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May 03, 2010
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FOX Business Network’s (FBN) Liz Claman sat down in an exclusive interview with Warren Buffett, Bill Gates and Charlie Munger to discuss Goldman Sachs, derivatives, Wall Street reform, taxes, technology, investments and the future of the United States economy, among other topics.

Excerpts from the interview are below:

*Mandatory Credit: FOX Business Network*

On the economic outlook:

Gates: “We’re still working our way out of it. The state budgets will be tight. Innovation is still there and it’s very much a global system. We’re way better off and this is going to be a great time for the country.”

Munger: “I think the relative place of the US in the world is almost sure to go down. It just means other people are gaining in welfare faster because they come from a lower base.”

Buffett: “We have a terrific system. In the end, decade by decade, people live better in this country.”

On joining the board of Goldman Sachs:

Buffett: “No, I would say no. I have been the director of 19 public companies over my lifetime. Not too long ago I was the director of five and it just takes too much time away from Berkshire which is my first love…No, they have not asked.”

On the Abacus Transaction:

Buffett: “I don't see anything wrong [with Abacus].”

On Wall Street:

Buffett: “Per point of IQ and per erg of energy, you'll make more money in Wall Street than virtually anyplace else … The capitalistic system dispenses rewards in some very peculiar ways … you make a lot of money on Wall Street relative to your talent compared to almost any other occupation in the country.”

On derivatives:

Buffett: “I mean, I can say socially that derivatives have the potential for being financial weapons of mass destruction and they've proven it, but they exist for securities and if they're mispriced we buy, I have no problem with that at all.”

Munger: “I don’t think this massive derivative trading net has a social advantage to our civilization. The risks and troubles they create does us more harm than good. If I’d been running the world, we wouldn’t have had them.”

Buffett: “I wrote a four page letter to Congressman Dingell at that time (in 1982) and said this was going to turn Wall Street into much more of a casino, and it has.”

On the capitalistic system:

Buffett: “This system works. You know, we make mistakes. We overshoot, we overcorrect. We have our hiccups in all kinds of ways, but nobody's ever come up with anything like this. In the last couple hundred years just look where we are, so don't bet against the United States.”

On looking for new opportunities:

Buffett: “I want to buy good companies anyplace they are, if they have good management I can understand them and the price is right. I'd love to buy a company in Japan, India or China you name it, or Omaha, Nebraska. We're looking for opportunities all the time and there are bound to be some that exist outside this country we don't hear about them as often if they're outside of this country, but I hope we do.”

On the Berkshire Hathaway cash position:

Buffett: “The cash position would be not counting the cash at Burlington or energy companies, the cash would be around $22 billion.”

On financial regulation reform having no affect on running Berkshire Hathaway:

Buffett: “We might -- it depends on what's required as collateral. We can put up our Coca-Cola stock, for example, or something. So we have tons of collateral and it would not change my thirst for acquisitions or my willingness or anything of that sort…I hope my phone rings as soon as I go back to the office

and I'm ready.”

On government regulations:

Buffett: “Well, you never know what they're going to do and we'll -- we've managed to adjust to all kinds of regulations and laws over the years and most of them we think are pretty good. So, that, I'm not sitting around worrying what Washington is going to do in terms of running Berkshire Hathaway.”

On the succession plan for Berkshire Hathaway:

Buffett: “And, you know, we’re blessed right now. And that wasn't the case 30 years ago, but we've acquired companies, we've acquired talented managers in connection with those acquisitions. A few have come up through the ranks, too. So, we're all set. The real question is if I don't get hit by a truck.

“I know today what it would be if I died tonight… If I died tonight, there would be somebody in place within 24 hours and we know who it is and they’re – you know, we're all set to go.”

On Wall Street being against finance regulation reform:

Munger: “Of course, they are like a diver when you step on the air hose. Of course they don’t want you to take away their air hose.”

Gates: “I don’t think it’s (finance reform) the critical thing for the next four of five years. I think they will do some of the right things. Even experts seem to disagree on this one.”

On “too big to fail”:

Buffett: “We can’t eliminate it unfortunately. It may drive people crazy, may drive me crazy. Freddie and Fannie were created by Congress and they are still around. I would like it to be “too painful to fail,” for the people that run these places.”

On the situation in Europe:

Buffett: “That's untested and you have a great worry about moral hazard, if one country lives big and then they expect other people to pay their bills, why shouldn't another country. So, it's-- I don't know how this one comes out.”

On concern ratings agencies will downgrade the US:

Buffett: “They'd be out of their minds if they did. The United States, all of our debt is in our own currency. When you can print your own currency, you don't default. The problem with Greece, they can't print their own currency and that's the problem with various other countries.”

On steps the US government took help mend the financial crisis:

Buffett: “We followed the proper course of action when the world virtually stopped in the fall of 2008. That only, only the United States government could have stepped in to leverage up to offset the deleveraging going up in the rest of the economy so we applied the right medicine basically. We applied massive dosages of it. We couldn't keep doing that without having other consequences, it's the right thing to do then. It’s the right thing to end at some point and ending it is harder than starting it.”

On the possibility of divesting in Moody’s:

Buffett: “Just depends on prices and alternative opportunities. I mean, every day we have a portfolio, we don't move a lot and we don't move frequently, but sometimes we sell stocks and buy other stocks or businesses.”

Bill Gates on Buffett’s business sense:

“He has a framework for looking into business and the profit stream that’s going to come out of it and the dynamics of competitors and policies that allows him to make quick and very sound judgments. And it’s a lifetime of doing that on the rare case where it doesn’t work out, he can say, ‘ok, what do I miss’ and so that model just keeps getting better and better and no one else is as fanatical or as talented.”

Gates on never advising Buffett to invest in tech companies:

“No, I've never done that. Whether it's Microsoft or any other, because tech companies, by their very nature, live on the break throughs that five years down the road, there will be another breakthrough that changes the rule. And five years later, there will be another breakthrough. Now, that's a fun ride, but in terms of being able to say, is this where capital should go for 20 years, I think that risk of technical change is not what Warren feels is his game. And he's got a game where he's better at it.”

Gates on Microsoft’s tablet projects:

“Microsoft has a lot of different tablet projects that we're pursuing. We think that work with the pen that Microsoft pioneered will become a mainstream for students. It can give you a device that you can not only read, but also create documents at the same time.”

On Apple:

Buffett: “Steve Jobs has done a terrific job. And there will be companies that excel. And occasionally they will excel because of luck, but usually they excel because of brains.”

Gates: ‘Yes, I think both in general and in the specific, Apple's done a great job.”

On growing business in the United States:

Gates: “We still have the best system for letting people take risks, get capital. We are the envy of the world. They are coping some of our good ideas. Unfortunately, our health care system, they are not copying some of our bad ideas.”

On the VAT tax:

Munger: “I think we’ll eventually have one. I think it’s a good thing.”

Buffett: “In the end, we’re not taxing enough and spending too much. One way or another we are going to have to close that gap in a major way.”

On the oil spill in the Gulf:

Buffett: “We would have much more exposure (with Berkshire insurance) with the earthquake in Chile. It’s a big disaster. I don’t think you write policy based off one incident.”

On the BYD investment and how the company is doing:

Munger: “I’ve seen not the slightest lagging in their ambitions to keep doing better.”

Buffett: “They’ve got a brilliant fellow on top. When they decide to do something, it gets done.”

H: Buffett: Don’t See Anything Wrong at Goldman

LINK: http://video.foxbusiness.com/#/v/4176448/buffett-dont-see-anything-wrong-at-goldman/?playlist_id=87185

H: Buffett: I’ll Invest in Good Companies Anywhere in World

LINK: http://video.foxbusiness.com/#/v/4176443/buffett-ill-invest-in-good-companies-anywhere-in-world/?playlist_id=87185

H: Gates, Buffett on Burlington Northern Deal

LINK: http://video.foxbusiness.com/#/v/4176460/gates-buffett-on-burlington-northern-deal/?playlist_id=87185

H: Gates and Buffett on Berkshire Succession Plan

LINK: http://video.foxbusiness.com/#/v/4176455/gates-and-buffett-on-berkshire-succession-plan/?playlist_id=87185

H: Buffett, Munger on Derivatives

LINK: http://video.foxbusiness.com/#/v/4176459/buffett-munger-on-derivatives-/?playlist_id=87185

H: Gates, Munger and Buffett on Financial Regulation

LINK: http://video.foxbusiness.com/#/v/4176478/gates-munger-and-buffett-on-financial-regulation-/?playlist_id=87185

H: Gates, Munger and Buffett on BYD Investment

LINK: http://video.foxbusiness.com/#/v/4176497/gates-munger-and-buffett-on-byd-investment-/?playlist_id=87185

HED: Gates: U.S. Has Best System for Entrepreneurs

LINK: http://video.foxbusiness.com/?playlist_id=87060#/v/4176539/-gates-us-has-best-system-for-entrepreneurs---/?playlist_id=87069