CNBC's Becky Quick interviews Warren Buffett (2/25/19)

Berkshire Hathaway Chairman and CEO Warren Buffett joined us right after writing his annual letter to shareholders and Warren, this is a big deal, it's something that the investment community expects and considers required reading because it goes overboard. a lot of time writing. too much, you start writing the letter, well, I started this one very early, very early because I had a section in mind, it turned out to be the last section, but when I talked about the Americantale window I probably wrote it at the end of the summer and and then I work on different sections, but it takes a lot of time, no, yes, I am NOT a first draft writer.

Well, for people who have been reading this for a long time, this letter was markedly different from what you have written for the last three decades or So, as at the top, the opening of each letter in the past up to this point has been Berkshire's percentage change in book value as the metric he thought was most important, this time he removed it and said it is no longer the most important metric. for a couple of reasons, one is that Berkshire has changed so markedly, but you also think that it won't be the way you measure things in the future, no, it's not the most relevant number, at least over time. in any one year period, but basically its market value because we have become overwhelmingly an operating company and we hope to become even more than a company that really had a lot of stocks and bonds, so I talked about that in previous reports.

I wouldn't have wanted to quit in a year where I was beaten by the one I was quitting and I was adopting one that made me look good so I brought them both in and it was a good year to transition and you said it's different I've always I've had the image that I'm talking to my sisters I have two sisters they're both Berkshires pretty much all their investment they're smart they're not active in business so they're not reading about it I do it every day but I pretend they've been away for a year and I am informing you about your investment and then this year because we may be buying back shares.

I tried to take the view that they were talking to me about whether they should sell their shares and I was explaining to them exactly how I would see it if I were in their shoes, so it's there Doris and birdie at the beginning and then I take it away at the end, but I'm talking with them and I'm trying to talk to them in a way where, if you know they're pretty much entirely in Berkshire and if they're thinking about selling some, here's what I'd like them to know before they made the decision to do so. . new description to come up with it this time, which was the idea of ​​having five groves being maybe a logging company and having five groves that the Berkshires actually invested in.

You broke down and analyzed each of them case by case. the non-insurance businesses that Berkshire owns, another is the group of stocks that has the last one, the insurance companies, but it also has Treasuries and cash that it has and what am I. Oh, and then the businesses that he owns part of not just five groves, that's pretty interesting, how did you come up with the idea of ​​just the gross, because it's something that someone who's not that immersed in business can understand quite a bit ease? Berkshire, you know like dozens and dozens and dozens of companies and and what the analysts see, you know they want to go out and find out, you know how many boxes of Valentine's Day we sold, you know, in our candy company and you can get completely lost in terms of looking at the strength in trying to look at each tree because some of the trees are flourishing, some of them are declining and some of them are huge and important and some are more or less twigs, so I thought I would group the assets in a way that is logical and where you can understand the valuation that could be attributed to that particular Grove and I think it is much better than trying to describe 80 or 90 companies with 300 but close to 300 90,000 employees.

I mean, we're in one of the companies right now and this is a very interesting business situation, but we have Jordans in Boston, we have a star in Houston, yes, we have RC Willey and review everyone and tell them about the latest open story and it's much better to just watch it in groups because they are sensible groups. To that point, this is the Ask Warren show and we've gotten a lot of questions coming from viewers, some from Berkshire shareholders, some from people who are just long-time observers. I would like to raise a question that comes from Marcelo P.

Lima or Lima writes in and I think this comes from Twitter sir. Buffett in his letter points out that some of the Berkshire trees are diseased and unlikely to come back into existence within a decade, which ones do you have in mind and how do we prevent healthy trees from becoming good partners? I said that, but I wouldn't name the ones that have important problems just from a moral point of view, but people would say that we are going to continue to run them and we have companies that are both in the downward phase and in the positive phase and it would be very difficult and and the which are, as I call them, diseases, they are a very, very, very small part of our income, nothing is gained analytically and a hundred people would go to work today feeling that they know well that we better give up or something like that. of that type, so I don't like to name them specifically, although you can probably figure something out by looking at our list of companies.

There are some companies that are simply in the wrong industry. I mean, if you were to let you know whatever, they might even make TVs from This country, I mean, it was a hot industry, you know, when I was young and we don't do that anymore. We saw a lot of them here in our store, so I wouldn't like it if I was working in a company. accent and my bosses, are in decline, name some of the large redwoods they consider essential for growth, although I think they said the energy of Berkshire Hathaway and the Burlington Northern Santa Fe Railroad or the largest redwoods found in the girl Yes, they are big again and they both set after-tax profit records last year combined, they make about eight billion dollars after taxes and eight billion dollars of money for us, that's a third of our operating profits that we made 24 a large fraction of last year's operating profits, twenty-four billion, and those two companies alone made an energy that now Berkshire Hathaway also has several companies, but the BNSF railroad is just one big railroad, let's talk about that number of operating profits, was twenty-four point eight billion. dollars, but under GAAP, what they're focusing on now is four billion dollars and that's because of an accounting change that came into play this time.

It was a twenty-five billion dollar loss on his investment holdings that he now counts back from the enormous amount of securities he owned and then also the three billion dollars in Kraft, he is at pains to emphasize again that he doesn't think people should be watching these meetings even though you're reporting them that way, God, we say the same thing, well, that's the bottom line profit gap of twenty-four point eight billion also our profit gap, but your operating profits and I think they were , we had some tailwind on that, but there was forty-one percent. bigger than any year we've had in operating profits, but beyond that, we have this great portfolio of stocks and also the right kratides for dinner, but the main thing was the stocks in the portfolio and we have made a lot of money in stocks throughout of time, but there have been years in which we have lost money.

I tell shareholders that we expect to make money from the stock over time. We have no idea what years will be high or low and then they changed the rule. last year for unrealized gains or losses to be recognized through differential income that had not been true for dozens and dozens and dozens of years before, so that changed our numbers, but that's why I explained to you, that's why I tell Doris and Bertie what happened in The county during a period I used to point out that this time it was a decrease of more than twenty billion dollars.

There would be quarters where you would see a big rebound and you don't think people should pay attention to the rebound. These are fluctuating numbers. No, they should pay attention to how we do for ten years with the stocks we own, but actually, the way the rule works now, you know, is that every minute the market value of your nieces is recorded and we are buying stocks that in some cases we will maintain ten twenty years and even more and those companies are retaining profits, they are reducing the number of shares, they have a lot of things going for them and I would like to know that we have had a lot of money. 173 billion shares here and I love having them and they will make us money over time, but I have no idea what they will do in the next year or two.

Well, let's talk about some other questions that have come up from viewers just regarding Berkshire, well we're here Eric Lafont wrote and said Warren, how have you structured Gregg Capaz and G Jane's compensation now that they oversee dozens of different businesses? He pointed out that he believes the business is much better managed now that it goes to our vice president, each of whom runs their own set of companies, yes, our proxy is coming out very soon and that shows what they received. I think unless there's some quirk in the timing or something, they'll each have gotten $18 million last year and the base salary is a high percentage of that and then the bonus is discretionary with me, but they're making a fabulous job and it says discretionary only based on maybe the only one you will read about like that are the proxies, there is another one.

The question that arises regarding Greg and the G saying that this is the rational path is a suggestive question on Monday given that Abel and Jane are not only responsible for running those businesses but also vice presidents, shouldn't they be on stage? with Charlie at the annual meeting many of us would like to hear from them, yes, well, you will hear more in the sense that they will be candid with microphones ready to answer any questions that arise. I know we're there, it won't go. It's been many years where the tool is our button and they will be on stage when we reorganize the format and rewrite the format.

He's shaking up Charlotte to some extent, but it's logical, it's logical for them and I hope it addresses a lot of questions. Well, for them at the annual meeting, because we will feed the men. I should mention one thing about your compensation. There is this rule and I may not be giving it to you exactly to hear it properly, but there is a rule for public companies that can be deduced. just a million dollars less as compensation, unless the excess is tied to some formula to make everyone pay, you know you can run the super company of all time and they tend to increase the base salary, so it's a million or two million and then call the rest something that qualifies according to the IRS where they get the deduction for every company that kills you and they and their employment consultants know it and everything so you have all these salaries but then they have something that makes it very easy for them to make a lot more money and that money is deductible, while I don't think what we overpaid, I think it's over a million, is deductible, but I mean that would be a joke, so we're telling them paying a good amount of money, I think that is not deductible, where is it and almost any other company that is designing it?

I always wondered why the base makes everyone feel like they're passing out or just 10 or 20 years ago and immediately we all, oh, we just had this revelation that Now that you're really only worth a base salary is a small amount, you know? And they came to me to design something like this. Well, I said, you know, it's just a joke. I mean, we're not going to pay a million dollars here and huge responsibilities. So you'll see, you'll see a little bit different situation. I think the bonus I gave them was 16 bases and two Motos. I think they're both probably dr.

Sol 619 on the east coast and you're already making friends, well done, let's move on to another audience question, this comes from Brian Chan. He asks how Ted and Todd's performance has been since they joined the money managers there about eight years ago. Do you have Ted Weschler and Todd Combs? Did they perform better than the index? Charlie recently said that most money managers didn't add any value compared to a bottom line. Yes. The first few years, each of them came at a slightly different time, maybe a year. to a year and a half or something like that at different times and they got way ahead of the index and they got paid compensation, now they got paid, so they came in thirds so they could get two thirds back if they missed the second year. and so on, they are generally a little bit behind the S&P, each by about the same margin over the same time over the entire period over the entire period and the whole Perry's is a little different for both of them, they now manage about 13 thousand millions each.

They've done it, they've done it better than me, so that'sIt is a measuring stick. I mentioned it because if I don't do it, someone else does, they've both done an incredible amount of work in terms of acquisitions and Todd and particularly in our medical business they than anything that a Berkshire we did in a deal with Lee Enterprises in terms of managing our newspapers Ted handles all that I mean you know they got my approval but it's got a million details and they're both but theyBoth interviewed on all sorts of roads to Berkshire but it's been a tough time beating the SP and that's the deal we have with them and they have a small deficiency transfer for I mean they got some back from Claud before, they made quite a bit of money for a few years and a substantial sum from Claud due to the three year retrospective agreement and now they have a small transfer, another ask. who came in, they've done better than me Tony Dickinson writes what changes we should expect from Geico with the transition from Tony Well to Bill Roberts and how they approach leadership differently if they're two peas in a bucket By that I mean they've worked together for so long that they are so compatible that they have the same feelings about Geico.

I mean, no one can do magic with IKOS. Tony's feelings about the boy go, but there's just no change. I was at a Geico meeting. that they had maybe 40 of their top executives and they all showed up and gave the list of how long they had been with Geico. I think the shortest time any of those people said was nineteen year old girls, your own Warren, we're just sitting down with you for the first time since the news last week that Kraft Heinz published, there was so much news that it's hard to even summarize it, but they made profits that didn't meet expectations and said it certainly won't improve in 2019.

They revealed that an SEC accounting investigation is underway. They reduced the value of the brands by just over fifteen billion dollars. Did any of this news surprise you? What did you think about what happened? Because the street was shocked that the stock was down 30% yeah well I may have learned a week or ten days before about something like the SEC investigation and I'm not on the board, the beans on the board and I talked with Greg and Greg had been talking a lot. to the head of the audit committee and he's a great guy, Jack Pope, but I make my own notes in my mind, so I wasn't surprised by that, although accounting firms view the notes a little differently than I do. , but I wouldn't argue with him about it and I can give him some math that would substantiate it.

I've been noting that I was wrong about a couple of things with Kraft Heinz, but I think we talked over lunch about which CPG brands are missing out. Our family owned a grocery store for a hundred years and we didn't have a lot of bargaining power, but the really strong brands and they can go toe to toe with Walmart or Costco or whoever, but the weaker brands tend to lose out now. The interesting thing about Kraft Heinz is that it is still a wonderful business because it uses about 7 billion of tangible assets. and they earned six billion before taxes, so on, the assets necessary to run the business 7 billion they earn approximately 6 billion after depreciation before taxes, but we and certain predecessors, but primarily us, paid one hundred billion more than the tangible. assets, so for us you have to win with 107 and not just with the seven billion that businesses employ and we don't have a way to be wonderful, we had a way to deploy another seven billion and six billion, but it's not So. there, so I think when you go head to head with a Walmart or a Costco or maybe an Amazon very soon and you have a modestly good Brad, maybe a word of the trends a little bit against it or something like you know you have a weaker negotiating hand than ten years ago the really classic situation is this, everything about it Becky Hines was started in 1869, so they have all that time to develop various products, especially to capture things like that. the craft part is a little murkier, but it goes back to CW Post in 1895, those companies have brought all kinds of brands, all kinds, you know them, you had them when you were a kid, didn't you have a mouse?, something they have It has been distributed worldwide through tens and hundreds of thousands of outlets, they have tested hundreds of millions, spent a fortune on advertising and their sales are now twenty-six billion.

Costco introduced the Kirkland brand in 1992 twenty-seven years ago and that brand thirty-nine million last year, while all the craft and ice brands made twenty-seven, twenty-six or seven billion, so here's to a hundred years plus tons of advertising built in in people's habits and everything else, and now comes Kirkland, a private label band, with only about seven hundred and fifty outlets they do 50 percent more business than all the artisanal leather brands, so private label private label brands are getting stronger it varies by country around the world but it is bigger and will continue to grow ok a couple of questions about that first of all does that mean you overpaid?

Well, we overpaid, we didn't overpay for the craftsmanship, I mean a firm price that we bought, which was originally a 50-50 private deal with three J's, part me with three G's, yeah. but 3G we had it with the shareholders and then we overpaid for the craftsmanship and we wrote 15 billion of that and then you know that's the way the CPAs see it, actually the markets undercut it more than that and and and and probably with quite right, I mean what to remember, let's say you know how the stock doesn't know you own it, you pay ten dollars for the stock, it goes up to eight, you think there it goes back to 10, I'll sell it, right?

If it goes up to 20, you say I can take out, sell half of them, take all my money, all those things are crazy, but in business, if we paid seven billion for Crafton, which is all it takes to run the business, he would still win. the same amount as if we paid the one hundred billion three million for the shares the business does not earn more just because you pay more for it and not only after buying crafts does everyone start speculating about the things we buy, so the prices of everything goes up and then Plus, we pay big premiums for it and we misjudge it.

I hear what you're saying about private labels and competition from places like a private label that Costco is launching, but what about Millennials changing their habits? The thing is, younger consumers don't want the brands their parents and grandparents have. There are some changes in habits, but if you think about it, people don't really change their habits that much if you try to think about the billion-dollar brands they have. have been created in foods and their private brands, there are very few billion dollar brands being created, so the guy pivots and yogurt, you probably know that, but you don't really see that that hasn't been a big change.

The physical volume has not changed much. However, pricing power has changed and that is huge. We had an analyst last week talking about what she perceived as problems with Kraft Heinz and she said that she believes they are not investing enough in the business. I mean, it's been three The G way is to get to the bone and that's how you make this profitable, but she believes there's been little investment in the brands. Does she agree with that? I don't think so, but that's how I can tell, but I see clearly that she was. on the board I mean, I saw a lot of innovation in indifferent products and you saw them advertised to a certain extent.

I don't think so, but I don't know for sure, but I think if you take the 10 largest food companies, I think in an innovation. They have tried many things, but how many things work? If you look at Kellogg and General Mills and you go up and down like Coca-Cola. I mean, how many new products really become big? You read the bottom, but that kind of tomato sauce. You know, hey, it has 60% of the capture, your brand, it has higher percentages in other parts of the world and it is a very, very, very strong brand. Some cream cheese is a strong brand, but other brands are weaker and you are certainly right. that in certain categories maybe in kool-aid or gelatin or something like that, you know they go back 75 years or something and there are some secular trends like that, but that's not the key, I mean they reduce costs, not in a innovation or in the quality of the product or something like that, they just took it out as DNA, basically now they may have made a mistake in terms of work.

I shouldn't say that we may have made a mistake in terms of trying to push hard. some of the retailers and we found out that we were not as strong as we thought we were, let's go to one of the viewer questions because we have a lot of questions related to that Kraft Heinz, this is number t5, someone named JC Dominguez. I wrote: Is this the kind of incident where you buy more Heinz or pull the plug? Oh, we don't disconnect. We have never sold a share of Kraft Heinz and we did sell. or bought it should be reported within two days, so we won't be able to do anything significant, but it's not like that, it's not our strange style, it's the partners with 3G, so we have exactly the amount of shares that we had before and we don't they do it.

I guess I should never say never at 88, someone else might, but I can tell you I have no intention of selling. I have no intention of buying. Why wouldn't I do it? You keep the business and today it is 30% cheaper, why wouldn't you buy more? Because it's not worth that much. You have one billion two hundred million shares, so that's 42 billion for equity and we owe. 30 30 or 31 billion, so the entire company is selling for seventy-one or two billion dollars and, as I mentioned, it now has about six billion operating income for six four six billion, would you pay much more than 72 where it doesn't seem like? it's going to be going up for a while maybe even good, they said it's going to go down in 2019, you know, I think there are other things where you get more bang for your buck and better prospects, not that I consider Kraft Heinz's prospects. terrible.

Maybe I would buy the bet one way or another. I think people are dropping off more of our products this year than last year, but if you see better places to spend money, why don't you sell it well? Hey, we can't, as a practice. The stuff moves tens of billions of dollars so easily, but beyond that, well, I mean, if we work with a million dollars or ten million dollars, would it have a position? No, no, I buy you, move with a million or ten million. and Ted and Todd can move reasonably well with thirteen, but that's going to be hard a hundred and seventy-three to build you, you know, you know your dance like an elephant, not like a guy from Dancing with the Stars, but we always have a sure winner Joe Last year, it's true that the favorites were eliminated early, but we split the $100,000 consolation prize for whoever does best now that it was split eight ways last year, but the year before that we had five people who were within a game and only the last few games of winning the million dollar prize now, if they had won the million, they would have had to split it if all five of them had won it, but there is a million dollar prize and we are going to do it again this year y and We limited ourselves to employees of I know of Berkshire, but close personal friends who have a brick.

It doesn't matter, I made you join last year and you didn't, no, no, we were doing other things that I was doing. It depends, let's do it again this year with a Creighton versus Xavier thing because they both have kind of losing records there, they're not doing that well, although Creighton will just be Georgetown and yesterday Xavier beat Villanova, I don't know if. You see, it's pretty cool, so let's do something there and see that there is a Netjet card. I can think about it. I don't know what the benefits are. Let's go to bed, but let's see who goes further and gets another brick exactly if me.

I'm like I guess, I guess 36. I have 30 seconds in the program versus a Netjet membership. For you, I'll tell you what I'll do. I'll let you name the bet and I'll let you name what's at stake. and we'll go from there Wow, this is the honor system Joe, you know, yeah, okay, let's do that, you're speaking his language, yeah, but you know he's very sneaky and very smart, like he sent me a Netjet card that he had my name. it was absolutely useless it was like i used it as a luggage tag it was worthless yeah you said you said net jack cards you didn't say it had to work for that it's a starter card that's the starter card you all have great things in pictures for you.

I have great things to talk to you about. I'm worried. I mean, I think you think the markets are worn out and expensive, so I want to talk to you about that. I mean, no I don't like saying that and you say that in the long run everything will be fine, but you have a lot of metrics that you're looking at, like market capitalization to GDP or GNP, which seemfaces. I mean, there are things. That seems expensive and you have trouble finding things, so you know you have to be honest with us about it or it's really exposing it, Joe, if it depends on interest rates, we've talked about that before, if you tell me that. % of long term bonds will prevail for the next 30 years, stocks are incredibly cheap, okay, because even you know I mentioned that Kraft Heinz makes six billion on seven billion in intangible assets, yes, even if you pay seventy billion and you get six billion, that's better.

You have to have 70 billion available and three percent government interest rates that cover everything and if there was a way to sell 30 year bonds and own the S&P for 30 years, it would give you enormous odds that the SP is going to be bonds at 30 years, now we've had this period of long-term extended wall rates not just here but around the world and now it looks like we're not going to raise it very

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ly so we can be in a new world, the world that Japan entered in 1990 and if Seoul stocks will when we look back no bullets, very cheap, but you know, this has not been the history of the United States, which has these continuous low interest rates, so there is no if, If I had the option today to buy a ten-year bond at 10 years, whatever it is, or 10 years, or buy the S&P 500 and hold it for 10 years, I would buy the S&P in a second pot, which takes us to a question a viewer wrote in this t67 pH pants says, based on the 13f annual report, it appears that Berkshire was the least active and the public markets in the quarter when the stock was cheapest also did the least buybacks in the Q4 when Berkshire was cheaper was taking the foot off the gas in Q4 was a conscious decision and based on what you just said, we have all these signs that it looked like the Fed wasn't going to raise rates in Q4. quarter;

So why did he do it? Isn't that a buying signal for you? Well, I thought I talked to her in the fourth quarter just like they did in the third, second and first quarter, but sometimes we have other things on our mind, that can use a lot of money and sometimes they work and sometimes they don't, but what does that mean you were saving your cash in case a deal was reached? We had at least one possible deal, it was very big and that's why we like the stock in the fourth quarter, but I like it I would like to buy a business even more, since I said in the annual report that we expect to be buyers of shares and this year we are not We have been net buyers.

I should point out that I mean the markets are going more or less up. I still think the stock is more attractive, but I'm having trouble buying it. What each day depends on the deal you just mentioned is that it's potentially still on the books. No, so I don't think so. I do not think it is like that. No, is it a deal here? in the United States on this planet, so he went out of his way in the letter to say that he thinks buying businesses directly is more expensive, although he doesn't think stocks are too expensive.

Question yes, and in this stock thing now If you have businesses, I should say you have a huge, huge fire, and that's not only that companies are also eager to buy, but you also have private capital and, if I don't know like, private equity is flexible because they can go to their partners for more money and all that, but let's say they would have a trillion available now they use a lot of leverage they call themselves private equity but they're actually largely private debt, but that trillion could buy as much as let's say three trillion assets if it's leveraged with two trillion debt, well the total stock market is something like 30 trillion and if you take the top five companies you eliminate six other companies, eliminate four if I can allow trillions off, then I We're in something where the purchasing power of private equity plus the normal purchasing power of companies that want to get in there is just an enormous amount of competition.

When you start looking around, do you think private equity firms are overpaying? They may or may not be worried about this. I mean, they obviously want to make the best deals they can, but they're in a game that's a lot more competitive than it is for them if you go back to the 1970s, when you know when. when they started leveraged buyouts, which is the same thing they're doing now, but the name lost its appeal at some point, but the deals you could do then are massively more attractive than the deals you could do now. I ask you one more question that came from a viewer.

You sort of answered this, but there may be a little more to the answer. This is T-84 for the control room. Nick writes why. Did a big acquisition happen for Berkshire during the 2008 Q4 selloff? Do you anticipate a much bigger drop in the market or I guess maybe it was the timing of it, maybe it was so

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? Yeah, well, in 2008, for example, we were going to do it with Constellation Energy, we ended up buying the shares and making some money on them, but that was part of a deal when Constellation went down, it was in the fall of 2008.

I I was watching the tape. Dave Sokol was watching what was going on. and we actually called each other at the same time and he was on a plane with Greg to Baltimore, yeah, that day and we contracted to buy it, so we were ready to buy it and we tried it on. other things and we put in, but we participated in tradable securities in a big way at that time; as you know, we spent, I think we spent 16 billion dollars in three weeks, when no one else was spending and when it went so well between September 15th and October. 7th or 8th and then we already had another three billion committed to Dow that weren't going to be eliminated until later, so we went through our cash pile pretty quickly, actually, you have a huge pile of cash right now , although twelve billion dollars, yes. we're and that doesn't even count the other twenty billion in cash and no, that does count, I mean, but the hundred and ten or something like that counts twenty and you know, I never get to twenty anyway, but but we.

We have a lot of cash and we would love to use it, but we are a private equity firm that will borrow six or seven times what they call Eva da, which I don't use as a metric, they will pay more. that we and you know, like I said, we pay too much for God, if you pay too much for something, you don't want to make more money to make it look good, learn what you earn and if we had paid if I paid ten billion less for crap I wouldn't learn the same money, you know, basically, this question that comes in this is the control room F seven Doug Wilford writes in Warren when you come across bad news about a holding, for example, Kraft Heinz, can you? share the sequence of criteria you use to determine if stocks are on sale and buy or break to sell what you're really worried about, what's behind a crash, well, the stock market isn't there to Instruct me, it's there to serve me, so if it comes, if there's bad news, the stock goes down, the question is in me, I have this, is that the long-term valuation changed and you know there was, there was certainly bad news at Geico. .

You can't buy it, for example, but there was bad news at American Express when I originally bought it in the sixties. It was the best investment the partners have ever made, so what you like is bad news about a fundamentally good business and then you have to make sure the business remains fundamentally good, but there is no bad bad news about a good business, We're better off because Apple stock is down significantly from where it was four or five months ago, so if they stayed there, Apple probably won't, but they have. They said they are going to go down to cash neutral, they could do it through acquisitions, dividends or buybacks.

I assume it will be mainly purchases; there's about a hundred and thirty billion dollars away from neutral cash now if the shares were 200 I would buy six hundred and fifty million shares if it's a, you know, 150, you buy about nine hundred million shares, yeah, we're much better off, you know, If it is a lower price when they are buying back shares, our partners are selling to us and there is nothing cheaper than otherwise, the worst that can happen from our point of view with the apples is that they are sold for thirty to thirty or something like that because we don't like to buy them at those types of prices like camels.

Yeah, well, I was back at Geico ten days ago when the camel was running well. Yeah, you should win some kind of crazy, you know, crazy or advertise me, you just, you know, turn that into, you know, people need to do that, if I mean. Geico, what the hell is a Geico? It's a Martin government, you know, and it wouldn't have gone anywhere, but you increased all that advertising spending and look at it now, so I mean, they really owe you the entire advertising industry. At work, yes, I'm really glad you remember that I was the one who came up with the idea for Geico the gecko.

I mean, the lizard people who looked like Geico, but the people who miss Geico remember that, they think it was their idea and me. Remember that little guy came out and said, Why don't we try to get credit? We talk a little bit about what Joe was talking about and Joe stays there because I know you want to ask about Byd, which could influence this exchange. conversations with China, yes, how important is what they have seen in their companies about their investments. Well, I see that the monthly reports of the companies come true and of a good number, obviously not insurance at all, but a good number. of the tariffs have had some impact, an error of 10% and several of them say that if it were 25% there would be big adjustments, some of them have been swallowed by the suppliers in China and others we have divided with them, but but it does raising prices, I mean there's no doubt about it, but it hasn't had a big effect on 10%, some of them told me 25%, I mean the world changes and you get a lot more money for your product or you get a different layer, you do something, so are you relieved to know that the deadline is going to be extended and pushed back that second of March?

Not everything is going to reach 25%. Well, I'm relieved that there are so many possibilities. that sense will prevail: it's bad for China, it's bad for us if we head into some kind of trade war and, as you know, negotiations are difficult and something like this ISM is a big problem for both countries and, to some extent, for you. We are playing a game of chicken and because it hurts both countries and I generally think that when two very intelligent countries have something very important at stake they will end up making rational decisions. I mean, I've been thinking that way with the Russians.

Since you learned about the nuclear bomb, I think that even though there are all kinds of tensions and people generally figure out what's best for themselves and what's best for China, the United States, is to work on something that both sides can live with. . Do you think there was a valid reason to escalate these negotiations to say hey, wait a second, we're not getting a fair deal? Well, I think we haven't been treated fairly to some extent, but I think we can sustain it. This means that to some extent the United States can do things that no other country can do, as I think there are smaller countries, for example, if they want to have trade surpluses with us, I mean, and it strengthens their economy, that doesn't It hurts us.

I mean, I think we have a role to play in the world in that way, but I also don't think we can be Uncle Sam. Jo, you have some breaking news, yes, about the breakup of General Electric for many of us who noticed. GE had so much money invested in biopharma that the General Electric company is selling its biopharmaceutical business to Danaher, something interesting for Danaher 421 point four billion dollars and 21 billion of that will be in cash. Ge says he will use the profits to reduce leverage and strengthen it. On your balance sheet, you expect the deal to close during the fourth quarter of this year and many of you know there's a lot of commentary about how you know how to deal with how this is in line with your plan to reduce leverage strength. on the balance sheet and all the other things in the deal, meanwhile, Danaher believes the deal will add 45 to 50 cents to adjusted earnings per share in the first full year and instead of us talking about this, Becky, me or you , I guess we should listen to Warren's comments. what are the effects of these movements, let's do just that and I want to mention this is something that Warren received questions from viewers about two random control rooms of IgE t 102 Brian Savage Rhoda and mr.

Buffett, given the recent turmoil with GE, do you think Larry Culp is the right man for the job? If he could advise him what he would tell him he should do lastly, if he is the right person, why hasn't he invested in a company like GE? Given his current funds, well, I think he should sell the medical operation for twenty-one point four billion for dinner. I mean, that has had sounds. I think it shouldtake advantage of GE. You know, there are great ideas. There I am. So they believe the same. I'm sure they owe more money than they showed the president and they should sell assets to some extent, not in a fire sale at all, so this is not a fire sale price, so I applaud what they did.

It was just announced and I met Larry at a great record dinner and we're a big GE customer, we're a big GE supplier, you know, I've had some connection with the company for four decades and they called us in 2008 when they needed money, so I think all of America is applauding GE, but I'm certainly one of those applauding if they called you more recently. Well, I've talked to them off and on over the last year or two, but and but I've said pretty much the same thing, that's what I'm saying here Joe, do you have other questions on this front, not so much about that, obviously I have a lot of things we want to talk about, I guess Warren probably knows GE pretty well.

Does he have it? I would like a little more color in his comments about G. He probably doesn't want to do that. What do you want with your expression? What are you saying? You criticize in general but you praise. by category, praise by name never led me to do that. I haven't seen his 10k yet. I mean, I want to get your 10k as soon as I can't and it might, it's probably already available and stuff. That's the document you have to read, approximately 50% of you don't believe that I thought about Laura, yes, apart from that, yes, but it is, you know, the capital is being sold for approximately one hundred billion dollars and and and then they have, actually, they have a preferred issue which is five or six billion people who don't even know about it and then they have, you know, just over a hundred billion of debt.

I'm consolidating capital, but I think that's the way to Look at it and they have it, they have a couple of very good businesses, but they were over leveraged and they have to reduce leverage and they are clearly doing that, I mean, you could. write, you could write a check for that war if you really liked it, that's true, but you won't be fine, there's a question that came up from a viewer and I asked it because we're talking about GE and it's one of many companies. that's looking at unfunded pension liabilities potentially in the future, this is control room t54 Brian Bannon Roads and how do you see unfunded pension liabilities in the United States affecting our economy over the next 10 years?

Well, if you are talking about the corporate sector, Unfunded liabilities have been decreasing because all the startups do not opt ​​for divine benefit plans, so if we take the four or five largest companies in the United States, they do not have any. Divine Benefit Plans We have purchased several older companies, so we have a good number of companies with defined benefit plans. We wouldn't start any divine benefits plans, but that's it, it's not a big deal in corporate America. I mean, you have Sears and the Pension Benefit Guarantee, but it's a much smaller problem than it was ten years ago or 20 years ago in the public sector.

You know it's a mess and you know it's interesting to me when they talk about these relocation issues, you know, in New York and Amazon, all that kind of stuff, you know. If I moved to some state that had a huge unfunded pension plan, I would be going into liabilities because I mean, who knows if I'm going to get the corporate income tax or my employees, you know, with the income taxes? personal or what, but that responsibility is not going to be, you can't send it overseas like this and those are big numbers, really big numbers and they can come, you can delay them.

It's been a long time, I mean you're getting pressure, maybe a little bit, but the politicians are the ones that haven't really attacked in a lot of states and when you see what they would have to do, I say to myself, why do I care? Sit there for 30 or 40 years because I'll be here for the life of the pension plan and they'll come after the corporations. I will go after the individuals. They have to raise a lot of money. I mean, when you say the states that come to mind after not having looked at the statistics for a while, would be Illinois and New Jersey at the top of the list, like I say, I pray you buy Damon, let's talk about the Amazon's decision to say forget it to a second headquarters in In New York City we were with Charlie Munger that day and this was February 14th.

Just a week and a half ago we were with Charlie Munger the day the ad came out and Charlie made some pretty strong comments about it, he said he thinks it's crazy that states like California and others are basically driving out the rich, what do you think about it? regard? I heard Charlie talk about it and he says, hey, they don't have kids, they don't have kids and a lot of our charities tend to donate. They tell them the things that are around them and they don't use the services as much relative to the taxes they pay as the average person and they say they use the hospitals.

No no. Obviously, a state like Florida, which has no income tax, appeals. a lot of rich people you know and in Texas you know when people wrote to move there, the fact that there is no income tax is a real factor and I don't know specifically about those two Tuesdays, I have a feeling that their retirement plan It's in pretty good shape compared to the old industrial states, you get legacy liabilities when you move in. Nebraska has been in very good shape for a long time and we've really been against the state being in debt, now they sometimes take care of that with leasing.

Well, what we're talking about is state versus state. Yes, now you're talking about some new tax plans that are being recommended in Congress or by specific senators or congressmen that are similar to some of those policies that we've seen. in the states, I mean, if you look at it Elizabeth Warren with her wealth tax on anyone over fifty million dollars an OSI Alexandria is fine Jie Cortez with her plan to tax everything over ten million dollars at a rate of seventy percent Bernie Sanders with his estate tax increasing to seventy-seven percent if those policies are enacted nationally.

Do you see that same kind of trade-off where people would potentially leave the United States? What do you think about these plans? Well, that's an interesting question. I would say this if tomorrow everyone in the world had the opportunity to make a one-time change to where every two billion families around the world lived, the only time they will have the opportunity to make the change, but they will be transported for free to any country you want. They want to go with their family and have citizenship, what do you think will happen tomorrow? let people be in the United States, a lot of people will come to the United States, very few people will leave North Korea, there may be a small decrease in the population, I mean.

The point is that this is an incredible country and it is true that right now we are raising three point three billion dollars and spending probably four points, strange. I have a debt deficit of around a trillion in a very good year of the cycle. I mean there is prosperity and that's five percent of GDP and that's probably more than likely. In reality, you could take a two to three percent deficit and not have a five-year debt-to-GDP ratio growing and prosperous, we're in a Go ahead so we know you can cut spending, you can raise taxes, but I I would say that the rich definitely pay less taxes compared to the general population, that was almost a dodge of the question, I mean, do these policies drive out the rich?

I'm sure if you could choose where to go, everyone would want to come to the United States, but would the rich do it if we changed our tax structure? Well, I think most people who have the rich marked as rich leave. In this case, I mean, you know he's going to leave before the feds arrest him yet and I don't think that if you offered to most of the rich people if they were sane anyway and said if you stay, we'll take half of your net worth and if you leave, you can take it all with you and your eighty-eight years like me.

I'm leaving the United States. You know I could move. South Dakota has no state income taxes. Wyoming has no savings, so we have two states. the border Nebraska Nebraska has a state income tax of seven and a fraction percent if I wanted to, which is right across the river, I had no income, I wouldn't move. I did it now. I think people want to come here. I think if you made that offer. did in the United States there would be more people in the United States than anywhere else and they would come if the deficit was a trillion or a trillion point two trillion Warren, you are making the decision to leave all your money to the private sector in terms of organizations charities and because you think, can I assume that you think maybe it would be better spent there than by the government?

Isn't it possible that it's just not the right idea to just look at what is already a bloat, you know what some people would think a bloated entity took care of the spending side or maybe you should reconsider if you think the government is that good at spending money well, why leave it all in the private sector? Go ahead and give it to him. everything to the government, let them do it, you seem to have the idea that you'll get a better deal if you do it, it was philanthropic Lee, I have about four options, Joe, I mean, let's say I have eighty billion dollars and I could spend it all. you know, but even to spend it all you'd have to sell Berkshire stock, so you'd incur taxes on, you know, twenty billion dollars in spending so the government would get twenty if it wanted to spend it all it could.

I don't know what world I would spend it in. I can give everything to my wife. Without a doubt, and there are no taxes. I can give. You could give four million people twenty thousand dollars each and there would be no pot. There would be no taxes on it, as long as you give them donations to separate people up to twenty thousand. Could. Could do it. There are no taxes. One thing you could do: the estate tax is the estate tax, I mean, in theory. They pay you taxes on the wealth of the estate, now you can donate to charities fifty percent in cash, 30 percent in appreciated stocks and make it deductible from your income from here.

Yes, they essentially allow you to deduct all wealth gifts at death so you can. you might have the limitation that you can only get 50 percent of the philanthropy and treat it the same it's actually like you're donating income over your lifetime there's a lot of things you can do with the tax law I mean the tax and I think that one way or another, when the Forbes 400 has gone from 93 billion to 2.7 trillion since 1982, the market system, as it becomes more specialized, we will increasingly reach the most important people if we were to be in the 1800s and we all worked on farms, you would probably be worth a little more than me because you would work harder and be stronger, but the person at the top who worked on a farm would be worth one and a half to maybe two times as much as the person at the bottom. person wasn't, but as we become more and more specialized, the guy who's best at knocking out a 200-pound guy is worth thirty million dollars a fight is now worth thirty million dollars a fight because someone invented television and Cablevisión as such. we become more specialized, the rich will become even richer and the question is how do you take care of a guy who is a wonderful citizen and fatherhood may have died normally or something and and and but he just doesn't have market skills and I created the Tax Credit by Earned Income is the best way to approach that question and that probably means some more taxes, it should mean some more taxes for people like me and however you do it, I'm fine, we've talked a lot. of things so far, but we have not received his opinion on the economy at this point.

Only one Federal Reserve report was released on Friday that suggested GDP for 2018 will likely be slightly below 3%. What do you think the economy is? what you're doing right now just based on your deals based on receipts, you see the companies that you track and where you have a big stock purchase right now just based on the monthly statements that I get and In some cases I obtained other intermediate data, but in general. they're a little bit better, I mean the rate of improvement is slowing, but it certainly hasn't plateaued now, that could change next month and housing construction has been disappointing, but most of our businesses where it was.

I have seen other figures in retail. which are strong and you know, including Walmart's, but I would say that our retail numbers in January are not strong, but January is a peculiar month and can be greatly affected by the weather, although any retailer will always like things related with the weather.you don't have market skills and we can solve that. a rich family can manage if they have six children and one of them is not so good in the market, it is good that they take care of all the other personal qualities and we have sixty thousand dollars of GDP per capita in the In the United States, that is six times more than when I was born in real terms, so we can take care of people and we close, but we should not ruin the market system.

Well, Bernie seems tame compared to some of the candidates running for president. To the left of him, well, there's someone who wrote in this is t13 Ted Waller. This is probably based on a replay of some conversations we've had with Jamie Dimon, but he says, do you still consider yourself a Democrat? If you look, I'm not. I am a card-carrying Democrat, but I have never been one. I voted for a good number of republics. I'm giving money to Republicans. I'm NOT a Bob Strauss called me once because they want me to handle the finances in Nebraska, he said, but the question is. to the question, Warner, are you a card-carrying Democrat, I said no, I'm not, I mean, I don't think, I don't think either side has a virtue advantage or anything like that, I mean, I think they have. different points of view on things and I think that when they enter politics, they somehow rethink their positions, although they move them in a period like this when they think that this can help them be more to the left.

You see people that kind of funds have a new New vision all of a sudden because they saw how it worked for Bernie, but no, I'm going to vote for more Democrats than I've voted for in the last 30 years. I voted for more Democrats than Republicans. I was president of the young Republican Club. in 1948 at the University of Pennsylvania I ran for delegate to the Republican National Convention in the 1960s, the only office I have ever run for when we just dated Charlie Munger, he said he didn't think much of many politicians, but I liked it what Mike Bloomberg did in New York City.

What do you think about Bloomberg as a potential candidate? What do you think about Howard Schultz potentially running as a third party candidate? I want to answer most of your questions, but I'm illegal. Would Mike Bloomberg announce tomorrow that he is a candidate? I would say I'm poor and I think he would be. I think you would be a very good president and I mean he and I don't agree on some things, but I think he knows. how to get things done I think he has the right goals for America he understands people he understands he understands the market system and he understands the problems of people who don't fit well into the market he says no.

I would have no problem being with him. I, Howard Schultz, if he were to suddenly run as an independent and if he were to run as an independent, I think it would take votes away from any Democrat, including Bloomberg, a favor, so I think it would be a real mistake for him to run and I think, in Third party candidates are generally going to hurt one side or the other and are more likely to hurt the side they actually favor because they are closer to that point of view, so they alienate more people than they would otherwise. , they would go second best with that view, so I hope no third party candidate leads the polls.

A significant number of them, I mean, there will always be a couple of people who apply, but I think third-party candidates are good, really, the will of the people. I just want to look at some of the holdings, some of the changes that were made and find out why, first at Apple, you cut three million shares to two hundred and forty-nine point five million shares of Apple and that took a lot of people by surprise. , they were wondering if you weren't selling to anyone else in the office. One of the two was about six or seven million years old, he had it before me and he works with a limited amount of money, the third, about a billion, so if he wants to buy something, he needs to sell something.

I want to buy something I already have. He had the cash to do it, so he sold about three million shares. I think he cut it in about half to buy something else and I never sold a stock so this wasn't even a conversation you had. with him, I guess this is a business, yeah, I mean, they don't consult me. Sometimes I learn at the end, well, I do at the end of the month. I look and see how his portfolio compares to the previous month and say what they say. I've done this, it generated a lot of questions from viewers and let's go to one s14 in which jedi marcus wrote if you loved it, that is, an apple undervalued by over two hundred dollars and a trillion dollar valuation by over two hundred dollars and a trillion dollar valuation, why would you? sell any this last quarter you already answered, you didn't say yes, by the way, I never paid two hundred shares of fern per apple, would you start buying at a hundred and sixty or something like that?

Why not? I think our average cost is a hundred and sixty or something like that. forty-one or something like that, well, there was a question that also came from Rick Saffir, since this is t90, he said, do you plan to add to your position at Apple throughout 2019? And I just want to mention a tweet from Jim Cramer as well, he tweeted. On February 5, Apple is not operating as if Berkshire has bought back. I talked to Cramer about it and he said, "Look, I don't know anything. It's just that all of a sudden the stock is really picking up.

It's almost like that." lower levels on a number of stocks, we all know there are some where we really can't get above 10 per cent and in general I don't like going above 10 per cent because it makes life quite complicated and, with banks, in reality leaves us perplexed. in the bank holding company, so there are shares that I would buy that we own at a fraction of nine percent and in fact, you may be selling a little bit because they are buying back their shares and I don't want to go above ten percent, but Apple that I don't see myself selling the lower the better, obviously I mean Apple is not one of those 10% stocks, you don't own around 5% of the stock or not, so is this a situation where you have He been buying quietly as it went down a lot at the end of December, it hasn't really gotten back to where it could have gone briefly, very briefly, but we are cheaper, we would buy it now, we won't buy it there.

It was another question that came up in this t91 from Umar, says the bear Zubair, who said that Apple slowed share purchases and share buybacks from around $20 billion in the third quarter to around $8 billion in the fourth quarter, right when the stock price was down around 30. In fact, Apple bought back zero shares in December 2018, when the stock was at a 52-week low, what's your take on the slowdown in stocks? Apple buybacks? Well, Apple has publicly said that there and they've repeated it that their goal is to achieve what they call a cash neutral position or their debt is roughly equal to cash.

I think to get there they would need about a hundred and thirty billion, but of course they could make some acquisitions, on the other hand they are earning a lot more than their dividend. so that number goes up mentally, I tell myself it's very likely that a lot of things can change this with them and the lower the price the better it will be, but then they should be at four billion shares probably and maybe three years. and also our 5% would become a little over six percent at that point and I like that perspective and then we could buy some ourselves, who knows it depends on the price, but they will buy a lot more shares if it is cheaper than if it were if it's higher and you know it's simple math, we'll be better off if in the next three years Apple is cheaper, you loaded up on finances in the fourth quarter and added to your stake some JP Morgan Bank of America Bank of New York PNC and US Bank Corp and top ten holdings over six years.

I think that our banks at this time, why so much emphasis on finances, are very good investments, the prices sound according to my way of thinking and they are there, they are good, they are cheaper than other businesses. Those are also good businesses by some margin and a couple of them we own a fraction of a percent and I don't like to get to nine nine because that means in that quarter I might have to sell something, so I try to leave it. between a year and two years of buybacks, but Bank of America has been particularly aggressive in purchasing a site, so Brian Moynihan has done a very good job of winning that company since he took over, I mean everything, he was the bank executive most underrated in the country and he is everything he said he would do, he has done it and he has surpassed it and he said stuffer goals for himself all along and he has been smart about buying back stock.

JP Morgan is a relatively new holding. You had 35 million in the third quarter and it was a new stake, you raise it to 50 million dollars or 50 point 1 million shares. I have to say in the fourth quarter it's your buy because for a long time you kept it in your own portfolio why I still have a little bit, but that goes back years and years and years, yeah, so why JP Morgan now? Well, the other question is why are we just stupid not to buy? I wasn't buying. It is clear, but it is a very well-managed bank and banks.

You can find a bank like JP. Morgan earns maybe 15%, maybe 17% even on that tangible like a nifty deal, in turns 15 or 16 or 17 percent on that tangible capital which is incredible in the world of 3% bonds. I mean, imagine you had a deposit account with JP. Morgan that they made a mistake and gave you 15% and couldn't redeem it. Why would you sell that account? You wouldn't sell it for 100 cents on the dollar. You wouldn't sell it for 200 cents on the dollar, when they even sell it for 300 cents on the dollar, you have an FDIC guaranteed instrument that would now cost 300 cents on the dollar if it were 15 percent on equity, you would be earning 5% , which is a lot. better than treasuries now if on top of that your deposit would allow you to let your interest compound to a certain point, now that instrument is worth much more because if you have an instrument that could compound at 15% for 10 years and use the additional capital which is worth much more than three times the tangible capital than current interest rates much more, so a lot can happen to change that equation and the banks, like every other American, almost every other American company got a huge advantage last year with the new tax bill.

I mean, corporations benefited a lot, including Berkshire, including banks that can be taken out, you know, but on the other hand, the FDIC now responded that there were special FDIC charges on the big banks that ended up here recently because the FDIC He has one hundred billion. dollars now that all the money comes from the banks the US government has not put any money into the FDIC people think that somehow the FDIC is funded by the government it is guaranteed by the government what was it started in the FDIC, I think. January 1, 1934 and I think he borrowed once temporarily but he didn't have a cent of government money in that money and now they have a hundred billion in there and the banks are much better off because that fund takes care of the bank here and there that By the way, no bank in the United States failed last year, no FDIC bank failed, that's the first time in a long time.

Let me ask one more question before I take a break. Oracle, which was a bet that suddenly appeared in the third quarter, Berkshire had $2.1 billion worth of Oracle stock at the end of Q3 and it hit 0 at the end of Q4, which is really unusual to see a tech company sneak in. Berkshire's holdings like that and it's even more unusual to see it disappear so quickly was that you, yeah, and Larry Ellison isn't a fantastic job with Oracle. I mean, I've followed it from a reading standpoint, but I thought I didn't understand the business, so I started buying it.

I felt like I actually changed my mind in terms of understanding it and not in terms of evaluating it. I think Oracle is a great business now, but I don't think so especially after my experience with IBM. I don't think I understand exactly where the cloud is going. I've been surprised by what Amazon has done there and now Microsoft isn't doing so well, so I don't know why I don't know where. that game was going and it takes us to f4, which is a question from a spectator named Mark Hall, who said, with IBM recovering, how do you feel coming out?

Oh, we came out of the contract with prices much higher than this. I'm not playing well, but the noble markets are back and the brand is at a high level. That doesn't mean I don't want to say it's at a high level and then goes down subsequently. I mean it's just that I hire someone who's been at it, you know, really forever. I mean, when we met here 10 years ago, the DA, the S&P was at 666 and within a day or two of when we met, people thought that America was finished and they were afraid of America and what happened quadrupled. in ten years,How many quads do you have in your life?

You are a company that has never sought deals like that, what do you think of companies that get special deals from the states? Well, in fact, I've helped Nebraska a few times when someone's governor asked me to call a company, oh, and they all do it. I mean, they say it's just that you know it's a competitive location game, but it can be a little irritating, since you're already here and you're. They employ thousands of people and want to give special incentives to someone they haven't given you and, in some cases, be your competitor. I'm serious, you know, Amazon is going to compete a lot in New York anyway, but I mean.

Amazon will negatively affect men's business, many companies in every state including New York understood that as Jeff Bezos says, you know your gross margin is my opportunity, does that mean you think New York was right to reject the agree or in some way second it? Guess the deal they had, yeah, that's what happened: They both got to the altar, you know, and then the dowry was exchanged in a sense. I don't know all the details, but you're in a tough position if we're a company and we're negotiating with public officials because public officials really can't necessarily have the final say, whereas it's the company, if the CEO says you got a deal. , you got a deal and on the public side you know there's a city council that has to ratify a mayor or something, so it's lopsided in that way now our experience in New York and Buffalo has been fantastic.

I mean, Geico went there, we got 3,000 people and the communities helped them and Governor Cuomo's hell. I mean, overall, it's been very, very, very good for us, but I think if you're going to have a bad marriage you better find out before they pronounce you husband and wife, they said after you that you're both a little hurt by the fact that he left. I mean it makes people think twice about making a deal where the community can get mad at you one way or another or the politicians can't deliver and from Amazon's point of view I mean They also heard something, but no.

It doesn't mean it's not a great path for either of us, but it's not an advantage for things to fall apart, so as much as possible, you want to have something sealed beforehand, but you need labor, figure engineering Policies, I mean many things. I can express it publicly. You know Jeff Bezos very well. In fact, you're working with him and Jamie Dimon on this healthcare initiative between the three companies. Can you give us an update on where things are right now? We have a great guy in a total Guan D running it, it's a long-term process, I mean, and when we get through it not only do we have to have a better medical service, I think we have a lot of wonderful things. about our medical system, but now it's costing us 18% of GDP, up to 5% and it's a tapeworm and if any other cost in America had gone from 5% to 18%, federal taxes would have stayed pretty much the same. constant around 18 percent for 40 or 50 years at the same time, medical tests went from 5 to 18, now there is double counting because Medicare is, but we have to stop the cause situation, but what we hope to find is something that not only makes a better job for our employees. but make them feel better about it and stop the upward rate.

You know, every GDP point you chew comes from something that comes from someone else and their only honor is pennies on the dollar. Okay, but it's a very long term, I mean, it's and and we'll do something, the odds, you know, I'm serious, we're trying to change if a $3.3 billion industry period, a three trillion dollar industry, I'm sorry, really. the people who participate and feel great about it, I mean the people who get the Troy 3.4, you know, the hospitals are not unhappy, the PBMs are not happy to go crazy, I mean, they know they might complain a little bit, but the people who are getting the three point four billion aren't screaming change change change what do you think about Kraft Heinz after all the current news and what is your biggest concern regarding the future of Kraft Heinz?

Well, we have some very, very strong brands at Kraft Heinz and, as I pointed out, As mentioned earlier, the company makes about six billion dollars before taxes, but after depreciation, not after amortization, after depreciation, earns six billion on seven billion of tangible assets. It's a fabulous business, in terms of return on tangible assets. I mean, this is a big deal. We are sitting here in the first year, but Richards is much higher in shit, he is much higher than at JPMorgan, he goes up and down the list a lot, there are very few companies that make 6 billion over 7 billion of tangible assets, but we paid a hundred billion more than the tangible assets in the purchase and we overpaid in a final deal.

I don't think we overpaid in money and we borrowed money related to projections that have not been met, we are and a lot of money, but we were paying a lot of money, so we had very little retained earnings to reduce debt, so our debt of 30.1 billion is higher than what we originally projected to the rating agencies and so on, and we have to reduce it and it is coming down very slowly, I mean, unless you sell properties, I mean, even if you cut the dividend from 250 to 160 , it's one billion a year, but at 31 billion, yohko, the right direction, but there is a lot of real debt that must be greatly reduced. of people wrote in and had questions about your partnership with 3G 3G we are your partners in the deal with Heinz and then with the addition of Kraft also let's go to t61 this is from James Shanahan sr.

Buffett, how would you characterize the relationship with 3G today? Would you still consider additional agreements with 3G? Yes, I considered George Apollo and his associates, but my main contacts were with George II Ballo Lemon over the years, when I first met him on the Board of Gillette and I think he is an absolutely outstanding human being and makes a year pointed out that the game had changed in terms of brands not giving a talk at some Forbes event or somewhere and that was a full year and six months ago I told them no, I think the brands said they are not such packaged products are not as good a business as the really strong brands were, but you know, we have learned that in recent years as the fight between the retailers and the brands has shifted towards the retailers and that is why that Kirtland is a big brand, very, very big.

Walmart is moving more toward private brands. There are great forces on the other side if you have a good enough mark, you know you can, you can, you can also call your lawyer. Costco dropped coke a few years ago, they brought them back. Do you see that changing or do you think the game will tilt this way towards the Retailers, except for the biggest brands, certainly look that way, particularly with the addition of Amazon to the picture. I mean, when you have Amazon and Walmart fighting, it's a little bit like the elephant fight and I mean, the mice get trampled and I don't.

Look, I certainly don't see the retailer's position weakening. I mean, you have all the tea coming and stronger. That's just and you got a Walmart, not a very, very, very good job, yeah, Doug McMillon on it, but carry with you that list of the top 10 retailers from the past and every decade, oh yeah, to remind them that you know that it is difficult to stay on top and, but now you have to bury many other players to put players too strong than that. I have my foot on the ground and to some extent they will push their own brands in terms of association with 3G if the situation has changed, according to Georgi Lehman, Jojo Paula Lehmann and you, if the brands are not so strong. as they used to be and as you've said in the past, it's become a lot more expensive to try to look at any of these other consumer packaged goods companies and potentially buy them, does that mean the whole 3G formula has changed in some way?

It's really hard to make it work if you can't go out and buy another company and then cut costs. Yeah, well, acquisition just doesn't work that well. I mean, on the one hand, prices went up and you know almost almost anything. at a price it can be good, not everything, nothing, at a certain price, it cannot be bad. I mean, if you pay too much, you pay too much and and it doesn't, that doesn't change and if you borrowed a fair amount Also, it takes a while to change rmii. I don't see it right, we are not in a position to buy additional brands and I didn't think it made sense as we have seen both prices change and the competitive position changed a bit.

Still, I really like the businesses we have. I'll be happy to be at Kraft Heinz in five or ten years. I'm certainly happy to be George Apollo's partner. He is an excellent human being and very smart in business. but you can say we both misjudged the fight between retailers and brands as to who would be playing for the other seeing what happened to Kraft Heinz stock on Friday after all that news came out after the market closed On Thursday, I'm talking about stocks. it was down 30% and I think for Berkshire alone it was a loss of about four billion dollars on top of their three billion dollar share of the fifteen billion dollars below.

I know you wrote the annual meeting or the annual letter about how there are days Because you have such a large portfolio of $173 billion in stocks, there are days when market volatility comes back and you see a swing of plus or minus four billion dollars or in certain ways, I know you're like Dr. Spock, you have no emotion when it comes to dealing with market movements, but is there any part of you that gets a little dizzy when you see that you've lost four billion dollars in one day? It doesn't at least make me assume that I like businesses more, what they are, but overwhelmingly during the fourth quarter things were going down and they were buying their own stock, so I'm actually making money that day, you know, without spending a dime. and then secondly, I can buy more. of some, although a lot of my 10 percent bets have problems, but I mean, there are certain stocks that I would have continued buying except they were crashing into 10 percent, but no, I mean, if you paid X X dollars per pound for amber yesterday and you go today and now it's at 80% of the price is cheaper, what else in the world would you not like to buy cheaper, but then pay the day before?

That's if you're going to keep buying it, that's the very logical way to look at things rationally. Hey. Joe has a question for Joe mr. Spock Mr. Dr. Spock is that mad god dr. Spock wouldn't come swing, he's the baby. I finally said something that caught your attention, no, no, I actually wanted to ask. I was just talking about dr. Spock with my saying that it was I don't know what it was I don't know if you let the children cry forever I think you need it anyway no, no way, you can't, you can't think that I was crazy traveling with Freud too and this Anyway Anyway, I agree, unless you can quickly ask about that 60 minutes and some philosophical questions, Warren, so the basic idea of ​​this article yesterday about electric cars was that at least the way I read it is in this country, I think.

We're starting to feel like maybe the subsidies that Tesla receives aren't necessarily a good way to do things and in China they seem to be going the other way, where they're going to subsidize this, it's almost a state-owned company. how much they are subsidizing electric vehicles as a result, the goal of the piece was that by 2025 they are going to make a couple million 3 4 million electric vehicles, we will be stuck below 1/2 million is that In your opinion, what should we be doing here or is there some reason why they are investing there in electric vehicles instead of here.

I mean, the way to do it is we should completely subsidize it here in the US or market forces. allocate capital better, the markets are better overall, so you know me, I'm on it, but that doesn't mean all the time, but you know for sure, but the markets are better. I think I actually think that electric cars will have a There are a lot of people pushing electric cars and in the United States, although the subsidy is disappearing, I think it disappears at 200 thousand units or something like that and Dussel is catching up and so on, but no I think electric cars are very fashionable.

America's future and I think long before autonomous driving, but listen, I'm all for the Chinese doing what they're doing. I'm serious and in terms of the planet and you know it's a good thing, so I applaud. them for doing it, I don't think we need to do it in the United States, so much that you invested there, no, how is it done here? Oh whenwe bought the BYD ten years ago and Charlie called me and said buy this and that's totally Charlie's position and that's fine and he keeps in touch with management all of that is not something I couldn't tell you within 20 percent what it would be the price why I don't Don't look at it, so that's not your thing, okay, but it's just looking at it.

You know the spin I was getting on 60 Minutes was you know we don't understand you know certain industries. We need all the help from the government or almost, you know, subsidies, they know ten times more than they are now to try to win at something that is not amazing for 60 minutes, but I was wondering if you thought we would be left behind if we don't have an effort concerted government to prop up the industry. I think there's a pretty conservative industry effort from what I've heard. I mean no, I think we're going to see a lot more electricity, and by the way, I mean we have an interest. in the Flying J pilot, so we have certain businesses that would be negatively affected with all electric, but I think we're headed in that direction and I think you'll see American companies pretty aggressive in that space, right?

I was listening the whole time Becky, what do you mean it's just commonly? I was listening, although I'm listening, listening, I have nothing else to do here to listen, so I was really, I was listening, I just like that, I like that, you know. You know how much I love mixing metaphors. My favorite is like a walk through the cake. I call him. You know, or you know, there's only so many guests if you can mix them up, but when they start working in March, March Joe starts working on your. March Madness Ticket I'm offering a hundred billion to someone who gets a perfect bracket.

It happened once, didn't it? We had one a few years ago. That group not all you have to do is pass the first group to win a million dollars. There's something no one else makes a million three grand anyway, but we had five of them two years ago, five of them made it to the last four games and four of them got knocked out in one game and one went out in the other game, but they broke it down, what are your thoughts just in terms of looking around trying to find businesses, trying to find parts of the business versus when you started the game?

Well, it's harder for two reasons, one of which is peculiar, we just have so much more. money, so our universe of possible things to do shrinks from thousands and thousands of things I used to look at when I had small amounts of money to relatively few things. Nothing seems to defy logic. I have more money, so I have less things. can do, but it's only because ideally it's going to be a lot bigger than you know, so no, there's probably a hundred stocks, you know, if we put five billion dollars into something and it's 10% of the market cap, what which would be as much as It would be that we're talking about 50 billion and up market cap and five billion is 1% of our Berkshires securities, so if it goes up 50%, we gain half a percent and I'm basically worth tax of 35 to 40 basis points. then your problem, yeah, and then the second thing is that you obviously got away from more competition than when we started in '19, really when I took Ben Graham's class in 1951, I mean, the whole world was in my oyster because people didn't was going on. the manuals and you had to do it, now it's easier to get the data, on the one hand, I mean, just with the Internet it's a lot easier and I used to mail any report and go to the Interstate Commerce Commission, the Public Utilities Commission , the Insurance Commission I went to. all those offices and they looked through the papers and now you know it takes someone five five seconds to get the information.

I'll ask this very fleetingly as your position changed on Bitcoin. I know it's a shame, but Bitcoin is clever and blockchain is important, but Bitcoin has no unique value, it doesn't produce anything, you look at it all day and little bitcoins come out or something. It's basically an illusion, so we've passed from rat poison squared to an illusion of who knows where we will be next year, but I am very sorry that this happens because people are hopeful that something like this is going to happen. change their lives and there's something very clever about figuring out how to have a limited supply and make it harder and more expensive to create them as you go all that kind of stuff, but it doesn't work and this is explained to me. by people much smarter than me, but they say that blockchain does not depend.

I'm betting and JP Morgan is not about creating their own, you know, JPM and then it will be worth $1, I mean, it matches the dollar. and I guess I think people don't want it. There are many questions that are like the new questions about Bitcoin. We have several questions that came to ask you. I'll go to t46. This is. forked Design LLC Do you think the hemp and marijuana industry is a viable industry to invest in even though there are still restrictions on how capital can be moved and used? We have many variations. It's an industry I really don't know anything about you. seed, otherwise no, never, no, I couldn't even smoke a cigarette, what do you think of college athletes and should they be paid?

I ask this after seeing what happened to Xion Williamson, the Duke player whose Nike shoe exploded last time. I read that whole debate last week, and you're a long-time observer of college athletics. Well, I say this, if I were an athlete, I think I should probably have a spectator. Should be. I mean, if you are. You're really good, you have enormous business value, and the design rules are designed to prevent you from capitalizing on that business value, you know, for some time that's not the case. The rich schools are going to win and Harvard can we have a resurgence of football this came in t-28 the tataka go say do you see any irrational human behavior by American investors or corporations right now?

You're nice and Charlie are like the police of corporate America. Do you see that you don't like it now? Well, there are always a certain number of people doing things designed to take advantage of others because the market is so big and there have always been people that you know, maybe it's Bitcoin, maybe it's new problems, I mean, look at all that, look at all the things that have been created around Bitcoin, I mean, and there has been a lot of fraud and disappearance and all this kind of stuff, it attracts charlatans basically because the money is so big, I mean, yes I have managed to make something fake and sell myself -yo or something, there's no real money in it, but when you get on Wall Street there's a lot of money and you can do it with little pieces of paper and you don't get it back for a long time and a lot of people have a moment when Madoff was the old example , but that's going to happen and that's why we have an SEC and Wiley has courts and it will always continue, you will always need surveillance.

There are plenty of new technology IPOs that are scheduled to hit the market this year. I think about what you thought about tech IPOs in 1999 and not wanting to be around them, these are a little different, a lot of them actually have profits. you think of Airbnb, you think of Pinterest or something like that, is it that different? What do you have this? No, yes, but the big ones make losses and some report profits differently than I would report well, I mean, it's you know. we have more time to fight and, if you think about it, you have a lot of people on the other side who have an interest in marking each stage, even if it is false, sometimes they offer a price for the employees who already have the shares and so on but then they have an artificial price so they can say this round was at a higher price it's that they are picking the time to sell to you I don't like it I like it when I'm picking the It's time to buy a 2008 instead of them picking the time in the They have decided that this is the time when we can profit from my sale.

We'll do you a big favor and let you shop, so I've never been. I'm a big fan of IPOs and the valuations are kind of amazing now on some in particular by category, that's the category of those where you think the valuation is amazing is based on earnings just in case a company has a couple of people. They will choose a figure of fifty billion dollars. What should I expect to earn in five years? You should certainly expect to make five billion before taxes. I mean, if you wait five years to get ten percent of your money and people don't sell it that way and there aren't that many companies that have five billion or more before taxes, there are a good number, but it's not that big. easy and particularly not so easy if you count what you have.

We're paying employees and stock options, all that kind of stuff came up this is Todd Marshall's t1 twelve, he says who wins more at the card game, bridge, Buffett or Gates, well I probably play a hundred times more than Bill, so that's probably the only game in the world that I would have a slight advantage in with a very slight advantage in the rate that we probably spent two full days working on it would do better while you mention Bill Gates. Melinda Gates has a book on the way. it's coming out April 23rd I think it's one of the best books I've ever read what it's about it's about women and it's about women around the world it's about herself and it's told very candidly when the stories are fabulous and I read it on another day Once again, it's only two hundred and twenty or thirty pages that will be out on April 23rd.

I think it's going to be a great summer, that's great. I hope to see him. Another question that came is T-55. Steve Pilger asks for those of us who have lived. our lives and careers reading and listening to Warren Buffett and Charlie Munger who do our grandchildren recommend, listen carefully. I hope it stops being an actuarial phenomenon, no, there are many interesting writers, you know, but I will tell you that the fundamentals won. If you don't change, you're not going to discover anything new about investing in the next 50 or 100 years. I mean, when buying a business, you have to know how to value it and you have to know something about how the markets operate, but they don't. buy a business unless you can value it, you have to learn to value businesses and know the ones that are within your circle of competence and the ones that are outside and that won't change and it really comes back to Lane. a dollar an hour of purchasing power and get more in return in the future and you try to figure out how much you are willing to pay for that bird in the bush compared to the bird in your hand warning we want to thank you for the three hours you spent with us today We really appreciate your time.

Thank you.