Business

Did Warren Buffett: Tough World For Private Equity; Apple Should NOT Buy Tesla

Aug. 30, 2018 – 2:56 – Point View Wealth Management’s Managing Director John Petrides discusses why he disagrees with some of Berkshire Hathaway CEO Warren E. Buffett’s stock picks and which stocks he would invest in.

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Warren E. Buffett

Did Warren E. Buffett miss opportunities in the tech sector?

Transcript

I want you guys to move your attention to the Transport's at the bottom here of all the major indices is taking the biggest hit as far as percentages are concerned down three quarters of a percent or eighty eight points. Perhaps some of this has to do with this fear that there will be more tariffs on Chinese goods. And they of course may slow down their economy and stop buying our airplanes. Maybe our choo choo trains who knows. But we're watching all of this very carefully because the Dow the NASDAQ and the S&P and the Russell are struggling at this hour. But they're off the lows. So you heard much of our conversation with Warren E. Buffett whose most recent top Berkshire Hathaway holdings are apple. Wells Fargo Bank of America Kraft and Coca-Cola. But today's count down closer doesn't always agree with Buffett. He's got picks for us that include one of the companies that we mentioned and one that the Oracle of Omaha recently sold job trainees as managing director of. Wealth Management joining us now. Was there anything you agreed with Buffett on.

Yeah I think if you're confused by the market today with what's going on in China tariffs and where the Fed may be use this opportunity forget about the macro and focus on company fundamentals. That's what Warren E. Buffett is doing now. He's doesn't care about the short term. He's focusing on the cash flow of the business. And what do you want to pay for it.

So let's talk about the stocks that you disagreed with them on. He sold one and he is not in another.

You tell me what conceptually I think it's the same idea. Big companies have strong balance sheets that general ought to generate a lot of cash flow. You know we're looking at it from a different way. You know his foray into IBM many years ago was because they were buying back a lot of stock. IBM is very different today. It was amazing.

He actually thought it was one of these blue chips that was a great company going through a tough time and that's when he likes to buy stocks the most right.

And I say that they're further along in their turnaround today than they were three years ago. And if you look at three years from now I think the stock's going to be significantly higher. Plus you get a four and a quarter percent dividend yield while you wait that he sell too early.

I do believe you did. OK. He also said he should have bought eBay right.

Because it has markedly changed the productivity of this world and in fact with his own glide charity luncheon by putting it on eBay. He reached the world whereas before it was going for twenty five hundred bucks. Three thousand bucks now goes for three point three million because the world's richest have access to the bidding process.

Well I think an interesting comment that he made at that he goes there's a lot of stocks out there that you missed. Right here is to your point is the arguably the greatest investor of all time and he's out there meeting hey you can't swing the bat at everything. So you focus on what you know Warren E. Buffett has historically avoided tech because it's not in his core competency tech either. It was a tech company. Now it's sort of an auction house distribution company it's changed its model there when it was in 1998 when the stock was through the roof in a dotcom bubble. So I think that he just didn't focus the penthouse.

Warren E. Buffett: We do not want trade wars

Aug. 30, 2018 - 5:35 - Berkshire Hathaway CEO Warren E. Buffett discusses why he dislikes quarterly profit forecasts and how trade tariffs are impacting his companies.

Transcript

There are fewer publicly traded companies for the past decade. We've seen thousands to be acquired or go out of business and some would say that that means fewer employers to choose from. But also you and Jamie Diamond of of JP Morgan have come out and said you know maybe part of the problem is forcing companies to give quarterly guidance and that that tends to destabilize things and the Business Roundtable has said they would rather see bi annual twice a year and then on top of it. President Trump has said he'd like to see that investigated. What would that change the one of the questions. You know I started not investing but really when I was 12 but when I started visiting companies in everything when I was in my 20s one of the questions I used to ask then I still ask now.

If I'm looking at your company and you're running a public stock I say what would you do differently if you owned it all yourself and you could sell it and your family had to keep it for 50 years. And sometimes the list is quite long and sometimes it's quite short of Berkshire. I try to be able to run it so I can say the answer is nothing. But I believe in reporting frequently to your owners. I do not believe in giving guidance because I have seen guidance lead people who I would love that marry my daughter or live next to me play games with numbers. And once the CEO has committed to earning a dollar and seven cents per share people beneath them are going to do things. I mean it sends a message to the whole organization that the most important thing to do is to the dollar and seven cents per share this quarter hit it and people cheat. I mean you know they do things that are legal but some of them do things that actually they couldn't put on the front page of the paper and I've seen it I've seen them many times.

That's called short termism.

They're thinking in the short term that they just their investor relations department tells them you should give guidance the analysts want to give guidance. And. I don't know what Berkshire is going on. I know how our businesses are doing. But you know a hurricane that could change are insurance figures I guess. I don't get it. I don't care about building the businesses but incidentally I think most CEOs do. But I do think they get pushed and once they start giving it then they feel they can't quit doing it and then they decide I better give all number so I could always be that. And then they decide you know we aren't going to make it this time so maybe we'll offer a special deal to Wal-Mart or something to move with some extra goods that would normally move them a quarter. It's poison.

There is a short term possibly longer term situation with the trade wars and the tariff wars. You have a broad span of more than 80 companies in different industries. What is the number one affect that you have seen.

Well I would say in terms of dollars it might be in steel. But but but it affects our companies in different ways. I mean. The newspaper business as you know is struggling and there's a newsprint. I think they just I just. Went a few days whether it's permanent or not. But but terrified of terror blunders. Yeah yeah and it was. It was. That was a story about it was instigated by a domestic producer. But we need it newsprint. To keep putting out papers and it's been it will be a significant price increase but that's happening in various ways in various spots. I talked to the precision steel guys who on that journey and they told me already they were saying this was back in May at the Berkshire getting that they were seeing prices spike and that it would eventually have to pass that cost on to customers eventually eventually. Quickly has that happened to some of your peers that you've mentioned. And that's a small but it's happened at my tech which buys a lot of steel. I mean it buy everything. The camp Benjamin Moore the price of that can I think it's gone up 20 or 30 percent in the last year.

Do you think though at the end of the day President Trumps tough rhetoric on all of this may ultimately end up in a fair trade deal here and there for the United States.

Well also I mean this is negotiating in his own way. But the word we do not want to have trade wars over time. And on the other hand you don't want to give away the store. So it's it's just a question of how you do negotiate but trade benefits the world. It benefits the United States and China benefits everyone. Can you name it. We will not have as product of the world for your children and grandchildren. If it's a world of lots of trade barriers there's no question about that. How they got that. So it benefits the most people. It's different. There are different ways of trying to get at that. But but the the goal has to be. Something where goods flow. From around the world seamlessly. And incidentally we have. 12 percent of our GDP or close to it in exports. Now in 1970 only 5 percent so we we saw a lot of things to watch.

The president's particularly going after China. It is not news that China steals intellectual property has Berkshire or any of its companies ever discovered that China or any other country was stealing intellectual property.

Not that I know of. No we've. Done more and more business in China. No I mean China is a great market for so not Dairy Queen Blizzard technology. We've got a we've got a lot of Queens in China. They. Just. Treat only but I think there's 500 or so dirty in something like that in China.

Warren E. Buffett: It’s a tough environment for private equity

Aug. 30, 2018 - 2:16 - Berkshire Hathaway CEO Warren E. Buffett discusses why it’s a tough environment for private equity.

Transcript

Top with the markets at this hour. Yes we're looking at a pullback but the entireU.S. market. We've told you this has been on a tear since Election Day of 2016. But take a look at this. Warren E. Buffett's Berkshire Hathaway conglomerate home to everything from Dairy Queen Benjamin more pain to Burlington Northern Railroad is up forty three point four percent since Election Day far outpacing the S&P 500 gains over the same time of thirty six point two percent. And just narrowly surpassing the Dow's forty two point five percent rally. I just sat down with Warren E. Buffett arguably the greatest investor of our time because he's in Manhattan to have a steak and cake lunch with the winner of his annual charity lunch for the glide Homeless Services Foundation.

You have to hear what he said to me about being and the widespread optimism that is driving stocks higher and higher every financial expert trader CEO that we've had on the show recently has said we see nothing on the horizon that looks like it would derail a very strong and fast moving train of an economy to you.

Well they don't know and I don't know the symbol you can pay attention to it. It took any attention to me if I ever start to tell you what the market is going to do. Figures inevitably are really set in.

Some asset valuations and I say some because it depends. Look a little rich to you. Well I would say that American businesses relative to interest rates and everything is relative and just where you put your money if you don't put it in stocks. Rather all businesses than bonds by some margin to see people in private equity for example.

Well I've got a lot of money to invest. And it's a much tougher environment for them because if you've got a trillion dollars and somebody is paying you a fee even when you haven't taken from them in many cases which many people don't know but they they charge them a fee to be in line. And the pressure to put that money out because you want to raise another for next time. So you've got a lot more competition on the demand side coming from private equity. That's just the way the world works and investments. So anything that works gets pushed and pushed and pushed because there's money in it.

Warren E. Buffett on Apple investing in Tesla: It would be a poor idea

Berkshire Hathaway CEO Warren E. Buffett discusses how he isn’t giving up on Wells Fargo and why it would be a poor idea for Apple to invest in Tesla.

Transcript

Wells Fargo West Fargo writes a lot of mortgages. WARREN In yet another revelation with Wells Fargo. They foreclosed on 400 homes by accident because they didn't realize some of these owners deserve loan modifications. And just in the last couple of hours they've had to fire a bunch of brokers who were fudging on their meal receipts. At what point do you put aside the investment opportunity and say this is so embarrassing and there is incompetence at some levels. I'm out of this stock. People did something wrong. They had the wrong incentives initially. This is different things around.

I will guarantee you that if you go through everything Berkshire is doing today with three hundred and seventy thousand employees. We've got at least six things done that are wrong. I hope we catch them fast. I know we don't. Jim I'll do something about it but we've got 300. You do not have a town. Three hundred and seventy thousand people you know and leave your doors unlocked.

So you're not there yet with Wells Fargo. Apple I know that you've been buying Apple stock and more and more of that you got more than 56 billion now. I have to ask you that Apple has been suggested by some analysts were pretty smart that they should get into the electric vehicle business and maybe do so by buying Tesla. You and Charlie Munger vice chair did this years ago with the idea of buying electric vehicle an electric battery company. Would you suggest that Apple get into or would you support it if they bought it.

I would support what Tim Cook does about it. I think there would be a very poor the auto business. It is not an easy business. And incidentally that the auto business is different than some but. It. Is your premier with Google on surgery or premier movies on Netflix or whatever it be. There's a huge first mover size and no network effect and all are working for you. You can win in one year and you lose the next I mean you've got. A dozen big companies out there that reassures that they're going to keep coming they copy what you do. People move from one year to another. You don't worry about the fact that you know your whole life was on the iPhone as opposed. You don't want your whole life to be in one corner or something. It's not it's not. There's not going to be a permanent damage.

The always colorful Elon Musk the CEO got into a little trouble recently. If one of your CEOs did an Elon Musk type of tweet I'm going private. Of course they wouldn't go private but they revealed something they shouldn't have. How would you have handled.

Well I think I think what you do if you misspeak and I can do it with you or somebody I mean it. If you misspeak. You correct it immediately. And if you got the stock was trading like crazy. Come on. Three minutes later. And don't say say I misspoke when I said London you cured. I meant to say I really think I can get funding into something with bitcoin.

You and Charlie have told Fox Business and made news calling it rat poison rat poison squared. Has anything changed to make you take a second look. It will come go bad. Andy stout well you're not coming to a bad life. You're 88 years old. We just got word from Berkshire that you're not going to be hosting the MBA programs anymore. We had been able to see what we called Buffett you Buffett University where he ties a lot of students and took pictures with them. I mean you were dancing with some of them you were doing wrestling poses in Charlie's Angels.

Are you feeling OK. I feel great. And doctors at home and wife are shaking. Well it's a few years ago. I know. I I I love I have to work. But.

The only drawback. And I did the students for 60 some years in different forms. I love that last year. But. It does require committing yourself six or seven or eight months and I never would not would want to not show up or something sort.

So I just decided to pack it and my dad used to say at 88 to his patients. The mind gets soft but the arteries get heart so kind of balances itself or whatever it is it's good.

And an aide is lucky in China. So I got to age going for me and the year the engineer. So. I feel great.

Warren E. Buffett on eBay: I probably should have bought the stock

Berkshire Hathaway CEO Warren E. Buffett discusses his support for Glide, an anti-poverty foundation, and how he should have invested in eBay.

Transcript

Happy birthday. Thank you. Thank you. Now 88.

Thought about lying about your age. No

never. Actually I might say I'm older. Actually you could get all these I mean people doing things for you. Oh I would imagine.

Well and they have low expectations to this glide launch luncheon is 19 years old. The first one went for twenty five hundred dollars. Now we're at three point three million. What happened the Fed says there's no inflation. That's to runaway but happened between then and now.

I hope now that the CPI will distort things. Now what happened. Well one important thing happened was was eBay. You know our audience was limited to a group for getting together in San Francisco for a dinner to start with. And that in effect. EBay made that dinner table worldwide. So that was dramatic.

Isn't it amazing that eBay now that I think of it the access and the reach that it's given people for things like this to sell things absolute is it. The world has changed so much when they say productivity is only going up a little bit or.

I'm so much more productive now than 20 years and I'm not due to the internal factors but the facts I can learn in seconds that took me hours to dig around in the library or you know just did writing my own report. It saved me hours and hours and hours and hours. What you have ever thought thinking that eBay has done so well for this charity to buy a stock I probably should. Have.

Missed a lot of buzz. I. Buy. Are Being Agard in the 20th century to. Help Berkshire.

Well I'll tell you as we look at this the money three point three million will go to homeless services or the Glide Foundation. The economy has done so well people say it is strong. It's getting stronger. So by that logic. We would expect to see a lesser demand for homeless services are you seeing that at all.

Oh no. And and glide takes the people of the world's forgotten about and given up on maybe they've given up on themselves. And Cecil Williams for more than 50 years and running glide and never giving up on anyone.

There are millions of jobs out there though. However you could also argue and that's terrific that you could argue that the quality of the jobs isn't necessarily incredible. Well paying and some don't come with benefits and the wage growth is stagnant. Why is that right now.

But you're right about what you say. The problem is. Not the 25 year old is trainable or something happens to their job but take carpet installation that nobody thinks about everybody. We'll tell you if I talk to our carpet people everywhere in the country they need Carpet installers. They need truck drivers and they need people in jobs that pay 60 or 70 thousand dollars a year. We're paying we've got a school in Denver that our home builder contributes to. Just to teach construction skills so. That. Matching everybody up. But some people. Do not get that luxury draws in markets. And we live in this incredibly prosperous society. And like any rich family we should take care of everybody.