that's not your thing. Okay, but I just watching it, you know, the-- spin I was getting from 60 Minutes was that, you know, we're-- we don't understand that you know, you certain industries, you need full-on government-- assistance or almost-- you know, subsidies at the-- you know, ten times what they are right now, to try and win at something, which is not surprising for 60 Minutes. But I was just wondering whether you thought we're gonna fall behind, if we don't have a concerted government effort to prop up the industry.

WARREN BUFFETTI think there's a pretty concerted industry effort, from what I hear. I mean, it-- no, I think you're gonna see a lot more electric-- and incidentally, I mean, you know, we have an interest in-- in Pilot Flying J. And-- so we have-- we have certain businesses that---- would be adversely affected-- with all electric. But I-- think we're going in that direction. And I think you'll see-- the American companies quite aggressive in that field.

JOE KERNENAll right. I was listening the whole time, Becky. What do you mean, that's the only time I'm-- I was listening. I'm been listening. I've got nothing else to do here, but listen. So-- but-- I was-- I was listening. I just like that. I-- I like that-- you know, you know how much I love mixed metaphors. My favorite is, like-- that's a walk in the cake--

BECKY QUICKYou do.

JOE KERNENLike-- you know, or-- you know, there's just so many good ones-- if you can mix 'em up. But when they--

WARREN BUFFETTStart working on March.

JOE KERNENMarch madness-

WARREN BUFFETTStart-- Joe, start working on your March Madness ballot.

JOE KERNENOh, I-- I know I won't--

WARREN BUFFETTWe're counting on you--

JOE KERNENYou know, I know how you operate, Buffett. I-- mean, yeah, I-- you-- why don't you just offer-- why-- offer $100 billion to someone who gets a perfect bracket. It's never gonna happen. It's never gonna-- you-- it's never gonna happen, ever.

WARREN BUFFETTNo, no.

BECKY QUICKIt has happened once, didn't it?

WARREN BUFFETTWell, we--

BECKY QUICKDidn't a kid win a few years ago with a perfect bracket, not against you, but--

WARREN BUFFETTAll you have to do is get through the first bracket to win $1 million, assuming nobody else wins at the same time—then you split the million.

JOE KERNENThat's hard.

WARREN BUFFETTThen you split the $1 million.

JOE KERNENSo hard. Great though. I can't wait.

WARREN BUFFETTBut we had five of them. Two years ago, we had five of them that got to the last four games and – perfect.

JOE KERNENThat's amazing.

WARREN BUFFETTAnd four of them went out on one game, and one went out on the other game. But they split it. They split it.

JOE KERNENLast year, you were going to let me take over your Twitter count, if I got to the final. And I—

BECKY QUICKWhoa.

JOE KERNENWhy? I want to do that again.

BECKY QUICKWhoa, whoa!

JOE KERNENIf I get all eight.

BECKY QUICKWhoa! Look out!

JOE KERNENIf I get all eight. If I get all eight, if I tick all eight, can I have—

BECKY QUICKIf he gets all –

JOE KERNENThe lead eight.

WARREN BUFFETTYou got a deal.

BECKY QUICKWait, you'd better set some parameters on that. How long does he get to keep your Twitter account for?

JOE KERNENOh, this is going to be good.

WARREN BUFFETTListen, I have other people pretending to be me on Twitter.

JOE KERNENYeah, you do anyway.

WARREN BUFFETTYou might – I mean, it's very cheap. I mean—

JOE KERNENAll right. Thanks. We're going to take a break.

BECKY QUICKAll right, Joe, take us away.

JOE KERNENAll right, I will. Still to come, your last chance to submit your questions for Warren Buffett with the hashtag Ask Warren. It's not, you know, ass Warren. Anyway more of his answer after the break. U.S. equity futures at this hour, 146 on the Dow, 13 on the S&P. We'll be back.

BECKY QUICKWelcome back to this special edition of "Squawk Box." We are live in Omaha, Nebraska, at the Nebraska Furniture Mart, with Berkshire Hathaway chairman and CEO Warren Buffett. Warren, we've talked about a lot of things this morning. But for people who are just tuning in, I'd like to go back just to your thoughts on the overall market. We just had a conversation with Charlie Munger about a week and a half ago. And I asked him if he thought the golden era of value investing was over. And he said, "No, not for forever." But he thinks the game is a lot harder than it used to be. What are your thoughts, just in terms of looking around, trying to find businesses, trying to find pieces of business, versus when you started the game?

WARREN BUFFETTWell, it's harder for two reasons, one of which is peculiar to us, is we've got a lot more money. So our universe of possible things to do has shrunk from thousands and thousands of things that I used to look at, when I had small amounts of money, to a relatively few things now.

BECKY QUICKSee, that seems to defy logic. "I have more money, so I have fewer things I can do." But it's just because a deal—

WARREN BUFFETTIt doesn't—

BECKY QUICKIt's got to be much bigger to move the needle.

WARREN BUFFETTIt doesn't move the needle, yeah. So no, there's probably 100 stocks. You know, if we put $5 billion in something, and it's 10% of the market cap, which would be as much as it would be, you're talking $50 billion in upmarket caps. And $5 billion is 1% of Berkshire's value. So if it goes up 50%, we make a half a percent, you know, basically, on value before tax. 35, 40 basis points afterwards.

BECKY QUICKI'd love to have your problems.

WARREN BUFFETTYeah. So and then the second thing is, I mean, obviously, you've got way more competition than when we started in 19 – well, really, when I took Ben Graham's class in 1951. I mean, the whole world was my oyster. Because people were not going through the manuals. And you had to – it's easier to get the data now, for one thing. I mean, just with the internet, it's far easier. I used to mail away for annual reports and go to the Interstate Commerce Commission, the Public Utility Commission, the Insurance Commission. I went to all those offices and dug through papers. And now, it's, you know, it takes five seconds for somebody to get the same information.

BECKY QUICKI'll ask this very fleetingly. Has your position changed on Bitcoin?

WARREN BUFFETTNo. I mean, it's too bad. But Bitcoin, it's ingenious. And blockchain is important. But Bitcoin has no unique value at all. It doesn't produce anything. You can stare at it all day, and no little Bitcoins come out or anything like that. It's a delusion, basically.

BECKY QUICKSo we've gone from rat poison squared to a delusion. That's kind of an upgrade.

WARREN BUFFETTWell, yeah, you know, who knows where we'll be next year. But I'm really sorry it happens. Because people get their hopes up that something like that is going to change their lives. And it was a very ingenious thing, to figure out how to have limited supply and make it harder and more expensive to create, all that sort of thing. But it doesn't – the function is, and this was explained to me by people a lot smarter than I am, but they say blockchain does not depend on bitcoin – and you know, JP Morgan is talking about creating their own, you know, JPM. And it'll be worth $1. I mean, it's matched to the dollar to dollar. And I'm sympathetic to people that own it.

BECKY QUICKThere are a lot of questions that are kind of, like, the new Bitcoin questions. We've got several questions that came in to ask you about. I'll go to T46. This is Forca Design, LLC. "Do you think the hemp and marijuana industry is a viable industry to invest in, even though there are still restraints on how capital can be moved and used?" We got lots of variations on this question.

WARREN BUFFETTYeah, it's an industry that I don't know, really, anything about, usage or otherwise.

BECKY QUICKNever?

WARREN BUFFETTNo, never. No, I couldn't figure out how to do it. I mean, I couldn't even smoke a cigarette. I mean, you're talking to a guy that doesn't pick up things very fast.

BECKY QUICKWhat do you think about college athletes and whether they should be paid? And I ask you this having watched what happened with Zion Williamson, the Duke player whose Nike shoe blew up on him last week. It kind of reignited that whole debate. And you're a long-time watcher of college athletics.

WARREN BUFFETTWell, I'll say this. If I was an athlete, I think I probably should – I would probably have a view on I should be. I mean you are – I mean, if you're really good, you're of enormous commercial value. And the rules are designed to prevent you from cashing in on that commercial value, you know for some period. It doesn't – the rich schools are going to win, then. Harvard may have a resurgence of football.

BECKY QUICKThis one came in, T28. Mititaka Gotu said, "Do you see any irrational human behavior by investors or corporate Americans right now?" You're kind of – you and Charlie are kind of like the police of corporate America. What do you see that you don't like right now?

WARREN BUFFETTWell, there's always a certain number of people doing things that are designed to take advantage of other people. I mean, the market is so big. And so there's always been people. But you know, maybe it's Bitcoin. Maybe it's new issues. I mean, look at all the things that have been created around Bitcoin. I mean, there's been a lot of fraud and disappearance and all these kinds of things. It attracts charlatans, basically. Because the money's so big. I mean, if you go out and do something phony in selling yo-yos or something, there's no real money in it. But when you get into Wall Street, there's huge money. And you can do it with little pieces of paper. And they don't bounce back on you for a long time. And a lot of people get well, Madoff was, you know, an example. But that's going to happen. And that's why we've got an SEC and why we've got courts. But it'll always continue. It'll always need policing.

BECKY QUICKThere are a bunch of new technology IPOs that are slated to come to market this year. I think back to what you thought about the tech IPOs back in 1999 and not wanting to be near them. These are a little different. A lot of these actually have earnings. You think of an Airbnb. You think of Pinterest or something along these lines. Is this different? What do you – how do you value this stuff?

WARREN BUFFETTYeah, some of them – now, yeah, but the big ones have losses.

BECKY QUICKUber.

WARREN BUFFETTAnd some of them report earnings differently than I would report earnings. I mean we haven't bought IPOs. And if you think about it, you've got a whole bunch of people on the other side who have an interest in marking up each stage of it, even if it's phony. Sometimes, they offer one price for the employees that already have the shares. But then, they have an artificial price so they can say that this round went at a higher price. They're picking the time to sell to you. I don't like – I like it when I'm picking the time to buy, in a 2008, rather than having them pick the time when they've decided, "This is the time we can cash in by selling to you. We're going to do you a big favor and let you buy in." So I have never been a big fan of IPOs. And the valuations are kind of staggering now on some.

BECKY QUICKAny in particular?

WARREN BUFFETTNot that I – no.

BECKY QUICKNot that you feel like discussing.

WARREN BUFFETTBy category.

BECKY QUICKBut let's – the category of those that you think the valuation is staggering is based on what? Just earnings per the market for some of these?

WARREN BUFFETTIt's just, I mean, if a company's going to become public, we'll pick a figure, $50 billion. What should you expect it to earn in five years? You should certainly expect it to be earning $5 billion, pretax. I mean, if you wait five years to get 10% on your money. And people, they don't sell them that way, you know? There aren't that many companies that earn $5 billion or more, pretax. There's a fair number. But it's not that easy. And it's particularly not that easy if you count what you're paying the employees in stock options and all that sort of thing.

BECKY QUICKA question came in. This is T112 from Todd Marshall. He says, "Who wins more at the card game bridge – Buffett or Gates?" Who wins more when you play bridge?

WARREN BUFFETTWell, I probably play 100 times as often as Bill. So that's probably the only game in the world where I'd have a slight edge with him, a very slight edge. If he probably spent two solid days working on it he'd do better. Oh, while you bring up Bill Gates, Melinda Gates has got a book coming out on April 23rd. I think it's one of the best books I've ever read.

BECKY QUICKWhat's it about?

WARREN BUFFETTIt's about women. And it's about women around the world, it's about herself. And it's very candidly told. And the stories are terrific. And I read it the other day in one sitting. It's only 220 or 230 pages. It's coming out April 23rd. And I think it'll be a huge seller.

BECKY QUICKThat's great. We'll look forward to seeing it. Another question that came in is T55. Steve Pilgrim asks, "For those of us who have lived our lives and careers reading and listening to Warren Buffett and Charlie Munger, to whom do they recommend our grandchildren listen?"

WARREN BUFFETTWell, I hope it's to us. But that would be sort of an actuarial freak. No, there's plenty of interesting writers, you know, but I will tell you this. The fundamentals won't change. You're not going to discover anything new about investments in the next 50 or 100 years. I mean, it's buying a business. You have to know how to value the business. And you have to know something about how markets operate. But you don't buy a business, unless you can value it. You have to learn how to value businesses and know the ones that are within your circle of competence and the ones that are outside. And that won't change. And it really gets back to laying – investing is laying out a dollar an hour – a dollar of purchasing power – and getting more back in the future. And you try and figure out, you know, how much you're willing to pay for that bird in the bush, compared to the bird in the hand.

BECKY QUICKWarren, we want to thank you for the three hours that you've spent with us today. We truly appreciate your time.

WARREN BUFFETTThank you.

BECKY QUICKWarren Buffett, the chairman and CEO of Berkshire Hathaway. And Joe, do you have that bracket ready?

JOE KERNENI have been watching and I'm getting into it now. I watched a lot yesterday. I watched Michigan-Michigan State. I watched Cincinnati- Connecticut. I watched Xavier-Villanova. And like I'm into the Big East again Warren, just so you know. You know, our friend, Bill Murray, Becky, you believe that? His son no longer coaches at Xavier. So he's going to send me all of his crap from Xavier. He's immediately becomes a Louisville fan? That is weak.

BECKY QUICKJust so you know, Bill's watching. He's been watching since 5:45, eastern time this morning.

JOE KERNENThat's weak, though. I don't want his crap.

BECKY QUICKHe's over in Europe somewhere. He's actually watching.

JOE KERNENI don't want his used Xavier stuff. I can't believe he can just switch like that. We would never do that, would we Warren? You're going to be watching.

BECKY QUICKHe's a fan of his son, who was coaching at Xavier and now is at Louisville. You'd do the same.

JOE KERNENWhatever. I'm very disappointed. Anyway, Warren—

WARREN BUFFETTPlus, he'd have some good golf tips for you, Joe.

JOE KERNENGood wardrobe.

BECKY QUICKSays the guy who's suddenly a UPenn.

JOE KERNENGood wardrobe. Yeah, exactly.

BECKY QUICKYeah, it's true.

JOE KERNENAll right, thank you, Warren. Becky, thank you. About CNBC: With CNBC in the U.S., CNBC in Asia Pacific, CNBC in Europe, Middle East and Africa, and CNBC World, CNBC is the recognized world leader in business news and provides real-time financial market coverage and business information 410 million homes worldwide, including more than 90 million households in the United States and Canada. CNBC also provides daily business updates to 400 million households across China. The network's 15 live hours a day of business programming in North America (weekdays from 4:00 a.m. - 7:00 p.m. ET) is produced at CNBC's global headquarters in Englewood Cliffs, N.J., and includes reports from CNBC News bureaus worldwide. CNBC at night features a mix of new reality programming, CNBC's highly successful series produced exclusively for CNBC and a number of distinctive in-house documentaries. CNBC Digital delivers more than 52 million multi-platform unique visitors each month. CNBC.com provides real-time financial market news and information to CNBC's investor audience. CNBC Make It is a digital destination focused on making you smarter about how you earn, save and spend your money by zeroing in on careers, leadership, entrepreneurship and personal finance. CNBC has a vast portfolio of digital products, offering CNBC content to a variety of platforms such as: CNBC.com; CNBC PRO, a premium service that provides in-depth access to Wall Street; a suite of CNBC mobile apps for iOS and Android devices; Amazon Alexa, Google Assistant and Apple Siri voice interfaces; and streaming services including Apple TV, Roku, Amazon Fire TV, Android TV and Samsung Smart TVs. To learn more, visit https://www.cnbc.com/digital-products/. Members of the media can receive more information about CNBC and its programming on the NBCUniversal Media Village Web site at http://www.nbcumv.com/programming/cnbc. For more information about NBCUniversal, please visit http://www.NBCUniversal.com. Got a confidential news tip? We want to hear from you. Sign up for free newsletters and get more CNBC delivered to your inbox Get this delivered to your inbox, and more info about our products and services. © 2026 Versant Media, LLC. All Rights Reserved. A Versant Media Company. Data is a real-time snapshot *Data is delayed at least 15 minutes.

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