I think this is the best Warren Buffett interview I have seen. He talks about a variety of very interesting topics: Kraft Cadbury deal, the Bank Tax, Ben Bernanke, Too Big to Fail,
Stimulus Bill, Health Care reform etc. It is an excellent video I recommend everyone watch it
I also provided a brief summary of the video below
Berkshire Hathaway’s Buffett On Diversification
In his 2014 letter preview, Buffett states that, far from being a weak choice, indexing can often achieve investor's goals far more easily than complicated picking strategies. This is a special guest post by Robert R. Johnson, Ph.D., CFA, CAIA. He is a full professor of finance at the Heider College of Business at Creighton Read More
Warren Buffett was on Squawk Box this morning. He was asked a number of questions by Becky Quick and the other hosts. It was one of the best interviews of Buffett I have ever seen. He talked about a wide arrange of topics. I did not catch the entire interview but I saw most of it.
Here are some of the topics Buffett discussed:
Banks and Bank Tax
Buffett has trouble understanding the rationale behind the bank tax. He thinks that the banks should not have to cover the losses the Government incurred on Fannie Mae and Freddie Mac. He repeatedly noted that banks such as Wells Fargo’ current ROE is lower than the ten year average ROE.
Buffett talks about the bonuses and says that people are not differentiating between the outrageous bonuses that the investment banks are paying out and the more reasonable ones the commercial banks are paying. Buffett also stated that the money the banks make should not go to management or the Government, rather it should go to the rightful owners, the shareholders.
Buffett believes the Government should not backstop banks including Goldman Sachs and Morgan Stanley. Warren says that most banks got into trouble due to top management. A solution for the too big to fail problem would be for CEOs, recent former CEOs and their wives to be basically wiped out if they need a Government bailout. Directors should also be penalized if the banks need a bailout. This system would create an incentive for management not to take undo risk and rely on the Government if they make foolish decisions.
Buffett stated that it is hard to set a defined ratio of leverage that would ensure banks are more adequately capitalized. There are ways to measure leverage and ways to get around it without breaking the rules. He believes that we need a regulator to monitor the banks.
Buffett believes the regulator should be the fed. He strongly supports Ben Bernanke and stated that if he could, he would vote twice for him. He thinks Bernanke did an excellent job during the “economic pearl harbor” of September/ October 2008. Buffett believes that if Bernanke is not confirmed in the senate it could spook investors and cause a selloff in stocks.
On The Economy
Buffett realizes that most people don’t like the health care bill, do not like congress, and the economy is bad. He believes all these factors converged to hand Scott Brown a victory in the election yesterday.
Buffett believes people had too high expectations on the economy and Obama tried unsuccessfully to lower these expectations. Buffett does not expect the mood of the country to improve until unemployment comes down, which may not be for a while.
He also understands the frustration of the American people with the stimulus bill. He is frustrated himself that there are more than 8,000 earmarks in the bill.
He does not agree with Paul Krugman that spending more money would help. Buffett also stated that he is skeptical of the job numbers that economists say the Stimulus bill saved.
Buffett talked at length about the Kraft deal, and how he thought it was a bad idea. I see that someone on Gurufocus.com wrote a good article about the Kraft segment of the interview already. Therefore, I will omit commenting on it, in this article. Here is the link to article discussing Kraft.