Highlights of Warren Buffett Interview on Charlie Rose Show – October 22, 2013

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Oct 232013
 

Warren Buffett was interviewed (along with his son and grandson, both named Howard) on the Charlie Rose Show on October 22.  These are some of the highlights relating to the economy and finance:

(1) The U.S. can service its current debt which equals approximately 70% of GDP.   However, future debt should not increase at a faster rate than growth in GDP.  (Debt should not increase as a percentage of GDP.)

(2) Nobel laureate Robert Shiller is correct in his prediction of more bubbles in the future.

(3) The 2008 financial crisis resulted from a huge housing bubble.  Homeowners “were margined to the hilt”.

(4) Dodd Frank will not have an impact on cycles of greed and fear (1929 and 2008).

(5) It was a mistake for the U.S. government to fine J.P. Morgan $13 billion for actions taken by Bear Stearns and Washington Mutual before they were acquired.  Jamie Dimon did the U.S. government and the American people a big favor by acquiring these failing companies.  J.P. Morgan should have been indemnified against subsequent lawsuits resulting from Bear Stearns and Washington Mutual’s behavior prior to their acquisitions.  J.P. Morgan can afford the $13 billion fine.

(6) It was AIG’s shareholders (and society) who lost money as a result of AIG’s bailout.  If a company needs to seek government assistance to be saved, then the CEO should be made to walk away “broke”.   The Board of Directors should surrender their previous five years of income from this company.

(7) IBM (large investment by Berkshire Hathaway) will report record earnings per share this year despite its current problems.  Every company, including Berkshire, has “blips over time”.   IBM will perform well in the years ahead.

(8) The U.S. will continue to grow and prosper as it has over the past 237 years.

 Posted by at 11:20 pm

Highlights of Warren Buffett on CNBC – October 16, 2013

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Oct 162013
 

Warren Buffett was interviewed on CNBC from 6 a.m. – 9 a.m. today.  These are some of the highlights:

(1) The threat of not to raise the debt ceiling after you have spent the money is a political weapon of mass destruction and totally irresponsible.  It should never be used.

(2) Stocks are where we have our money.  They are the most attractive alternative over the next 20 years.

(3) Stocks are NOT at bubble levels.  It makes no sense to diversify into cash or long term bonds.

(4) Berkshire has $40 billion in cash to invest, but a $12+ billion “elephant” recently got away.

(5) Earlier this morning Berkshire purchased a $1.1 billion UK company that manufactures liquid dispensing and beverage cooling machines.

(6) Companies should be managed for shareholders who are going to stay, not for those who leave (referring to Apple and Carl Icahn).

(7) Bank of America’s (BAC) earnings report released this morning is very good with write-offs down to 70 basis points vs. 50 basis points for Wells Fargo.  (Berkshire owns warrants to purchase 700 million shares of BAC at $7.14 over the next 8 years vs. current price of $14.28.  Wells Fargo is Berkshire’s largest equity holding.)

(8) Buffett is very pleased with Berkshire’s large investment in IBM.  IBM will be reporting its quarterly earnings after the market closes today.

(9) Instead of local governments taxing soft drinks with sugar, they should tax calories (candy, etc.).  It is calories that add to a person’s weight.

(10) Berkshire-owned Benjamin Moore Paint is profitable even though its CEO has recently been replaced.

 

 

 Posted by at 9:29 am

Center for Audit Quality Forum on Investor Confidence – October 9 at Mayflower Hotel

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Oct 042013
 

I will be on a Center for Audit Quality panel discussing investor confidence on Wednesday, October 9 at 8:30 a.m. at the Mayflower Hotel in Washington, DC.   The other panelists include Ben White – Chief Economic Correspondent for Politico (Moderator), Andy Cross – Chief Investment Officer for Motley Fool,  Alice Korngold – President of Korngold Consulting, and Cindy Fornelli – Executive Director for the Center for Audit Quality.

http://thecaq.org/events/CAQ_InvestorInvite_wModerator.pdf

 Posted by at 8:09 am

Berkshire Hathaway Owns $2.1 Billion of Goldman Sachs Common Stock

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Oct 012013
 

Berkshire Hathaway will receive Goldman Sachs common stock worth $2.1 billion today (October 1) through warrants acquired as part of an agreement signed in October 2008 during the financial crisis.  Under the terms of that agreement, Berkshire had the right to buy about 43.5 million Goldman shares at an exercise price of $115 per share for $5 billion.  Goldman announced an amended deal in March 2013 that would give Berkshire a much smaller stake but would not require it to commit any capital to exercise the warrants.  Berkshire will convert the warrants into shares equal in value to the difference between the warrants’ exercise price and the average closing price for Goldman shares in the 10 trading days up to October 1.  Based on the last 10-day share price average of $164.38, Berkshire would be entitled to about 13.1 million Goldman shares, making it the sixth largest external investor with a 3% stake in the bank.

Warren Buffett’s investment in 2008 included $5 billion in Goldman Sachs 10% preferred stock.  Goldman repurchased the preferred shares from Berkshire at a premium in March 2011.

On September 10, 2013, Goldman Sachs became one of the 30 components of the Dow Jones Industrial Average.

 

 

 Posted by at 1:20 am