Warren Buffett Talks About His Outlook On Markets, Tax Reform, Pilot Flying J And More (Full) | CNBC

we are here this morning with Warren Buffett the chairman and CEO of Berkshire Hathaway and warm we want to thank you very much for your time this morning thanks for having me you know we're just coming out of this story about Las Vegas and while unfortunately it seems that we as a nation are becoming more and more and you're hearing about shooting stories this one is different in the scale and the scope of it and the stories that are coming out right now you have any reaction to it you never should get in your inner Judas and the one thing I would say is that I that I heard that the shooter got off 200 rounds in 90 seconds or something like that and I think the Las Vegas Metro police did an incredible job and getting there I mean it was when somebody's shooting at that rate the police force may have saved maybe even hundreds of lives by reacting as fast as they did but you've got 325 million people in this country and and a certain percentage of them their brains don't work like brain sugar and you see a situation like this develop obviously our hearts and our thoughts are with the people of Las Vegas and the people who have traveled around to be there today but we are talking about business - and as much as we should not become inured to this if you look at the markets it's hard to see much of a reaction the markets have ignored just about any potential bad news lately with the Dow setting another record yesterday and with eight quarters in a row now of gains for the markets is that a market that makes sense to you do valuations here make sense well the valuations make sense with interest rates where they are I mean and in the end you you measure laying out money for an asset in relation to what you're going to get back and that and the number one yardstick is US government's and and when you get to 30 on the on the ten-year I think stocks the blue considerably better than that so if I have a choice of the - I'm gonna take stocks at that point on the other hand if interest rates were on the ten-year were five or six you'd have a whole different valuation standards for for stocks and and we've talked about that you know for some time now it's been years that you've been talking about how this is in relation to gravity pulling the markets down and how it's not happening here yeah interest rates your gravity if we do interest rates were going to be zero from now until Judgment Day you know you could pay a lot of money for any other asset you would not want to put your money out of zero yeah and I would have thought back in nineteen I'm in 2009 that rates would not be this low eight years later but it's been a powerful factor and the longer it persists the more people start thinking in terms of something close to the the race they've seen for a long time so the one thing I'm sure of is that over time stocks from this level will beat bonds from this level and if I could be short the 30-year bond at three percent or something in long the S&P 500 and just have it put away for thirty years stocks are gonna fire off perform bonds and the question is which variable is gonna change and everybody expects interest rates to change but they've been expecting to quite a while so does that mean I mean if the one factor is interest rates we know that the Fed is looking at raising rates it's going to do so slowly and gradually over time at least that's what they've been telegraphic to this point would you bet on that continuing for the next couple of years I mean two point three percent to 5 percent is a long way with a long way when you're moving in a quarter point increment oh yeah that'd be a long way and I might I would I would guess I don't try and guess the stock margin by businesses I like but if I were to guess if if interest rates if the tenure moved up to five percent I think stocks would be somewhat cheaper if but you're not betting that that's going to happen in the holiday all the time I'm gonna own stocks I mean it it's been so wide I've written about it in their annual reports I mean it stocks them then so much more attractive than bonds for a long time now and and that's partly intentional on the part of the Fed I mean they the one assets to increase in value and and the way to do it was to reduce that gravity force of higher interest rates the Fed has been sounding a little more hawkish even Janet Yellen has been sounding a little more hawkish does that concern you are people getting complacent thinking rates are going to be low for an extended period of time well I think they expect have been great but the question is how much I'm being it the three years from now interest rates here 100 basis points higher than the stock stocks it will still look cheap at these prices if they're 300 nerve 400 basis points they won't look cheap and and yet a Yellen doesn't know what she would do three years ago I mean he's got she's got more of a job than that's that's simple factor of the stock market it's really interesting because the Fed is said that they'd like to say 2 percent inflation I mean no they're fairly recent that was Paul Volcker would not have swept us either murdered in the eighties but if the US government is borrowing at ten years from you at two point three percent and and their own instrument the Fed is saying we would really like money to become worth two percent a year or less they're not promising you very much in terms of real terms were saving right so Janet Yellen you said she's got a big job the question is does she keep that job or does president Trump appoint someone else and it seems like two of the leading figures right now are either Kevin wash or Jerome Powell as an investor do you have to spend some time thinking about who's running the Fed to think about what stock prices are going to do if interest rates are the most important factor yeah I I I don't spend time thinking about but it wouldn't do me any good to think about I wouldn't know the answer in the end and most of the time the Fed is not that important occasionally it's everything if not last eight or nine it could be the only game in town there was only one person that was a number of 2008 could walk out like the sheriff into the street and say you know that that that this isn't going any further we're going to do whatever is necessary and have the power to do it I mean the Fed has got is of enormous importance during a panic and if people tend to hang on their every word in between we don't pay any attention to it mm-hmm but you have said that interest rates are the most important factor so anybody who's trying to play the market and figure things out maybe not as long of a tournament investor as you're going to be what these things should be thinking about this well but if they think they can figure it out they might go play in the bond market get over to the stock market so the but I can't remember a decision we've ever made based on the Fed except for the fact that I felt that Bernanke and Paulson and Geithner but I felt the Fed would do the the right thing in the fall of 2008 we had an incredible economic machine that was in the hospital and the Fed could bring it out I realized that interest rates are not something that you often think about other than on a very broad scale you've also said that taxes aren't something that you think about other than on a very broad scale is that the case this time around well I think about them plenty right now because we may or may not have a a change in the tax code and we have lots of stocks with lots of games and we have a few stocks with with losses and here we are in October and if something happens the change of the tax rates significantly on January 1st it would pay me something that they would reduce rates on capital gains or corporate rates it would pay me to sell the losses now and defer the gains until next year and I think there's a lot of that going on because I think there's an expectation that if they reduce that if they have a tax act that will be they will cut the race certainly corporate rates and be kind of foolish they have a gain now and pay 35% tax on it if by waiting a few months you were likely to pay 25% so it actually very seldom enters into our thinking on balance we'd rather sell things with losses the game but but right now we're sitting at washing because it's within three months actually less than that we'll know the answer on this as to whether this was the year to take losses and not games and we've got actions on both sides that we would take I think so you're good that you're actually stopping what you're doing as at Berkshire this is not just your personal account at Berkshire you are actually holding off potential lobster sales potential sales and realized losses and realizing losses so that's an actual change in your behavior that I've never heard you say anything doesn't happen very often that there's a during the month of October with a major Tax Act being a real possibility who knows what other it's a 20% chance 50% yet but one thing I know about I'll know the answer within a month or two I mean there's not that many days left to legislate and and and I would feel kind of silly if I realized a billion dollars were the gains that paid 350 million of tax on it if I just waited a few months it would have paid 250 now if enough people are doing that that may mean that the markets being affected Charlie 16 right that's what what what is the broader play in the markets as a result because if you're doing it you've got to imagine lots of people and I think that's true I think that's true talking about billions of dollars of potential sales well maybe hundreds of billions he talking about people that it would it would tend to depress stocks that have behaved badly because people would be taking the losses now and it would tend to defer gains and reduce the sellers currently there would be in stocks with very large appreciation so how can a it's an actual factor at Berkshire and it's very very very seldom and by 87 years it has ever factor so what what might we see if but first of all what do you think the odds of a tax plan getting passed are well I personally think they're higher probably than most people think because I think that that having had the health care bill go the way it has and just generally and no infrastructure if you take maybe the three big items this is the only one less to do this year and I I would think the Republicans controlling both houses and the presidency they would not want to have a shutout in the first year and of top priorities and I think they can get it done I mean I it's not a tax reform act it's the tax cut Act and and I I think that any politician that that can't pass a tax cut probably to the wrong line of business a different thing with the Health Care Act but I think there could be a lot of compromise and I think it could be bipartisan to a degree okay I know Joe has a question but before we get to war and I know that we've had together let's get that back in before Joe asks this question but Joe make sure that this working before is that okay I think so okay Joe go ahead try that out I could what Joe asked whether it's okay yeah you can if you don't like the question you can say wow I don't know hey Warren you know I'm jealous I'm already practicing yeah we exactly you know I'm jealous envious but but I see sometimes I see you do things where I mean I would if I could by Flying J I wouldn't care if I ever made any money I would just like to own Flying J I'd like to oh yeah do you ever do things just cuz you can just say I mean now you're gonna make money on this or I like see like you lit with Dairy Queen you buy Dairy Queen I don't think you're trying to make money there you like Derek wait what about See's Candies you like C's Kent and I want to own why flying J's I love those places there's showers there's restaurants there's I mean you're out on the road you're like a cowboy and with the truckers and everything you do things just because you can I think right well they Joe if you feel that way I mean bring money I'll send you a map of all the locations and you do you you stop there right Becky have you've been at a Flying J I mean there's a lot of times I have I've been in plenty of them it's like an oasis there's there's one right on the interchange where you get off 295 in New Jersey and get on to exit seven and there's one right there but I was just talking to the Flying J CEO the pilot Flying J CEO who happens to be here and will be our guest no luck I just he just buys cool thing to Indiana back I mean so my question is does it have to be in good a good investment Warren you just buy whatever the hell you want because you like it well thank you know they're not mutually exclusive I I do like the I do like the products of virtually all our companies I suppose have we ever bought a funeral parlor something I wouldn't be as in thing but generally speaking I I like our product so but I kind of like good economics to go along with them do know you do I mean obviously you've been the house smart are you in terms of like I mean how profitable is like Geico I mean you do you you got an eye for things that are really really profitable but there are times where I just wish I had a lot of money I just say you know what I really like that place and you just you know I let remember that guy Victor Chi am I liked it so much I but he bought the razors because he liked the way they said maybe you know maybe when you get to a certain point you just do that you know well if you do it if you do it you do it with your own money and not Berkshires but III wouldn't argue against that I mean it if you have a lot of money and there's something you like it it isn't profitable you buy it because you know bite with Berkshires money you buy it with you most of Berkshire you own anyway Buffett what are you talking about - how much of Berkshire is yours that what well i every single share is gonna be giving away I know no I know I know well but it's fun you're here you know you have to do cool things it's fun they did absolutely I mean I mean the high point or bricks yo I sent you a brick I've never want to say this publicly but you really not show the proper appreciation no thank you not you know yo NetJets and i mean they like it would it really break the bank if you send me a few hours on a netjet plane would you know you sent me a brick instead well I didn't get any response from the brick so maybe I'll try on that judge I can't see your face it was not good for anything it was like a one of those you know Taco Bell card that's been all used up anyway sorry Thanks I do it very quick guards yeah all right we are going to be back in just a moment we're gonna take a very quick break here good morning everybody and welcome to squat box we are live in Omaha Nebraska this morning with two special guests we have already introduced you to Warren Buffett who's the chairman and CEO of Berkshire Hathaway but joining us right now is Jimmy Haslam he is the CEO of pilot Flying J and just this morning in the last 15-20 minutes there was a deal that was announced that Berkshire Hathaway is buying a 39.6% stay at stake in pilot Flying J Jimmy thank you very much for joining us thanks for having us all Becky so how did this deal come together what would happen explain how did you two meet we have a mutual friend Byron trot who Warren is actually long known longer than we have and Byron's company BDT owns 5% of our company and he introduced the two of us back in May and over the last several months were built were able to put together a deal that we think makes a lot of sense for both companies let's talk through that deal a 39.6% stake that will then go to an 80% stake in the year 2023 why why that structure yeah I think it's 38 points yes why set up that structure I mean Warren this is not a situation where you're short of cash well we've set up a lot of different structures that that what the managing party would like to have and you know with the bumpkins we did it in 1983 it's the same structure so there's situation in terms of their family and their partnership and everything made this logical and and we have this two-step arrangement and we've got other two-step arrangement that Marmon with the Pritzker family we had a three-step arrangement yeah so we try to fit what the solver would like getting know with families everything you can you're gonna have different arrangements Jimmy this is a situation where this is a family-run company for almost 60 years we're talking about the number 15 on Forbes list of private companies in terms of size 750 retail locations in 44 states some of the net metrics are pretty amazing fourth largest tanker fleet in the nation just by what you're sending around to make sure you have enough fuel at all those stops talk about the company how you built it and yeah I think it's it's like a lot of companies Warren his bald it's a family-owned family-run company started my dad in 1958 with one gas station we've changed over the years gas stations see stores truck stops and we're now a huge distributor of fuel gasoline and diesel fuel we sell more diesel fuel over the road than anybody in the United States and it's a big logistics company every 22 seconds we drop a load of petroleum somewhere in the United States or Canada at one of our stops also a big food company will sell over a million dollars in food and over two billion dollars retail this year when 44 states and US and Canada well you must have a pretty good idea of what's happening in the US economy and even any given point given some of those metrics yeah Lauren and I were talking earlier I think we'd say it's pretty good it's pretty good particularly strong in Florida particularly strong in California and of course Texas with the return of the oil boom in fracking is really strong so it's certainly better than it was several years ago two of the states that you just mentioned are states that have just been hit pretty hard by the Hurricanes that came through do you see a blip on the screen for that is it something that's picking up or how hurricanes are obviously very unfortunate for the people involved from a business standpoint it does create more business there there are homes that need to be rebuilt there's new cars being sold etc so our business is up substantially in both Florida and intact Wow why does Berkshire seem like a good fit for you long-term investor I think I'm right Warren of the companies you bought not equities I don't think you've ever sold one I think you told us is that right yeah I think that's right yeah long-term investor hands off he truly wants us to run the company wants us to maintain the culture and of course if there is an opportunity for us to grow the company substantially he's got plenty of capital so it's just a marriage that we thought made a lot of sense Jimmie's based in Knoxville and we bought another company in Knoxville 14 years ago Clayton Homes their employment has gone from 5,000 to 16,000 and they've seen me exactly once they might have done better if they had to go down to one dog but but Jimmy knows and the families know each other and and so they've got a chance to check and see exactly how much we do interfere with operations and through this I wouldn't know how to build a manufacturer at home or trucks travel senator we depend on management Jimmy you have seen some pretty phenomenal growth I think you increased the number of stores you've had in the last two years by 10% is that correct yeah we've been a growth company and like I said from the get-go and we have a pretty large market position now but we're always looking for opportunities Becky to grow either organically to grow to buy a single stop or last year we partnered with marathon petroleum on 41 stops in the southeast over the last couple of years we've added 71 stops and still think there's an opportunity to continue to grow the company where where are you not right now that you'd like to be we really were in 44 states we're not in Alaska and Hawaii in some of the northeastern states that are small or tough to get in for the truckstop standpoint so I think the growth will continue really in all segments of the country Texas obviously with the natural growth Texas has coupled with the oil industry presents I think great opportunities great Jimmy we want to thank you so much for joining us today and hope to see more of you in the future great thanks thank you appreciate you having us on we appreciate it Joan Melissa I'll send it back to you in the studio thanks Becky we got to go but send me how many is Jimmy Ben - I just wander out of the 750 I'd like to visit they're just cool anyway we will have much more with all but one John but one and when I when I just named one I said there's one in New Jersey I'd describe kind of where it was he said oh yeah I'm Bordentown your new exec just open one in Lathrop California hadn't done it yet that's a lot right next to our house see that's that's worth it right there just sink it Alaska be cool but people aren't really driving across so you know you gots a destiny it's not really like going somewhere if it but but think about a way we're gonna have much more off from Becky quick and Warren Buffett throughout the hour stay tuned welcome back to squat backs everybody we are live in Omaha Nebraska today and our special guest is Warren Buffett he's the chairman and CEO of Berkshire Hathaway we've been talking about a lot of different issues this morning more on one of the thank you for your time again but while you're here today it happens to be the same day that Wells Fargo CEO Tim Sloan is headed to Capitol Hill this has been a long messy process of trying to find out what happened at Wells Fargo Tim Sloan is just the latest person who's being called before Congress with this but already there's been a lot of santim theory before he gets there I want you to listen to a sound about coming from senator Warren who was speaking with Jim Craig Cramer recently on Mad Money go ahead and let's listen to what she had to say you know we had a hearing a year ago when John Stumpf who had gone on your program first one out of the barrel instead hey listen I take personal responsibility for what's gone wrong at Wells Fargo and then it turned out what personal responsibility meant was firing thousands of people who made 15 bucks an hour you know so we got John Stumpf in front of us asked a few questions stump is no longer the CEO of Wells Fargo but let's face it there's still a lot of folks running Wells Fargo who were there at the time of the crisis again that was Senator Warren speaking to Jim Cramer of NAB money very recently talking about what he can expect coming in today what do you think about what Senator Warren has to say on this front well I didn't hear all but but she's absolutely right that you should send the situation to Solomon I had 8,000 people and four or five of them that caused the problem and the the job is to remain this remove the stains from almost all of the 8,000 and get it where it properly belongs with the people that either perform the acts or condone them after they were performed and that's what we did at Solomon I think that's what they've been working at it at Wells and you can't do that necessarily in a day or a week sir you can't do it in a day or a week but it's been quite a bit longer than that would you say that the actions that have taken place to this point with John Stumpf getting clawbacks with the the other woman who was in charge of the the banks getting clawbacks with some of those issues John Stumpf believing and new position new people being put in these positions is that sufficient in your view of what happened well I proposed actually in the annual report of Berkshire maybe four or five years ago sometime after 2008 that the problem is that the bank gets fined and the shareholders are the ones that pay for it they didn't have anything to do with it basically and and I suggested that that probably more extreme actions than Senator Warren in terms of clawing back all the directors fees for I think five years and I I think that you really want you want as much as possible you want the people that we're responsible to pay and you and ideally you would have the people that were innocent not pay but it doesn't work that way in the American judicial system I think that that if you have a company a very large company Berkshires large you have a hotline I think the CEO has to be very attentive to what comes in on the hotline now most of its silly self but there's there's real stuff comes in too and you get anonymous letters and you've got to you've got to follow through on the ones that actually sound like they have real meaning and clearly you couldn't have activity as broad as it was at Wells without without the hotline here and so somebody messed up and the job is to find out who messed up and and ideally to make the penalties these sites that have discourages other people in the future from doing similar things you know the part of the concern has probably been how the news has dribbled out over time when it comes to Wells Fargo that it wasn't just the fake accounts that we heard about at the beginning it turned out that was more widespread than we'd realized it turned out that there were auto insurance there was auto insurance that was being sold the people who didn't need it there was life insurance being sold to people who didn't need it that continual drib drab can just eats away at the reputation of everything sure and I I say when you've got a problem and you're gonna have problems I mean if you had a very big you can't have two hundred and eighty thousand people working without something and most things are minor but everything to get something systemic you've got a big problem and once you find out about it you've got to get get it right get it fast get it out get it over and and getting it right is hard I mean because you know you turn over rocks and sometimes you find some things and and and it's very seldom there's just one big thing going wrong at a big institution or something like that's going on so you you've got to get it right and the one thing you don't want to do is probably thing and be wrong about it a lot of the things that you just said are not exactly how things have gone at Wells Fargo you're the largest shareholder in Wells Fargo do they still have your your faith that are you still behind the bank yeah Tim Sloan has my faith and like I say it happen to me at Salomon above Solomon had my faith that that doesn't mean every person to Solomon had my faith after I got there and I got and I had some surprises I mean I was worried about surprises every day but the truth was that 99% of the people perfectly decent people they were just like the people working at Goldman or some other place and and somebody gone off the totally gone off the gone haywire and and other people didn't report it that's but when you find a problem you have to jump on it I mean that is the that's just basic you just said the temps alone has your confidence it is have you have you spoken with them before he goes before Congress well I actually I was in Las Vegas last week talking doing about 400 wells people and Tim was head of this it was their top group from around the country I did the same thing about five or six years ago four wells in Chicago I did it for B of a maybe seven or eight years ago I mean every now and then they they asked me to come around just so that people can see who owns a lot of shares so I I know I've talked about I must have talked for at least an hour just last week and did you talk to him at all about this is testimony before Congress I get I mean he knows that I testified many years ago and connection with Salomon both to the House and the Senate and I I told him something of my experience but it's all on tape and being able to see it anyway but I gave I told him what I would do if he has your confidence or we right to assume that you have not sold any shares of Wells Fargo only enough to stay under 10% which was something that the Fed requires and add since Wells repurchases their shares and we were right up against 10% that we we went over because they repurchase shares not because we bought so we keep we will sell enough to stay at around nine point eight but that's that's that's to avoid becoming a bank holding company act so we see the SEC filings that show you're selling we should not assume you'll find we're just keeping a little below 10% we've not sold to share except for that purpose okay you are a major shareholder in Bank of America - that's what's your favorite bank what's my favorite Bank well what's your favorite child but the Bank of America is not a sensational job under Brian Moynihan Brian had all kinds of problems what he came in I mean they were not of his own doing but he had a ton of problems and he had a lot of rocks that turned over and it costs a lot of money and he just set out step by step to bring the bank back and he's gone from two hundred and eighty or so thousand people down to two hundred and ten thousand he's gone from a run rate of expenses in the 70 billions down to fifty four billion to me he has really done a job and now we will be will be older than be of a stock for a long long long time we're gonna take a quick break right now I will send it back to Joe and Melissa we have much more to come with Lauren after this good morning everyone welcome back to squat box here on CNBC we have a special program where we're live in Omaha Nebraska this morning with Warren Buffett who's the chairman and CEO of Berkshire Hathaway we've been talking about lots of issues today from the market to what's been happening on Capitol Hill and Warren we touched briefly on taxes earlier but we didn't dig deeply into what you think about what's happening with this tax bill right now this is an area that you've written on that you've spoken on pretty extensively in the past you said earlier that this is not a tax reform bill it's a tax cut what do you think about it well I don't think I need a tax cut but for example the current proposal eliminates the estate tax and it's not a death tax they're going to be 2.6 million people died this year in the United States and there'll be five thousand tax returns that people the states that pay tax so if you start going to a funeral every month it's going to be 40 years on average before you go to one where there's any estate tax do it it's a very pejorative term the truth is if they passed the bill but they're talking about I could leave seventy five billion dollars to a bunch of children and grandchildren and great-grandchildren and if I left it to 35 of them they that you shop a couple billion dollars they could put it out of 5 percent to have 100 million I mean is that a great way to allocate resources in the United States because that's what you're doing whether through the tax code is you're affecting the allocation of resources so if they were lucky enough to come out of the right boom have the right name Buffett they could sit there and build tombs for themselves like the Egyptians Pharaohs never dreamt up they think they can do anything and and capitalism was all about intelligent allocation resources now some people say well you don't have to worry about that because they'll blow it all but if they blow it all that means that they you know that they've done some dumb things with some important resources and that's that's not good for capitalism I don't think it's good for the children I sure I sure don't think it's good for a society when there's a ton of money in equality to start with and so I would I think that's a terrible mistake for example however play devil's advocate sure you have three children who have foundations that each of them are running do you think that they're a better allocator of that money than the federal government i I do i but I I don't think that setting it up so children grand juror I let's say I died when they were 20 I don't think they'd be the same individuals that they are I didn't encourage that foundation program until they were in their 40s and and I'd seen what they done with their lives and they and they had a chance to live for a long time going to public school of living just like other people in all my heart live but I I just think that I don't think we should have our Olympic game twenty years from now be the eldest sons of the Olympic team currently so it's the dynastic dynastic I don't think I don't think a dynastic system with huge sums of wealth and bear in mind the wealthy are so much wealthier now than they were 25 years ago we're talking about the 400 now having two point four trillion against 90 billion 25 times as much money so you have sprinkled around you have these children and grandchildren that that just were those 400 could have to two point four trillion passed down to them that's a lot of the resources in this country with a twenty billion dollar gia and not even quite a twenty billion trillion dollar G GDP I think it it goes totally against what's built this country what country stands for and if those 5000 people can't stand to spend the 20 or 25 billion they've got lots left over believe me it instantly it would be bad for philanthropy I mean people would a certain number of people would like to set their kids up with you know billions and billions of dollars rather than the Navigo defines a big but I don't think that's the primary reason but I do think that'd be a byproduct the estate tax is just one part of this let's talk about the corporate tax first of all cut corporate taxes from thirty five percent to twenty percent yeah well I haven't lost all my friends by now I'll finish it off we have a lot of businesses sixty or seventy I don't think any of them are non-competitive in the world because of the corporate tax rate I mean American business earns a return on tangible equity under the present tax system that is extraordinary compared to history the last hundred years in America I'm talk about tangible equity but that's the money actually invest you could and the five largest companies in the United States by market value that's almost ten percent of the value the market they don't need capital or it is not like the old days were the big steel companies and auto companies and oil refineries were huge amounts of capital ever needed but we do not we do it when we are among the high earners of the world in terms of return on tangible assets but just looking at the tax code thirty five percent is what we're supposed to be paying or what corporations are supposed to be paying most of them don't a lot of it a lot of them don't and the ones that do or penalize because they're not taking advantage or they're not able to take advantage of the massive number of loopholes that have been built into the system isn't there an argument for saying let's simplify this let's level the playing field make sure everybody's paying the same amount that you can't snake your way around into a lower rate right and let's set up a tax code that by the way doesn't incentivize companies to keep cash overseas bring it back here and potentially put it to work right here in America yeah but if you if you if you make it very easy to take back money from jurisdictions in which you pay very low rates that's going to encourage you even more investment over there because you'd sell the higher rate in the United States ah it's American listen as a on a personal basis and for Berkshire Hathaway shareholders I hope they do change it downward I mean I think I would like it in the sense that it would be good for a million shareholders of Berkshire in terms of their net returns but I do think some of the arguments I think people may find their nose growing a little bit after they make them melissa has a question to Melissa Warren I completely get your argument that a lot of companies don't actually pay the going tax rate but Wells Fargo for instance pay his attacks that would be higher than the proposed corporate tax rate of 20% right their effective tax rate as of the second quarter was 27% or so so it would benefit so broadly speaking what do you think that tax rate to 20% would mean for the broader markets but that mean you know a 5% increase in stocks I mean what's your estimate well I a decrease in taxes would mean an increase in profits but it might not be totally the amount of the decrease in taxes but it would it would increase earnings there's no question about it so the question is whether that's already built into the expectations I doubt if it fully is built in the expectation so no the Lord the taxes no actually you know if you had a negative tax rate for corporations and really be great but you're right about banks incidentally banks tend to pay a pretty full rate unless they you know they own some tax exempt bonds but that's not a big item some of them do some low income housing tax credits and that sort of thing but the tax rate on banks is right up there among the top of various industries Berkshire most of our income is taxed at 35% but we do have a lot of unrealized appreciation and securities close to a hundred billion that hasn't been realized yet but if we were to sell all of the stocks we owned today we would we would pay 35% on about 80 or 90 billion dollars so it but I can say this the banks are doing okay they're not doing as well as they were eight or ten years ago that's primarily because the capital requirements capital requirements can kill the return on equity and banks and they've reduced it significantly from what was available ten or twelve years ago so ya know I'm just trying to just get exactly what you're saying Warren so if the money came back it would be a good thing but you don't want it to go you don't want to induce them to send it over there in the future so if you really did go to 20 and you really did bring it back and because you're at 20 and there's no longer an inducement to go over there why can't you just say outright that's a good thing why do you have to say well people are hyping it and their noses are grow what why can't you just say if we did it 20% would be better here and it wouldn't go over there anymore so the money might stay here and the jobs might say why isn't that a good thing why don't you give us an endorsement of that if they could do it well let's just say look let's just say that the the rate in some country was 2% and you charge people 10% 10% for bringing it back and you had a domestic rate that was 25 or so it's not 2% 2% it's it's the lowest is 12 probably in Ireland you think there'll be a race to the bottom if we do this as well is that oh there's rates more than 12 I are you're right about Ireland but there's there's Rachel a lot lower than 12 okay so then it's a race to the bottom you think it'd be a race to the bottom then at this point well there's some of that and one thing is interestingly enough Joe the money is coming back to some extent when Berkshire Hathaway sells a bond issue guess what the the foreign subsidiaries of certain very cash rich American companies buy those bonds so the money comes back to Berkshire Hathaway we pay interest to the foreign subsidiary of the cash rich country over there but that money ends up in the United States right there's trillions over there though I'd rather have the trailer and there's over three trillion count that I brought much rather have that back here do some infrastructure let's say you have let's say you have two companies company a and Company B and they both have a trillion dollars over there and company a borrows a trillion from Company B and Company B borrows a trillion from company a now you've got all two trillion back here and it's available for investment I see you got you so smart you know how to do all these things before they actually get done that's why you love that second to die insurance ie you don't care about estate taxes because you've got more things going on to get around it then now you you just you're just too smart you're too smart for what if everybody had you running the money we wouldn't need any we wouldn't need any tax reform yeah I can tell you exactly the secret of not having any of state action just give it all away exactly that's true but Warren just one one follow-up just to underscore point you said that a lower corporate tax rate will increase profits does that mean that you also believe that a lower corporate tax rate will cause the markets to go higher well anything that increases profits tends to push tight I mean there can be ten other variables happening right you know brother but but as a single variable in the in the equation for profits and profits determine stock prices over time no it's it is a plus for American business you know like I say I've got a million I got a million shareholders at birth weight and they would all love to see a corporation you also said you also said if my kids had grown up quicker and become mature quicker then then I would want them to keep it and not give it to the government I mean there's all these qualifiers in and let's some of your arguments warrant so if if you could keep it in the pot if you can keep it in the private sector but you didn't have crazy twenty year olds blowing it on god knows what then then you would so you see what I'm saying and like and you maybe there should be maybe we should have a wealth tax on you maybe we should have taken twenty percent of what you have right now because you got too much right now you can't possibly use it so maybe we should just take a you know just reallocating it now do you don't need that much well we're good I I'm where did y'all okay actually I'll be safe I'll tell you if you can tell me how to have your kids mature at age 20 let me set me the secret how about maturing at age 60 I'm you know the other way there's no guarantees billionaire I'm a that old one I'm good to do whatever you want like by Jay because you like their truck stuff right next year I love you I can shower their meaning hey let's talk about the markets again because you have a long running bet that's almost up it's in the final stages the last year of the bed about what does better the sp500 index over ten years or someone who you made a bet with for a million dollars who got to go pick five he created a fund of funds based on five husbands and between the two of you the S&P 500 index has been the massive out performer over the nine and a half years of the bench yeah yeah it'll it'll absolutely kill every one of the fund of funds that bear in mind each one of the fund of funds had a strong financial incentive to pick the best funds they could find ten years ago I mean it met real money yeah so it it was overwhelming and passive investment you know I've written about it a passive investment in aggregates gonna be accurate active investment because of fees you you did this as a result because you wanted to show people that they didn't need to be trying to beat the market all the time that they could just to be investors over the long haul and that would be a way to make money and the and that they didn't have to pay two or three percent a year to somebody to get those and average results were going to be very good and they were good they've been good all my life and in these ten years they've been good you've done perfectly okay with passive investment so you've done great with passive aggressive investment especially in the last seven or eight years there are people out there who are saying he just got lucky he picked the right ten years he did it right before quantitative easing came along there's a guy mark usko at Morgan Creek who's been saying he wants the next ten years bet and thinks he can outperform in that time what do you what do you say to say well they'll put up a substantial part of their net worth I get letters all the time from people who say I'd like to do it I'll put up $100 in you know or something they'll become famous so they they love the idea of me giving them a lot of publicity if anybody wants to put up a significant percentage of their net worth million dollars does that cut it so it depends on their net worth okay but if they if they want to put up a significant percentage of their net worth their family's net worth and they want to make a bet on ten years on active versus passive you know maybe that my estate has to be the one to settle with them at 87 anything involving 10 years is kind of a triumph of Hope over statistics but the nevertheless the ones that have written me they really want to get their name in the paper no basically but you'll you'll take anybody who puts up a substantial portion of their net worth you'll take that bad they could they can pick a group you got to pick a group you know and because I'm picking a group of 500 recipe and they can pick the date of the start with the data to start at nothing to do with that and the truth is the markets behave fairly typically in terms of of aggregate returns for the decade this is not some extraordinary period in the least there's nothing unusual about this the thing that was unusual is the size of the fees and that's a time alive Beijing hey the managers of these funds did very well during this period and the managers of the underlying funds did very well and their investors got killed compared to something they could have done you know one quick story it's picked up around this week that Oprah may be considering a run for the presidency I know you know Oprah have you talked to her about this no I haven't I'm talking Oprah for quite a while have you had any Democrats who have come to you who are looking to fundraise to run in 2020 not nobody's come to me into a fund raiser I'm not a great prospect no no no solicitors allowed yet or something I've done at the door no I it's to be a very interesting run-up to 2020 I mean there gonna be a lot of people to think about getting into this race because well you have somebody come from totally outside politics to get elected president it starts to the wheels churning with a lot of people that or I want to thank you so much for your time today it's really been a pleasure thank you for having me

Channel: CNBC

Views: 451,656

Rating: 4.696763 out of 5

Keywords: CNBC, business news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable news, finance news, money, money tips, warren buffett full interview, warren buffett, berkshire hathaway, stocks, investing, business, billionaire, trading, news, wealth, interview, warren buffett interview, secrets of warren buffett, buffett, warren buffet, berkshire hathaway warren buffett, warren buffet interview, warren buffett video, pilot flying j, flying j

Id: BXrYDGPUSF4

Length: 48min 39sec (2919 seconds)

Published: Tue Oct 03 2017

Reddit Comments

[u/brutalpancake]

Papa Buffet doesn’t flee to safety. He buys that fkkin dip like nobody else

[u/I_know_scoped_JFK]

Any other ground breaking discoveries.

[u/Tristanna]

If you guess keep memeing Buffet you're gonna kill him like you killed SPY

[u/NonrestrictiveBroom]

There’s another big interview with him coming up either this week to next week. They will for sure ask him about this again

[u/VicLinton]

Moneyshot:

[Buffet] ...and the question is which variable is going to change, and everyone expects interest rates to change, but they've been expecting it quite a while."

[Host] So does that mean, if the one factor is interest rates... we know that the Fed is looking at raising rates, it's going to do so slowly and gradually over time, at least that's what they've been telegraphing to this point, would you bet on that continuing for the next couple of years? I mean 2.3 to 5% is a long way when you're moving in quarter point increments.

[Buffet] Yea that would be a long way, and [I don't try to guess] the stock market I just buy businesses I like but if I were to guess, if [the ten year] moved up 5% I think stocks would be somewhat cheaper.

[Host] But you're not betting that's going to happen in the next couple of years?

[Buffet] No, over time I'm gonna own stocks."

and plenty of other good shit from long Daddy Buffet.

[u/waaaghbosss]

Good lord, the idiot at 12:30 needs to be kicked off of TV forever.

[u/waaaghbosss]

Its just not fair. In the early 80's bonds were like low double digits, now, 3%? The hell is 3%? Thats not even a tip.