May 062019

Warren Buffett, Charlie Munger, and Bill Gates were guests on CNBC this morning from 6 a.m. – 9 a.m. ET.

The highlights were:

(1)   Buffett: A trade war is bad for the world. It is easier to start than stop. Negotiations are a dangerous game. Cannot shake your fist first then shake your finger later. DJIA futures down 485, S&P 500 futures down 1.8%.

(2) Kraft Heinz to restate earnings for 2016 and 2017 (a reduction of less than 2%).  Buffett: Kraft Heinz has my confidence.

(3) Buffett: The value of oil stocks depend on oil prices over the long term.

(4)  Buffett: Doesn’t think there will be a trade war with China long term, but probability is not zero. A trade war will lead to a recession.

(5) Buffett: In favor of Apple’s share buyback program. The lower the price, the more shares that can be bought

(6) Buffett: If you have extra cash, you should want lower prices to buy stocks.

(7) Buffett: Companies should buy back their shares only if they are undervalued.  Berkshire will buy back its shares if they are below intrinsic value which Buffett estimates within a band of 10%.

(8) Munger: Expects trade agreement between U.S. and China

(9) Munger: Wells Fargo was an honest mistake with a bad incentive plan that was a blind spot to its CEOs.

(10) Buffett: Never bought an IPO. Inconceivable that heavily promoted IPO is best investment relative to thousands of stocks.

(11) Buffett: Private equity uses other people’s money and leverage providing only an upside with no downside and provide competition for taking over companies.

(12) Buffett, Munger, Gates: (Capitalism vs. Socialism) – Higher taxes on high incomes to assist those with lower incomes are desirable. Socialism today in U.S. does not refer to government control of production.

(13) Gates: Since interest rates are like gravity to stock prices, and they are very low now, the outlook over the next few years is for modest performance for stock prices.

(14) Buffett: If current interest rates prevail over the next few years, then stocks are “ridiculously cheap”.

(15) Buffett: Health care spending in the U.S. approximates total federal government receipts (each represents about 18% of GDP).  Munger: Lots of unnecessary health care procedures.

 Posted by at 9:00 am

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