Berkshire Hathaway's Warren Buffett sat down with longtime friend and Fortune senior editor-at-large Carol Loomis for a wide-ranging discussion about everything from George Bush to Rupert Murdoch. Below is an unedited transcript.
Here is how it it went down.
CAROL LOOMIS: Well, one of the centers of criticism has been the Wall Street Journal's editorial page.
WARREN BUFFETT: Oh, really? (Laughter.)
CAROL LOOMIS: And they've asked you to give them your income tax statement.
WARREN BUFFETT: Yeah.
CAROL LOOMIS: What do you think about that?
WARREN BUFFETT: Well, I think it might be a terrific idea if they would just ask their boss, Rupert Murdoch, and he and I will meet at Fortune and we'll both give you our tax returns, and you can publish them. (Applause.)
CAROL LOOMIS: We like it. We like it. (Laughter.)
The rest of the transcript is below:
LLOYD BLANKFEIN: Now, I have the privilege of introducing Warren Buffett, who will be interviewed by Carol Loomis, Fortune's senior editor at large.
Now, what can I say about Warren that hasn't already been said? We all know about his uncanny timing, his brilliant sayings, his investing discipline, and his uncommonly common logic.
To his disciples, he's a rock star. Just head out to Omaha for his annual meeting to see for yourself, or hang our dinner table and watch all the pictures go off on all these cell phones.
To policy makers, he's a source of wise counsel. They even like to name policy proposals after him.
To CEOs, he's either salvation, a once-in-a-lifetime opportunity, the most patient investor in the world, or all three. To me, he's been a friend, a supporter, and a constant reminder of the value of not buying into the prevailing sentiment, no matter how positive or negative it gets.
Warren has principles, and they aren't hard to figure out. The difference is he always lives by them. I know the Buffett Rule is being talked and written about a lot these days, but I like to think there already was a Buffett Rule. It says: Stick to what you're good at, keep a lot of cash on hand, and answer the phone when it rings. (Laughter.) Warren, keep taking my calls.
Please join me in welcoming Warren Buffett and his good friend, Carol Loomis, to the stage. (Applause.)
CAROL LOOMIS: Good morning. Warren, here we are for a fourth year in a row. The first year was financial panic, the next year seemed to be apparent recovery. The third year was political upheaval, and now we're in the state of uncertainty about the economy and really worrying about jobs.
Now, Berkshire Hathaway (BRK.A)(BRK.B) as a conglomerate is such a mirror of the economy. Let me ask about it first. You've got railroads, utilities, insurance, jewelry retailers, See's Candy, Dairy Queen, Business Wire, and then a whole slew of companies that are tied in one way or another to housing, Shaw Carpet, Acme Brick, Benjamin Moore Paints, Johns Manville, Clayton.
When you survey how these businesses are doing, what does the picture say to you about the economy?
WARREN BUFFETT: As of today, our housing-related businesses are as bad as they've ever been during this period. Everything else you name is up. And our railroad carried 200,000 car loads last week, that's the highest total in three years. That's stuff moving around the country, supplying merchants and doing all kinds of things.
If you take our five largest businesses, all of them will either set records for earnings or just about set records for earnings this year. And in our retailing operations, we're seeing same-store gains just like before.
I really thought in August and September with all the turmoil in the markets, you'd see a falloff particularly in higher-priced items, but it hasn't happened yet. Maybe it will, but as of today, the recovery is still underway.
CAROL LOOMIS: Well, you've also, in addition to watching those developments, you've been wearing your newsmaker hat in more than one way.
WARREN BUFFETT: You've noticed? (Laughter.) It's a boyhood dream, I wanted to have a tax named after me. (Laughter.)
CAROL LOOMIS: Well, I'll get to that one. But, also, there was a more direct company connected new development last week. You announced that Berkshire would stand ready to buy its own stock at a price of up to 10 percent above book value at any given moment. Why did you come to that decision and how does this move square with your past criticisms of moves that other companies, sometimes other companies have made to buy their own stock?
WARREN BUFFETT: Yeah, it was a terribly complicated decision involving thousands of variables. It boiled down to the fact that we will buy our stock when we think it's selling for less than it's worth, surprise. You know, I'll buy anybody else's stock when it's selling for less than it's worth, too. (Laughter.)
I've never criticized -- in fact, I've recommended companies buy their stock when it's selling below what I call "intrinsic business value." In our particular case, not true for most companies, practically all companies, but book value happens to be an understated measure of value, but one that, in a way, is a pretty good tracking device. And I use this figure of 110 percent of book as being the limit because I know that that price is demonstrably less than the businesses are worth.
If I can buy dollar bills for 90 cents, I'll buy them. I want to warn the people that are selling to me that I believe I am buying their dollar bills for 90 cents because they're our partner. So, I give them notice first. And then if they want to sell me dollar bills cheap -- any of you want to do it, I'm here. (Laughter.)
CAROL LOOMIS: Today.
WARREN BUFFETT: And it will depend -- you always want to have ample resources for anything that comes along. So, I limited -- I put in the announcement that we wouldn't do it if it took our consolidated cash below $20 billion, but we're comfortably above that, and I also said that it would depend if we find something else even cheaper, I may be doing that too. But for the indefinite future, if we can buy our stock at something of a discount from its real value, we're going to do it.
CAROL LOOMIS: Am I right that the times when you've criticized in the past, when you could not see that they were buying an undervalued stock at all, that their motives were really different?
WARREN BUFFETT: Yeah. I've seen it done. I've been on boards, which will go unnamed, much to their gratitude, where basically they want to buy the stock, A, because it's fashionable, maybe, B, you know, because they want to tell the world they think their stock is cheap no matter what the price is. In fact, I've seen very few that have tied it to any metric when they've announced a purchase. And then sometimes they say they're buying it to cover stock options and other things like that. Well, if it makes sense to buy in the stock, you buy in the stock. It doesn't make any difference whether you're issuing stock options or not, if it doesn't, it doesn't.
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