Warren Buffett Interview Notes
-U.S. economy: “It’s fallen off a cliff” “Luxury goods (business)… sort of stopped”
-This is close to the “worst case” scenario. “We are in a very negative vicious cycle”
-Economy: “can’t turnaround on a dime”
-”Unemployment will go a fair amount higher”
-He is critical of the 8000 earmarks Congress rammed through in this time of economic crisis
-Job 1, job 2, and job 3 should be to “win the economic war.” You should not use crisis to push through things you know is contentious (implying carbon cap and trade energy taxes, earmark pet-projects, card check “secret ballot”, etc.)
-M2 is growing very rapidly as you can check on the Federal Reserve web-site. Potential of being worse than inflation in the 1970s
-In 19th century had 6 financial panics when people lost confidence in the banks
-FDIC moved 8% of deposits last year and has assisted 3600 banks in its life-time
-We have a system that works started with 4 million people in 1790. Free markets, rule of law, and equal opportunity that “unleashed the human potential”
-World almost stopped last September when the Reserve fund broke the buck and money market/commercial paper markets hemorrhaged. He gives credit to Bernanke for doing the right thing and saving the system then
-Government should guarantee all deposits at all banks to give clarity and confidence to the financial system. The President should speak to this to be totally clear to the American people
-Over a 10 year period, you will do considerably better in equities vs. 10 year or short-term Treasuries. With Treasuries, you are guaranteed to lose purchasing power
-2008 mistakes include buying ConocoPhillips when oil was over $100 and buying two Irish banks
-He likes Wells Fargo and U.S. Bancorp. Wells Fargo has 1.44% average cost of funds. In 2-3 years can have $40 billion in income and $10-12 billion in losses. The spreads are enormous today and earnings power is great. Prospects 2-3 years out is better than ever
-250 million cars and trucks on road today. U.S. auto companies need to restructure where the business model can work at 13 million cars a year
-Free markets over-shoot, but works better than anything else
-Forget the (stock) quote, look at the business (fundamentals)
-Best asset during inflation is invest in your own abilities, be the best at what you do. Second best is own good businesses
-$14 trillion dollar economy U.S. GDP, stimulus bill won’t have that much impact in short-term. More important other things to do (fixing banking and financial system)
-4.5 million houses will change hands out of 80 million this year
-Obama should defer pushing his big agenda and focus on the economy
-He supports mark-to-market
-Bringing back the uptick rule is a good idea
-He is against union card-check and supports the secret ballot
Net-net: Economy is currently horrendous with no turnaround in the short-term. He goes after Obama pretty directly to not “muddle up” job 1 of fixing the economy with the other things on his agenda. He still likes his bank positions of Wells Fargo and U.S. Bancorp.