Warren Buffett: Mistakes Made At GE | CNBC

I know you must have had a like a book of GE questions for Warren Buffett today Becky I'm from from plenty of G for you from viewers and from you and from us but what do you think of that Beck so a a former person that ran the account yeah is that they need someone maybe to come play not a bad idea exactly the faz be a person that ran the faz be to come in and maybe they can sift through you know the power systems and the in the pension issues that are you know who knows how those things were being yeah you know I'm hooked in the question once here yeah Warren loved uh loved the CEO gave a huge the former CEO and remember that that big sort of at a time when GE really needed Buffett or Berkshire and in terms of saying you know that big investment that helped GE a lot Warren looking Becky you can ask all these questions that I wonder if looking back on it Warren you feel like you were duped to some extent by Jeff amount no I know I don't feel that way my job is to make up my own mind on things and we're talking that investment was made at the very end of September or the first days of October of 2008 and GE had been funded with extraordinary amounts of commercial paper and the commercial paper market ended and they they really had a problem and and and there was no question in my mind that that it would be temporary if the government got his act together and and and the economic engine got back on the tracks which I was sure it would and so we did buy a three billion dollar worth no piece uh preferred warrant and and when it came with the ten percent it came with a ten percent it came with a 10% coupon callable honored that we made some money on it we didn't make as much money on that as we made on our Goldman investment Warren looking back I mean there was a time where I think him out had your full confidence looking back on it do you think that that was misplaced if you revised your overall viewpoint of how he led GE over the over his tenure have you looked at that and and revisited that and think wow this wasn't what it appeared to be or or no well I I keep looking at GE I won't come and you know Jack Walsh is a very very good friend of mine that just a friend of mine and clearly there were mistakes made and they made mistakes in long-term care we made mistakes in long-term care they weren't on the same to the same degree but but that turned out to be a huge one and I will read their 10k when it comes out I'll read it very very carefully it'll probably take me all day to do it but I'll do it and and and no insurance cost them a lot of money and its cost other people a lot of money you can make big mistakes in it I say we made yeah sorry I've just seen some more stuff here I'm just wondering what Beck yeah you see we're trying to get through all the stuff that GE said and I don't know whether to go with some mark grant did you see this from from beer I don't know what this means that maybe there's going to be I have not gotten that yet look back I think you do but there's gonna be we already knew this this we already knew this the GE was going to restate earnings for 2017 that for both years that they day we don't know the extent of it yet but they are going to be restating earnings in large part because of how they were booking some of the the issues at power how they were booking revenue at power and some of the things that were coming through what would your comment be not knowing everything that's got a lot of flexibility when you're when you're booking that either construction of progress or potential service contracts everything I'll be very interested in what they have to say on that you know the I would say the the accounting GE has not been a model at all in in recent years but you can make mistakes and something high insurance or as early big time and long-term care has probably been the biggest single element of miss reserving and insurance throughout the industry and they were in a big time and I was but I was staggered by the amount of it by the amount of this most recent issue where they had to call up the reserves the tens of billions of dollars yes yeah and and and and the question gets to be I mean it was the Kansas Department the supervising them and that doesn't happen overnight so be interesting to see just exactly what the correspondence was between the Kansas Department and the company and all of that sort of thing yeah he is a wonderful oh yeah how wonderful how to the tune of buying how much percentage of the common stock right now how wonderful are you feeling about it Warren no we haven't modern a we have modern a stock why are you going to in fact we said we solidly sold our stock we had a small amount of stock that came from the warrants on the converse company that preferred and and we sold it I know we sold over the twenty nine whatever that was a while back it was a relatively small and that's on sale is on sale today we did get questions from yeah we did get in 1458 as the latest tick we did get questions from viewers I believe one came from the rational walk that asked very specifically has the company approached you would you be interested in buying parts of this there's another question that came in saying would you be interested in buying parts of either General Electric or Siemens particularly if it was something that would help you in your self healthcare initiative its star investor vacuous star investor with liquid assets learning less than projected inflation why not buy a cash generator industrial like GE or Siemens health care unit this could strengthen the healthcare partnership with JPMorgan and Amazon as early diagnosis provides long term savings to fix healthcare we wouldn't buy a healthcare business to try it in with the healthcare initiative would you buy it just simply because of prices on this if we like the business and the price was right we would we could write a check for cash and that would apply the GE they've got a few big businesses I don't think they want to sell them but they have some smaller units that they're interested in selling but we're always in the market for a big business that we can understand that we like and we think that we've got the management for and so on do you understand GE I don't understand the whole place no but I think I'd be capable of understanding given businesses or or managers that we have at Berkshire would be capable of understanding those payback is they have not approached us about anything just hurting business I've got a smaller go ahead yeah sorry Warren and I'm gonna let you go but but just for the record GE is I don't know they're do you see the speck you there what are their they're worried about how we're reported so the accounting rules this is not relate the Restatement of earnings does not do to the SEC investigation that's due to new accounting rules every you know I guess after the tax every company is required to do it well so they're worried let me let me ask I've been very confused by this I mean and maybe we can catch through some of this those accounting changes of the counting changes that we were just talking about with Warren at the top of the program accounting changes that will affect what you are doing going forward is that a reason to restate 2016 and 2007 2017 earnings well not just from what you done this morning oh god I don't know I think about it they obviously they miscalculated their insurance reserves in a big big way we're talking about that is not Restatement of earnings on any of these issues these are things that G has already said on this that that we're talking about from that front if in process business or a modest amount capitalized as possible earnings in the future and we're put on the books for in terms of service contracts or something like that anytime you get extended pieces of business as you get in aircraft or engines and that sort of thing there's a lot of flexibility in when you record both costs and revenue and and my guess is the SEC is looking at that I don't know a thing about it in that respect but I guess is that they're looking at that and I've seen companies use much different and enough referring to General Electric at all I've seen a much use much different approaches to contracts that extend over years and and how they treat the first few units which obviously have a higher cost because you're just getting into it there's a lot of flexibility and whether you have a conservative or an aggressive management can determine the earnings for at least a few years hey there thanks for checking out CNBC on YouTube be sure to subscribe to stay up-to-date on all of the day's biggest stories you can also click on any of the videos around me to watch the latest from CNBC thanks for watching

Channel: CNBC

Views: 279,181

Keywords: CNBC, Mad Money, Squawk Box, Power Lunch, Opening Bell, Closing Bell, Financial News, Finance News, Stock News, Trading, Investing, Stock Market, US News, World News, warren buffett, warren buffett interview, warren buffett cnbc, buffett, buffett interview, berkshire hathaway, annual shareholder letter, warren buffett shareholder letter, shareholder letter, warren buffett buying criteria, buying criteria for deals, general electric, buffett on ge, warren buffett on ge, ge

Id: TM9ztFadLLs

Length: 9min 36sec (576 seconds)

Published: Mon Feb 26 2018