Transcript of classic Warren Buffett interview on CNBC's Power Lunch today, courtesy CNBC. Key points:
BECKY QUICK: THE FED IS GOING TO BE COMING OUT WITH ITSANNOUNCEMENT IN A LITTLE OVER TWO HOURS [they held steady and jawboned about inflation]. AND THERE'S BEEN A HUGE DEBATE ABOUT WHETHER THE FED SHOULD BE MORE CONCERNED ABOUT HIGHER INFLATION OR SLOWING GROWTH. IN YOUR MIND, WHAT IS THE MOST IMPORTANT FACTOR?
WARREN BUFFETT: THEY SHOULD BE CONCERNED ABOUT BOTH. BOTH ARE GOING ON. GROWTH IS SLOWING AND IN FACT I'M NOT SURE IT'S GROWTH ANYMORE. AND INFLATION
IS REALLY HEATING UP. SO IT'S NOT AN EASY JOB TO HAVE WITH, YOU KNOW,
CERTAINLY TWO MASTERS IN EFFECT. AND THAT'S WHY I'M GLAD THAT BEN
BERNANKE HAS THE JOB AND I DON'T.
QUICK: PRETEND YOU WERE IN HIS SHOES. WHAT WOULD YOU DO?
BUFFETT: I WOULD BE OFFERING MY RESIGNATION.
QUICK: YOU WOULD KEEP RATES STEADY? IF IT WAS YOUR JOB TO DECIDE THIS
NOW?
BUFFETT: I THINK INFLATION IS REALLY PICKING UP. SO I THINK THAT THEY
HAVE -- THAT HAS TO BE VERY CAREFUL TO DO ANYTHING THAT SIGNALS THAT
THEY REGARD INFLATION AS A SECONDARY GOAL AND SOMETHING THEY'LL WORRY
ABOUT LATER. BECAUSE IT'S HUGE RIGHT NOW. I MEAN WHETHER IT'S STEEL,
OIL, YOU NAME IT. AND THERE IS -- THE PRESSURES AND YOU'VE SEEN IT IN
CHEMICAL PRICES RECENTLY WITH 1,000 AN OUNCE AND WE SEE IT EVERY PLACE .
IT'S EXPLODING.
QUICK: THAT IS AN ARGUMENT FOR RAISING RATES TODAY. THERE IS STILL A LOT
OF WEAKNESS FOR CONSUMERS S THAT TOO MUCH OF A SHOCK IF THEY CAME OUT
WITH A SURPRISE RATE INCREASE TODAY?
BUFFETT: I THINK IT PROBABLY WOULD BE. BUT THE ECONOMY IS WEAKENING. ALL
THE DATA I SEE, I SEE A FAIR AMOUNT ON REAL TIME BASIS, INDICATES THAT
THE WEAKENING OF ANYTHING IS GETTING WORSE.
QUICK: YOU MEAN FROM THE CONSUMER'S PERSPECTIVE.
BUFFETT: YEAH, FROM THE CONSUMER'S PERSPECTIVE. WEAKER CONSUMER BUYING
TURNS INTO CREDIT CARD LOSSES AND THAT SORT OF THING.
QUICK: WHERE DO YOU SEE THAT WEAKNESS? YOU HAVE A BROAD AWAY OF
BUSINESSES, EVERYTHING FROM BRICK BUSINESS TO INSURANCE BUSINESSES TO
ACTUAL RETAIL BUSINESSES. WHERE DO YOU SEE THE BIGGEST WEAKNESS?
BUFFETT: EVERYTHING CONNECTED WITH CONSTRUCTION AND WITH CONSUMER I SEE
WEAKNESS. AND IF ANYTHING, IT'S ACCENTUATING A LITTLE BIT.
QUICK: ALONG WITH THE CONCERNS OF INFLATION, THERE ARE A LOT OF PEOPLE
WHO HAVE BEEN SCREAMING THAT THE FED HAS TO DO SOMETHING TO SAVE THE
DOLLAR. THEY HAVE SEEN SO MUCH WEAKNESS RECENTLY. DO YOU HAVE ANY
CURRENCY BETS RIGHT NOW?
BUFFETT: JUST -- I HAVE THAT TAIL END IN THE BRAZILIAN DOLLAR, BUT OVER
TIME, IF WE KEEP DOING WHAT WE'RE DOING -- AND IT ISN'T THE FED -- IT
STARTS WITH POLICY MAKERS IN CONGRESS. BUT IF WE KEEP DOING WHAT WE'RE
DOING, WE'RE GOING TO GET THE SAME RESULT WHICH IS A WEAKENING DOLLAR.
QUICK: YOU MEAN IN TERMS OF RUNNING A BUDGET DEFICIT?
BUFFETT: IN TERMS OF RUNNING HUGE DEFICITS. PART OF THAT STEMS FROM
OIL.THERE IS A LOT OF THINGS THAT GO INTO THAT. BUT THE TRUTH IS WE
CAN'T SENDED 2 BILLION A DAY OUT TO THE REST OF THE WORLD AND NOT
EXPECT A DOLLAR TO GET WEAKER OVER TIME. I MEAN THAT IS NOT A SHORT-TERM
FORECAST. THAT IS GOING TO HAPPEN OVER TIME.
QUICK: YOU MENTIONED OIL PRICES. THERE'S BEEN A HUGE DEBATE WE'VE BEEN
HAVING ON OUR SHOW AND THROUGHOUT THE DAY. PEOPLE ARE TRYING TO FIGURE
OUT IS THE SUPPLY AND DEMAND PICTURE OR SOMETHING TO THE IDEA THAT THERE
SPECULATION GOING ON IN THE MARKETS? THERE IS A LOT MORE MONEY IN THE
MARKETS THAN THERE USED TO BE THREE YEARS AGO.
BUFFETT: IT IS SUPPLY AND DEMAND. YOU KNOW, IF SOMEBODY BUYS 1,000
FORWARD OIL CONTRACTS, SOMEBODY ELSE IS 1,000 FORWARD OIL CONTRACTS. THE
ONLY WAY YOU COULD HAVE SPECULATORS HAVING A BIG IMPACT IS IF YOU HAD A
HUGE AMOUNT OF STORAGE WHERE THEY STARTED WITHDRAWING ACTUAL PHYSICAL
OIL FROM THE SYSTEM. BUT IT'S NOT SPECULATION. IT'S SUPPLY AND DEMAND.
AND THE SITUATION IS THAT IN MY ADULT LIFETIME, UP UNTIL THE LAST YEAR
OR TWO, THERE'S ALWAYS BEEN A HUGE AMOUNT OF EXCESS SUPPLY AVAILABLE.
THERE'S BEEN RESERVE CAPACITY. AND THAT GOES BACK 30 YEARS AGO. IN THIS
COUNTRY WE PRODUCE WAY MORE OIL THAN WE NEEDED HERE. WE HAD THE TEXAS
RAILROAD COMMISSION THAT SHUT DOWN WELLS. AS A MATTER OF FACT, THEY GOT
NOW TO WHERE THEY ONLY ALLOW WELLS IN TEXAS OPERATE EIGHT DAYS. WE DON'T
HAVE EXCESS CAPACITY IN THE WORLD ANYMORE. THAT'S WHY YOU'RE SEEING THE
OIL PRICES.
QUICK: EXCEPT THAT YOU HAD A SERIES OF PEOPLE THAT CAME TO CAPITOL HILL
TO CONGRESS ON MONDAY AND THEY SAID IF YOU CLAMP DOWN ON SPECULATION,
YOU COULD CUT 50% OUT OF OIL PRICES IMMEDIATELY. IS THAT HOG WASH?
BUFFETT: I THINK IF THEY CLOSE THE OIL TRADING FUTURES. INCIDENTALLY,
THE FIVE-YEAR OIL PRICE, YOU KNOW, YOU CAN BUY OIL FOR DELIVERY 2012
NOW OR 2013. THAT PRICE IS VERY CLOSE TO THIS PRICE. NOW IF ANYBODY
NEEDS SOME SHORT TERM SPECULATION, WHY ARE THEY BUYING $130 A BARREL TO
GO TO 2013?
QUICK: YOU'RE THE LARGEST SHARE HOLDER IN ANHEUSER-BUSCH. INBEV MADE A
BID FOR BUD. AND THERE ARE A LOT OF PEOPLE TRYING TO FIGURE OUT IF YOU
THINK THAT IS A GOOD OFFER. WHAT DO YOU THINK ABOUT IT?
BUFFETT: WHEN WE GET THROUGH THE INTERVIEW, A LOT OF PEOPLE WILL BE
TRYING TO FIGURE THAT OUT. I'VE BEEN -- ALL THESE THINGS HAVE BEEN
REPORTED. I HAVE NOT TALKED TO ANYBODY ABOUT IT.I'VE BEEN REPORTED TO IN
ST. LOUIS. THERE IS ABSOLUTELY SOME DOUBLE OF ME RUNNING AROUND ON
THERE. I CAN'T IMAGINE ANYONE LOOKING LIKE ME. BUT IF HE'S OUT THERE,
HE'S PARENTALLY IN ST. LOUIS AND HE'S APPARENTLY OVERTALKING TO INBEV.
QUICK: SO YOU HAVEN'T TALKED TO ANHEUSER-BUSCH MANAGEMENT OR INBEV?
BUFFETT: I HAVE NOT TALKED TO ANYBODY.
QUICK: WHAT DO YOU THINK ABOUT THE DEAL?
BUFFETT: I THINK IT'S AN INTERESTING SPECTATOR SPORT AT THE MOMENT.
QUICK: SO YOU'RE NOT GOING TO WEIGH IN ON EITHER SIDE OF THIS?
BUFFETT: I CERTAINLY HAVEN'T SO FAR.
QUICK: AND YOU DON'T WANT TO RIGHT NOW?
BUFFETT: WE HAVE ALL THESE PEOPLE HERE. IF WE DIDN'T HAVE ALL THE PEOPLE
WATCHING, I'D TALK.
QUICK: LET'S TALK ABOUT POLITICS, TOO. BARACK OBAMA HAS BEEN THE PERSON
THAT YOU'RE SUPPORTING. THE FIRST TIME YOU'VE REALLY HAD A CHANCE TO
TALK SINCE HILLARY CLINTON DROPPED OUT OF THE CAMPAIGN. BUT YOU'RE
HOLDING A FUND-RAISER FOR HIM NEXT WEEK.
BUFFETT: YES. JULY 2ND.
QUICK: WE WATCHED SOME OF THE NUMBERS COMING IN MAY. AND BARACK OBAMA'S
FUND-RAISING ABILITY SLOWED DOWN IN MAY. MCCAIN'S PICKED UP. DO YOU
THINK THAT WAS A TEMPORARY ONE-TIME BLIP OR ARE THEY GOING TO BE RUNNING
NECK AND NECK WHEN IT COMES TO FUNDRAISING?
BUFFETT: I THINK BARACK OBAMA WILL HAVE PLENTY OF MONEY. I MEAN HE GAVE
UP ON FEDERAL FINANCING. SO I DON'T THINK MONEY IS GOING TO BE A PROBLEM
FOR EITHER CANDIDATE. THE AMERICAN PUBLIC, WHEN THEY GO TO THE VOTING
BOOTH IN NOVEMBER IS GOING TO HAVE A VERY GOOD FIX ON BOTH CANDIDATES
AND THE SHORTAGE OF MONEY WILL NOT IMPAIR THEM HAVING THAT FIX. SO I
THINK MONEY IS GOING TO BE A NONISSUE IN THE CAMPAIGN.
QUICK: BARACK OBAMA DID GIVE UP ON PUBLIC FINANCING AFTER SAYING HE
WOULD ACCEPT IT. WHAT DID YOU THINK OF THAT MOVE?
BUFFETT: I DON'T AGREE WITH THAT.
QUICK: YOU DON'T AGREE WITH HIM CHANGING HIS POSITION?
BUFFETT: I DON'T THINK HE SHOULD HAVE, NO.
QUICK: WHAT ABOUT THE IDEA OF SUPPORTING WIND FALL TAXES AGAINST THE OIL
COMPANIES? THE CANDIDATE YOU SUPPORT BUT IF YOU START TALKING ABOUT
TAKING WIND FALL TAXES OUT ON THE OIL COMPANIES, IS THAT SOMETHING YOU
AGREE WITH?
BUFFETT: I THINK IT'S VERY HARD TO HAVE WIND FALL TAXES. STEEL DOUBLED
IN PRICE. WIND FALL FOR THE STEEL PRODUCERS, SURE? CORN IS, YOU KNOW, $7
A BUSHEL. I DON'T THINK ANY CANDIDATE IN HIS RIGHT MIND WOULD SAY YOU
OUGHT TO TAX FARMERS ESPECIALLY BECAUSE THEY'RE GETTING A WIND FALL. BUT
THEY ARE GETTING A WINDFALL FROM COMMODITY PRICES. MAYBE THEY DESERVE
IT. BUT TO PICK OUT ONE COMMODITY, COPPER $3.60 A POUND, YOU COULD SAY
THAT THE COPPER PRODUCERS ARE GETTING A WINDFALL. YOU KNOW, THE NETWORKS
ARE GETTING A WINDFALL BECAUSE OF THE OLYMPICS ARE BEING HELD. SO I
DON'T THINK THAT TAKING ANYBODY THAT'S HAD A COMMODITY THAT INCREASED IN
PRICE A LOT AND SAYING THERE OUGHT TO BE A SPECIAL TAX BECAUSE OF THAT
MAKES A LOT OF SENSE.I THINK THE TAX CODE SHOULD BE CHANGED. I DON'T
THINK THAT'S THE WAY TO DO IT.
QUICK: HOW DO YOU THINK THE TAX CODE SHOULD BE CHANGED?
BUFFETT: I THINK THE SUPER RICH SHOULD PAY MORE AND PEOPLE IN THE MIDDLE
CLASS AND LOWER SHOULD PAY LESS.
QUICK: IF YOU START LOOKING AT THE PROPOSAL PUT FORTH WITH SOCIAL
SECURITY TAXES WHICH INCLUDES STOPPING, STILL AT 102,000 FOR SOCIAL
SECURITY AND PICKING UP THAT PAYROLL TAX AT $250,000. IS THAT YOUR IDEA
OF A GOOD CHANGE?
BUFFETT: THE PAYROLL TAX IS A THIRD OF ALL TAXES RAISED. OVER $900
BILLION.SO PAYROLL TAX IS TERRIBLY IMPORTANT. IT QUITS AT $100,000 FOR A
GUY LIKE ME. I PAY PRACTICALLY NO PAYROLL TAX IN RELATION TO MY INCOME.
MOST OF THE PEOPLE THAT ARE GOING TO BE -- PEOPLE ARE GOING TO BE
SERVING US STEAK IN THIS RESTAURANT ARE PAYING -- THEY'RE PAYING 15.3%
OR SO. I AM PAYING A TINY FRACTION OF 1% OF PAYROLL TAXES. I THINK
THERE SHOULD BE A MAJOR OVERHAUL OF THE PAYROLL TAX. I THINK GUYS LIKE
ME SHOULD PAY MORE.
QUICK: THERE ARE PEOPLE WHO HAVE SAID, UNDER THIS NEW PROPOSAL THAT IS
PUT OUT, IT WOULD END UP MEANING THAT SOMEONE LIKE AN ENTREPRENEUR GOES
BACK TO A TAX RATE OF 50%. AND THAT IS EVEN BEFORE YOU INCLUDE SOME OF
THE STATE AND LOCAL TAXES. DO YOU WORRY THAT IF ENTREPRENEURS AND OTHER
PEOPLE ARE TAXED AT 50% TO 60%, DEPENDING ON WHERE THEY LIVE AND HOW
MUCH THEY MAKE, THAT IT WILL STOP INNOVATION? IT WILL HARM THE
INNOVATION?
BUFFETT: I I WORRY ABOUT MY CLEANING LADY PAYING 15% ON PAYROLL TAX WHEN
I PAY ON MY TOTAL INCOME TAX 15%. SHE IS PAYING A HIGHER TAX RATE THAN I
AM. THE UNITED STATES GOVERNMENT RAISES ABOUT -- SPENDS ABOUT 20% OF THE
GDP. NOBODY WANTS TO PAY THEIR SHARE. THAT'S HUMAN NATURE. BUT THE
CONGRESS HAS THE JOB OF SAYING WE'RE GOING TO GET 20% OF GDP FROM THE
AMERICAN GOVERNMENT BECAUSE THE AMERICAN PEOPLE DEMAND THESE SERVICES
AND SO ON. AND THE QUESTION IS THEY GET IT FROM ANYBODY THAT PAYS IT,
THEY'RE NOT GOING TO LIKE IT. YOU HAVE TO FIGURE OUT ON A BASIS OF YOUR
OWN IDEA OF SOCIAL JUSTICE AND MAKING SURE THAT THE GOLDEN GOOSE KEEPS
LAYING GOLDEN EGGS. WHAT IS THE BEST SYSTEM? I THINK THE ANSWER IS TO
TAX THE RICH MORE.
QUICK: YOU ARE HAVING LUNCH WITH PEOPLE THAT PAID $600,000 TO HAVE LUNCH
WITH YOU HAVE YOU SPOKEN TO THEM AT THIS POINT?
BUFFETT: I HAD SOME CORRESPONDENCE WITH THEM. I'M LOOKING FORWARD TO
SPEAKING WITH THEM.
QUICK: WHAT DO YOU THINK YOU'LL BE TALKING ABOUT? I KNOW THEY BROUGHT
THEIR CHILDREN AND WIVES ALONG. WHAT IS YOUR PLAN?
BUFFETT: WE'RE TALKING ABOUT ANYTHING THEY'RE INTERESTED IN WE'LL TALK
AS LONG AS THEY WANT TO TALK AND THE SUBJECTS THEY WANT TO TALK ABOUT.
IF YOU WANT TO PAY $660,000, WE'LL TALK ABOUT ANYTHING YOU WANT TO TALK
ABOUT, BECKY. MAYBE EVEN THE ANHEISER DEAL.
QUICK: GREAT. ONE MORE QUESTION FOR YOU. THERE HAVE BEEN PEOPLE WHO HAVE
BEEN SAYING JUST TAKING A LOOK AT POLITICS AND SOME OF THE THINGS OUT
THERE THAT MAYBE YOU WOULD BE INTERESTED IN GETTING ON A TICKET AT SOME
POINT. IS THERE ANY TRUTH TO THAT?
BUFFETT: NO -- I WILL GO ONE BETTER, WHATEVER HE SAID.
QUICK: OKAY. MR. BUFFET, THANK YOU VERY MUCH FOR YOUR TIME. WE
APPRECIATE IT.
BUFFETT: THANK YOU.
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Lehman Brothers, the nation’s largest underwriter of mortgage-backed bonds, has crushed yesterday. Lehman was down 22% to $15 over rumors that Pimco, the world’s biggest bond fund, is pulling money out of Lehman.
The Banks are always lying about its liquidity. Lehman said on June 3 that it doesn’t need to raise more cash. Additionally Lehman reported $2.8 billion loss in the 2ndQ earning report on June 9 and planned to raise $6 billion in capital. It’s beyond over $300 million loss as expected by analysts. It’s David Einhorn’s Winning in Betting Lehman Collapse.
David Einhorn, hedge fund manager, and Erin Callan, Lehman's C.F.O-Photo by portfolio.com.
