sorkin back at headquarters. we have a news packed morning ahead of us. warren buffett will be answering your questions this morning but, first, we have a roundup of the headlines at the top of the hour. good morning to both of you. >> good morning. good morning to mr. buffett as well. it's great to see him. thank you very much. when you said printing press, i thought you were at the fed this morning. a different printing press. >> yeah. a little different printing press this morning. this is the "omaha world herald the". >> if it was the fed we probably couldn't hear you because it would be running right now. >> because they would be running right now. let's do these headlines. oil prices slipping after five days of gains last week, pushed crude to a ten-month high. oil at this hour, as you can see, indicated down about a that a are. still close to $110 a barrel. deciding who should pay for the 2010 gulf of mexico oil spill has been delayed by a week to allow more time for settle many

talks and g-20 leaders meeting told europe let's put up extra money to fight its debt crisis if it wants more help, the leaders trying to pressure germany to drop its opposition, bigger european bailout fund. and "the artist" winning the academy award for best picture and won awards for best director, best actor, best original score and costume design -- >> you've never seen this movie. >> i haven't. here's the thing. i did not see -- and i successfully avoided everything pre and during and until this morning after. >> you didn't see with ryan seacrest? >> i don't know what happened. i'm not interested. here is the thing -- >> he took -- it was a promotion for his new film. >> i don't care about the dresses at all. >> there were some that looked

terrific. >> there's nothing there for me and i hadn't seen any movies except on a plane "midnight in paris." >> billy crystal was amazing. the guy is a legend. >> fine, fine. i'm with chris rock on the whole thing. >> what, you are not watching? >> he had some great comments when he was a host but i won't repeat those. there was nothing for me. i'm sorry. there was nothing for me. >> i will bet that mr. "b," warren buffett, may have watched a bit of it because i know he likes movies. >> you're wrong. >> warren, you didn't watch any? >> i didn't watch a minute. >> when ed asner did not get nominated, i decided to boycott. >> not a minute. >> good answer. >> becky, enough about -- is it fluff? is it me? it's my cranky, cynical old age,

i think. >> it is. >> there was golf on. i wanted to almost -- i didn't want to see anything. i didn't want to be in a room where even the channels were switching. i don't know. >> joe, you are dragging me into your crankiness, too. i boycott it had last night, too. i've been sitting next to you for so long that i automatically channel you. >> we talk about some important things here. i know it's a big business. it seems like it becomes more -- less important the older you get. and i didn't see any of the movies except for mega mind which wasn't nominated. >> if you had seen the movies you may have felt more. >> i saw "the descendents." >> a fantastic movie. >> it was really good. let's start off our conversation with warren buffett. we do have some important topics to get to. first of all, we want to thank you very much for joining us. >> thank you for coming. >> we're here at berkshire's

most recent acquisition. last year you went ahead and stepped in and i guess one of the key questions i have is why did you do that? why don't we start off talking about that right at the top. >> william jennings brian was the editor of "the world herald" so if you go back to 1894 to '96 and then of course he started running for president and he didn't have too much luck until he lost three times. "the world herald" -- newspapers face three major problems and two of them they can't do much about but the third they can. the first problem they have is that the only reason you buy a newspaper is to find out something you want to know that you don't know. and if you go back many years, if you wanted to know the box score on your favorite baseball team, if you wanted to know the closing prices on stocks, if you wanted to find an amount, the

thup was primary. it's lost its primariness in certain major areas of news but still remains in a number of items that are extremely important to people. and it's vital they continue to be so. as long as they are of interest to you, that you can't find some place else. >> classified, obituaries? >> yeah, obituaries are a good thing. you are not going to find out whether your friends are alive or debt anywhere else. take high school basketball or nebraska football, you will learn more from reading the newspaper than from any other source. "the world herald" will always be primary. you will know ten times as much about nebraska football than if you try to get your news from any or source. the same is true in local politics and people, when there's a sense of community, people care with about that.

now where there isn't that sense of community, the second problem i have -- but they still are -- you start with trees up in canada and it's very expensive. that doesn't go away. electronic is not expensive. but the third thing is newspapers have been giving away their product at the same time they are selling it and that is not a great model. you're competing with yourself and that you are seeing throughout the industry a reaction to that problem and an answer to it and that's important. >> the answer is charging people online? >> yeah. in other words, you shouldn't -- you shouldn't be giving away a product you're trying to sell. >> rupert murdoch got there a long time ago and said this is something we should be doing and do you agree? >> the dow jones was doing it before rupert, too.

"the new york times" held off and it's being instituted in other ways. that's key to the future of the newspaper. newspapers tell you a lot of things you can't find out other places and most citizens are going to find them useful. you can't give them away for nothing. >> we can talk more about this later. i want to start off while we're here at this point the market, the dow and the s&p are sitting at about the highest levels in four years. we have seen an incredible run over the last several months and you are somebody who had stepped in four years ago or i'm sorry, back in 2008, when you wrote that op-ed piece for "the new york times," the headline was buy american stocks. i am. we've come a long way in the market since is then. the dow was below 9,000. i want to know what you think about stocks at these prices. do you still think that this is a great time to be buying stocks? >> stocks are businesses. you have to invest in something.

if you have your money in your wallet, it's invested in something. it's just zero. if you have your money in the bank these days it's at zero or in treasury bills it's invested at zero. i have a section in the report where i say that if held over a long period of time there's no question in my mind that equities is going to outperform in my view dramatically paper money or nonproductive assets such as gold. no forecast for the next three months, six months, or a year. i think it's obvious that owning really first rate productive businesses, and there's hundreds of them, you have to compound over time. pay the money out, reinvest it, share in shares so your ownership goes up. equities are still cheap relative to any other asset class.

>> but they're not -- >> i would say single family homes are cheap, too. >> you would? >> single family homes. if i had a way of buying a couple thousand single family homes and had a way of managing them, the management is a problem because they're one by one not like apartment houses. but i would load up on them and i would take mortgages out at very low rates. if anybody is thinking about buying homes, five years ago they couldn't buy them fast enough. interest rates are far lower. it's a way, in effect, to shorten the dollar. you can take a 30-year mortgage. you can refinance lower. if it's too low the other guy is stuck with it for 30 years. it's an attractive asset class now. >> if you are a young individual investor at home and have your choice between buying your first home or investing in stocks, where would you tell someone is the better bet? >> if i thought i was going to live -- if i knew where i wanted to live the next five or ten years, i would buy a home and i

would finance it with a 30-year mortgage. it's a terrific deal. and if i, literally, was an investor that was a handy type, which i'm not, and i could buy a couple of them at the stressed prices and find renters, i think that's -- and, again, take a 30-year mortgage, it's a leveraged way of owning a very cheap asset now. i think that's probably as an attractive investment as you can make. equities are very attractive compared to anything else. >> obviously they've come up quite a bit since you first were telling people you were buying them for your perfectly port foal yoe. >> you wait until you see the first robin, spring will be over. spring is over 0 but we're not in the dead of winter either. stocks, we with were three years ago and stocks have almost doubled exactly since we sat down three years ago so they're not as cheap as they were. but measured against the alternatives would you rather have cash, treasury bonds,

rather have -- you name it. i would rather own great businesses and we own a lot of them through stocks and we own a lot of them outright and i would love to buy another one this afternoon. >> when you look at stocks do you look at american stocks first? >> i look at stocks all over the world but, sure. the big market is here. i know the companies better here but we -- at year end, for example, we have a subsidiary in germany. i bought seven international stocks. in fact, i may have -- i put 175 million euros in each of h stocks and they were all european stocks. >> when was this? >> right toward the end of the year. yeah. i just picked eight of them. i do not know the eight as well

as i know american express or wells fargo. i know them enough. >> you looked at the situation with the euro prices and you thought it was improving or at least they started to make progress on that? >> i thought the eight companies were terrific companies that were cheap. >> but why did you focus on europe? you've never done that before. >> i just -- i just thought these eight companies were cheap and they obviously were affected by the european crisis and in the end those eight companies i bought are going to be there five, ten, 20, 50 years from now and there may be something else bothering the world five years, ten years from now. there will always be something bothering the world. these can companies will do fine regardless of what happens with europe. >> did you buy that for berkshire's port foal wroe? >> sure. i don't have -- >> what are you doing in your perm portfolio? do you continue to buy stocks? >> every now and then. i don't think about my own portfolio very much. i think about the portfolio of

our subsidiary. that's what i spend my time thinking about. >> okay. when you take a look at the housing market, you had told us last year when we sat down here you thought it could be the turning point and you said in your annual report you were dead wrong. we didn't see the improvement last year but you do think we'll see it this year? >> i think we're likely to. i sat here a year ago and said it would happen by now. what i do know is that today there are more households being created than houses. well, if that continues, and it will continue, eventually it gets in balance and when it gets in balance, it is in different geographies and time. when it gets in balance we will need more than a million residential housing units annually and when we're building, supply and demand will come into balance. it got way out of balance five years ago and that gave us time to work it off. but it does work off. the first year after the

recession, after it hit in 2009, household formation went like this. that happens in recessions. but that's changed. we have 4 million people roughly hitting each age cohort every year and we form households and they want to be in houses. >> there was an article that was out today talking about what economists are expecting with gdp and most of them, though they do see signs of improving will be growing at 2.4%. does that fit with what you see with the businesses you manage? >> i see our businesses getting better month by month and i've seen that since the summer of 2009 and the headlines have bounced around, the economist predictions have bounced around and looking at 70 some businesses leaving out the housing related businesses, the quarter by quarter ever since the middle of 2009, regardless of what the housing headlines were saying, the businesses kept getting better and they continue to. they're not at some rate like

that but they keep getting better. i don't pay any ait tension to the gdp forecast. >> the corporate profits have risen yet we haven't seen the jobs picture improve in days. >> that's because of the housing related factor. this was not a recession for housing. this was a depression. this was every bit the equal of anything we've ever seen in terms of a crash for housing. and the ripples from that spread out and they spread out quickly in 2008. but it's taken a long time for that to come back. but the housing related figure, if you look at the composition of employment, construction workers show us a number, but that's not really the number. we have five companies that are related to housing. only one is directly in housing.

we're the largest home builder in the united states, but we have four other companies, shaw carpet, acme brick, insulation, and those companies are affected enormously and their employment has gone down from 58,000 to 45,000. you will see that all throughout the economy. we have a healthy economy except for housing but housing is such a big factor. housing was $22 trillion of americans $60 trillion. when that is held on leverage with mortgages, the effect is enormous. >> i know joe has a question as well. joe? >> it's a sore subject, that stupid brick company. >> wait a second. i sent you a brick. clearly it didn't have any effect on you. >> i asked for a card and you sent me a brick. one brick.

one brick. >> i've seen the brick. it's on your desk. >> i actually took it home. that's a sore subject. you can't win. i was read iing about berkshire net income down 30% because of derivatives. how did you possibly lose money in derivatives? you didn't lose money. you made less than you made last year on the s&p derivatives, on the puts, right? you make $300 million, they still call you a slouch for having those derivatives. >> and actually if you priced them today versus december 31st, the markets going up not only here but europe and japan, we would show over $1 billion of profit today. whether or not that will be true on march 31st, it doesn't mean anything. we have $4.8 billion stuck in our pocket. >> i know. >> anyway, we wrote with about

it all. >> the other headline today that you knew was coming was buffett's trust me on succession isn't cutting it. "the journal" has an article, yeah, the board is comfortable. what, your shareholders are chopped liver? they can't be comfortable, too? creates instability. why not just say who it is or are you still are worried about like maybe the guy that you've identified, maybe he falls out of favor so you still have the option of changing it? why not just tell everyone? >> yeah, well, we have four stocks, we have $45 billion invested in. american express, coca-cola, wells fargo and ibm. every one of those four companies, every one of those four companies has changed management since we bought our shares. i didn't have the faintest idea

who the successor management would be in any of those four but we put billions and billions and billions of dollars in there, in some cases it's changed more than once. i don't know hot next manager of those four companies will be. i don't worry about that. they're wonderful businesses and good boards of directors. they will pick the person that will do the best job. if they make a mistake, they'll make a change. we've had had that -- like i say, if you ask he who the next ceo of coke or american express or wells fargo or ibm would be, i don't know the answer and i don't care. they have wonderful businesses and they're developing wonderful talent. the interesting thing at beck shir is normally if you run a business you are looking for somebody from production or manufacturing or sales or something who succeeds as ceo. at berkshire we have dozens who are running businesses. we have people running the bns. they are ceos already so we have a choice of dozens of ceos which is a luxury.

i don't know of another company that has it. in the end, it could be tonight. it could be five years from now. the board of directors knows who the person is the next morning and i don't know, for example, amazon is now -- i should say apple is now the largest company by market value in the country. exxon is number two. i don't know whether you know who the successor is. >> it's not matt rose. now i know it's not matt rose because you just said he's got to run the railroads. i was hoping it might be matt. i like matt. >> is it definitely not? >> i think you misread that. the person who is going to become ceo of berkshire is probably some ceo -- >> oh, so it is hat mat rose. >> you're breaking news here, john. you're stretching to do 0 it. >> when you sit and talk to the

board about a potential successor and you talk about the down sides of naming that person or naming a list of people, what are those down sides and i ask because there is all this fre pressure and it would seem -- you just mentioned tim cook. there was a sense, though, i don't know if it was said publicly that he clearly was going to be the successor and that gave some people a sense of stability around what was going to happen after a steve jobs. >> it was also clear that steve jobs had a real health problem. who is tim cook's successor? >> it's a great question. >> i don't know. hot is jeff's successor? who is jamie dimon's successor? all of those people have somebody in mind. for various reasons, one of the

reasons being they don't know when it will happen and when it happens makes a difference and they also probably don't like the effect of having a crowned prince. >> warren, this is the first time -- this is the first time that in the annual letter you've laid out and told the shareholders that there is one person in mind. in the past it was always this idea it was one of three or four people. >> you can blame me for that because i have said at annual meetings that the board knows exactly which one they would pick the next morning. i probably haven't made that as clear as i should have there's always been the case though there were three or four possibilities they knew which one would be the designated one but they did have the backup candidates. i should have made that more clear and i tried to this time. but five years ago, if something happened to me five years ago, the board had one person in mind. they had a couple of backups at

that time always. >> a year ago was it a different person they had in mind than now? >> no. >> david has since left the company. >> it would have been the same person a year ago as now. >> so it was not david? >> you can go back further than that. >> it was not david a year ago or if further back than that? >> no, not the one they would have picked. >> can you give us an update on what has happened with that situation? >> well, i really don't know because it's being investigated by various authorities and they talked to me last june, not a deposition or anything like that. just an informal -- >> who did? >> well, i can tell you the s.e.c. did. and then that's the last i've heard. now, unfortunately, i know that it must be fairly active because we have to pay dave's legal bills under delaware law and

we've paid like $1.4 million. i assume something is going on. i hate paying these legal bills naturally. if he's found guilty of a crime, we can get those back at some point. the bills just come in. i read where fannie mae have paid $99 million on three people, and they're not done yet either. that's the american taxpayer paying that. it's a very awkward thing when you have somebody who has been charged with something who was an employee and under delaware law you have the duty to defend them though you can get it back if they are found too much committed a crime and dave has plenty of money, so we would not have a problem getting it back if that's the case. i have no notion, i've not talked to dave or the authorities. it's their investigation and i'm on the sidelines but writing checks. >> andrew, did you have another

question? >> no, no, no, you asked the exact question we were planning to ask. >> just in terms of what had happened with that situation? >> no, i was more interested in the fact that in the report he identified -- he said that he had one candidate in mind and i was curious what had happened in the past year that was different from years past but he answered that question directly. >> i started all this trouble five or owe so years ago facetiously. i have this envelope -- i didn't have an envelope -- i made this crack that i open the envelope and i pull out the slip inside and it said check my pulse again. somehow that got the fact that there was an envelope. another one of my jokes that's gone astray. >> warren, we're going to take time right now to get a check on the markets and when we come back we'll have more of this conversation. andrew? >> absolutely. we'll come back in just a

moment. are we going to the markets right now? we are. we're going to go across the pond to see our friend ross westgate who is standing by with the global markets report. ross? hey, andrew. good morning to you. everybody here perking their ears up when warren says he bought eight european stocks towards the end of last year. if they were german stocks he would have done quite year, so far up around 16%. so try to work it out. today we're weighted to the down si side. advancers outpaced by decliners more than 8-1. we wiped out last week's slim gains. the higher oil prices weighing on sentiment. auto stocks have been weaker today. hsbc came out and they had the bid that made the most money out of any oecd bank, $22 billion. just shy of $22 billion in profits. the stock just down off, as you can see, 2.3%.

they just missed the consensus forecast. they did take a hit from europe on the investment bank. elsewhere the yen just coming back off its multimonth lows. we're keeping 0 our eyes on brent. was over $125 when we started. becky, back to you. >> all right, ross, thank you very much. warren buffett sitting here saying he's paying close attention to what you're saying, too. right now we're going to pause for a break but we have much more with warren buffett. he'll be answering some of your e-mail and twitter questions after this. also, buffett watch is not stopping there. later today i'll be hosting a facebook q&a session. right now, though, as we head to a break check out the global market headlines. americans believe they should be in charge of their own future.

how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪  the the new spark cardnth from capital one. spark miles gives me the most rewards of any small business credit card. the spark card earns double miles... so we really had to up our game. with spark, the boss earns double miles on every purchase, every day. that's setting the bar pretty high. ningsiness has never been more rewarding. coming through!

[ male announcer ] introducing spark the small business credit cards from capital one. get more by choosing unlimited double miles or 2% cash back on every purchase, every day. what's in your wallet?

welcome back. u.s. equity futures at this hour after what has been a couple of pretty good months so far. we're getting close to the end of february now showing at least a little bit of weakness. down 65 points. you can see the indicated

perce percentage losses. nothing too great at this point but a little bit of weakness this morning. u.s. economists see more reason for optimism this year. a new survey from the national association tore business economics says forecasters raised expectation for employment, new home construction and business spending this year. it could change, though, with the average price of a gallon of gasoline. that's our next headline jumping 18 cents. the lundberg survey puts a price of regular at $3 and i think it is -- is that a 6 and a 9? they have. $ $3.69 nationwide. the prompter seems even further away. like i have yours or something today. i'm not really sure. >> my prompter is a lot closer so i saw that pop right up. let's get back to some of our questions with warren buffett. joe mentioned that national

average on oil prices. do you worry that higher oil prices, higher prices at the pump could cut off any sort of economic rebound here in the united states? >> well, they're a minus but i don't see them stopping things. i would rather have them a lot lower. of course we had them a lot lower when the panic hit. oil had been $147 a barrel prior to obama coming in and then when the panic hit, it hit everything and oil totally tanked. i do not think it will derail what's been going on now for almost three years, two and a half years. we've had a steady recovery. >> does the price of oil make sense given that economic recovery or something people are too worried about what's happening in the middle east or where you have speculators playing in the commodity market? >> i have no position in oil so i don't really have a view. the one thing that's extraordinary in oil which we've never seen and causes people to go broke, is you have $100 plus

oil, $108 or whatever it was with $2.50 for natural gas. nothing like that has ever existed. the btu equivalent, people say that can't happen. so people who have gone long natural gas and short oil are really feeling the pain. i wouldn't be surprised if even the unwinding of some of those positions could cause some of what goes on in both markets. this is extraordinary. you would have said it couldn't happen but that's like saying long-term capital management that you couldn't have 30-year treasuries for 30 basis-point spread. you want to be very careful. >> in your annual letter you said you had guessed wrong with where natural gas prices were heading and that was one of the issues. >> yeah, like a billion dollars worth plus. >> let's get to some questions from viewers.

we promised to bring some of those up and we were talking about berkshire. you had a lot of questions that came in both on twitter and our own e-mail of people asking more questions about that. one is from max rudolph who writes in while you are careful generally about how you write your annual report, nowhere has it ever said that the ceo that you have in mind is an internal candidate. it seems to leave open the possibility of a board member becoming ceo. >> certainly we've got incredible business talent on the board, and they're intimately familiar with berkshire. i think it's unlikely that we would have somebody better in the position of ceo. if we're on a plane trip and the plane went down, the board would not be a bad place to look.

but that's not going to happen. >> if the person that the board has chosen to be your successor, does he know that he's been chos chosen? >> no. >> okay. jeff webb writes in from washington and he says, will it be necessary for the next berkshire ceo to reside in omaha and will the annual shareholder meeting remain this in omaha? >> i would certainly hope so but i won't be around to enforce it. maybe i will. i've left them all a ouiji board so they can stay in contact with me. i've threatened them in various ways. there's every intention of the headquarters being in omaha 50 years, 100 years from now. it wouldn't make sense for the ceo not to be located where the headquarters are. i think that's a 99.9% answer yes. >> david lund from ogden, utah, writes in and points out when lou simpson retired his

portfolio was liquidated. what will happen to your portfolio when you retire? >> well, i don't know. that will be for somebody else to decide. what will happen is that todd and ted, who are already onboard now, will be managing the investments and they will be managing counting the cash $160 billion and they're totally capable of doing that. my guess is that they would like some of the things we own very well, but it will be their call. they each, as i mentioned in the annual report, they're managing about $1.75 billion. that will go up in 2012. i don't know what they're buying. they don't have to check that with me. they could be each buying the same stock. i think in one case they've done that. it's their baby. they are getting paid based on

their results. it wouldn't mean anything if i were second-guessing them or they had to get approval by me. they will buy stocks and i will find out about it later even though they work in the same office. when i'm not there, they will be managing a whole lot more money and they're totally capable of doing that. >> they each have a few billion dollars right now? >> right now. that will even go up during this year. >> control room, i'd like to go to 108. this is a question from gary watkins in atlanta, georgia. since you bring up todd combs and ted wechsler, when you are talking about them you say each receives 80% of the performance compensation from his own investment results and 20% from his partners. he assumes if this is so they will help each other. can you elaborate? >> i've seen investment organizations where people are competing with each other. these fellows wouldn't anyway. i do believe in having compensation systems to reinforce the values that we

value and we certainly value cooperation among the people doing that sort of thing. performance is defined over a period of time. todd came onboard a year ago and did very well the first year. he didn't come onboard until this year, but from this point forward they will participate with each other. >> andrew, you have a question as well? >> it's on this topic. i'm curious if you imagine bringing on investment managers still. i recall you saying something to the effect of two to three to possibly more than that.

do you feel there's no more? >> i feel no need. i feel terrific with these two and they could easily handle the whole plate. it may well be that we find a thi third. i'm not thinking about that actively. if i thought it would add something to the picture, i wouldn't hesitate to do it and todd and ted ted would not be surprised if i did it. i hope you are talking to me five years from now and it will be ten. they are terrific human beings. these are two fellows who were running, in effect, hedge funds. they were making more money than they could make with berkshire and getting an entirely different tax treatment. the money todd made last year, which was substantial, he would have made that same money if he'd have been running his hedge

funneled and gone to work 0 at the same time in the morning, had a couple of assistants, the same people, reading the same reports, but he would have been taxed at less than half the rate he was taxed at because we pay it as ordinary income. he would have gotten it as long-term gain. >> doesn't seem fair. >> seems crazy. >> gets us to the topic of tax policy. i know that's a big can of worms we're opening up this morning, too. you have had a huge role in the discussion around taxes and you've been someone who has come out sharply on president obama's side. there's the buffett tax named after you. >> that's because alzheimer's has already been used. i've always wanted a disease named after me. >> how do you feel about the turn that this has taken in the national discourse and how it's put you front and center in a very contentious debate? >> well, a lot of people -- by

definition if you're into something, you make half the people of the united states mad at you coming out of the chute, but that's okay. we have an important problem in the united states, a very important problem. and it was man created and it can be solved by man. but it needs analysis. it needs thought and it needs action. to the extent that i can contribute either in the thought or the analysis or the action, i'll do it. it isn't like i have any magic facts. i just go on the internet and get the facts and see where they lead me. republicans and democrats know we need more revenue and lower expenditures. >> but that's not necessarily something they would all agree to. plenty of people come on the

show and say it's not unnecessarily a matter of bringing in more revenue. you do that by lowering taxes and growing the pie. as a result of growing the pie, you can actually lower people's tax rates and still bring in more money. >> the pie is going to grow and it will grow under the present tax rates. i have a table here that shows the tax rates back when i started in business. it was in the 30s on capital gains. they were 80% on ordinary -- it's grown -- we have a wonderful market system that works. so we will have a growing pie. but a growing pie isn't 9% or 8% of gdp. it never has and it never will. we fortunately the fact we have a growing pie does mean we have a two point or two and a half point gap between revenues and expenditures and have a sustainable economic picture.

so the goal, should it be taken promptly, is to get the gap between expenditures and revenues down to a two to three point gap. that's totally sustainable. the economy will grow. debt as a percentage of gdp will not grow as we get into that range and everybody realizes that and almost everybody says it has to come from expenditures and some from revenues. and then they get to the specifics and the biggest problem you have probably, because i've talked to republicans and democrats, they agree on that but they all want the other guy to go first. the republicans want the democrats to go first on expenditures and democrats want the republicans to go first on revenue and they feel there's a tactical advantage of the other guy going first. so now we've gone to this it dance where no one wants to get

on the dance floor. >> you've seen the figures if you let all the bush tax cuts expire, if you don't do anything about that, i don't know how much of the deficit but it's a large part. >> a large part. >> a large part of that. you don't see that coming from democrats. they only want to do it on 200 to 250 which solves very little. would you be -- is that the best thing to do to let it -- let all of the bush tax cuts expire or would that add to the income disparity or would that hurt on the fairness debate that no one under $200,000 or $250,000 should shoulder any of the deficit cutting or does it make sense to let it go back to the clinton years for everyone? >> i think if we hired 535 people to 0 run the government and to represent us, that they should not, in effect, act out of default basis and just say,

well, we'll let everything lapse back to where it was. they should proactively say what is the best way to get revenues up to 18.5% or expenditures down to 20.5% and let's do it now. this we can't do anything because it's an election year, why are we paying them? if they're going to go home, we'll pay them for three years out 0 of four. we've got, you know, a major, m major problem and the idea of putting it on a default setting is crazy. i can do that without hiring 535 guys. are so, no, i wouldn't -- i would approach it and say, look, we have serious propositions out there. we have to come up with something and get it for a vote. congress wants to vote it down, that's one thing. to sit there and say we're

paralyzed because it's an election year and let things drift along until the end of the year, all this stuff expires and kicks in and the payroll tax holiday ends and all of that, i think that's a crazy way to run a government. >> warren, you bring up the idea and you are quoted on the front page of "the new york times" in this story about simpson bowles. "the times" puts forth this idea that president obama has actually taken huge chunks. mr. obama has come to adopt most of the major tenants of the members. though his proposals do not go as far. he has quietly put forward simpson/bowles. would you agree with that? >> i have not read the article. i would say this. both of them i know. they are high-grade people. one is a republican and one a

democrat. they disagree on some things. you won't find people of greater integrity. they are smart. they work, i don't know, for 10 or 11 months. they compromise. they have people with diverse viewpoints as tom coburn of oklahoma who is a very high-grade guy but has different views than dick durbin who is high-grade guy from illinois. they got them to sign on. now having put that effort forth, they came up with a plan. i would like to see that lan voted on. what was the reason for sending them out to beat each other's heads for 10 or 11 months? they got 11 is out of 18 signatures. i understand that simpson and bowles are actually taking recommendations and crafting it into a legislative bill. i heard that a month ago. i don't know for certain that's true. i would hope that that bill just gets presented. bring it up next month. let's see how congress feels about it. they don't like it, they can

come up with something different. but conscientious, smart, decent people work 0 for months to come up with something. they were chartered to do it. i think congress owes them a vote on that and i would love to see that put up. and i would say this. if i wrote a letter to the ceos of the fortune 500 companies and said do you want to vote on this now, i think it would be almost unanimous. i think it would be the same with church leaders, you name it, up and down the line. it doesn't mean they all agree with it. do you think it's better than now? is it an appropriate response to a problem we all recognize we have? >> you can't cherry pick the items you like from that and start breaking apart the plan? >> once you start cherry picking the whole thing disintegrates and then k street comes out in full force. money pours in supporting this little thing that helps this person or that person. in the end we'll have a code

that everybody, you, i, everybody -- they're not going to like some part of it. but i can guarantee they don't like some part of this and this particular code is leaving us down a path unsustainable. why not a code that we don't hike that is sustainable as opposed to one that is sustainable? >> andrew is this. >> warren, there's an op-ed by rick santorum laying out his economic agenda and he proposes some new tax rates policies on corporate taxes he's having down to 17.5% and on personal he's in two brackets, 1078s and 28%. i'm curious beyond the simpson/bowles debate what do you think the right numbers are? what are the right brackets, and what is probably the highest -- what do you think from a competitive perspective on a corporate basis the highest rate should be? >> well, the rate -- what the rate should be is rates to bring

in about 18.5% or so of gdp as revenue. now we've had rates like that throughout most of had that thr post-world war ii. it's not impossible. and then we knock the heck out of rates. roughly ten years ago or a little less. so, the interesting thing about the corporate rate is the corporate profits as a percentage of gdp last year were the highest or just about the highest in the last 50 years. they were 10 and a fraction% of gdp. that's higher than we've seen in 50 years. the taxes as a percent, corporate taxes as a percent of gdp were 1.2%, $180 billion. that's about the lowest we've seen. so, our corporate tax rate last year effectively in terms of taxes paid for the united states was around 12%, which is well below those existing in most of

the industrialized countries around the world. so, it is a myth that the american corporations are paying 35% or anything like it. incidentally, you know, 1.2% of gdp or 12 or so percent -- 12 to 13 perce 13% that's a rate far, far below what we've seen in the united states. i've got a chart here that -- can you put that up? >> yeah, there's a chart that we gave you guys. i think it's e-1, the one you took a still shot of earlier, paul. yeah, here it is. >> yeah, here is -- >> it's on the screen. >> yeah. here's the -- here's what's happened over the last 60 years as percentage of gdp, that top blue line is individual income taxes. you'll notice that they bounced around. but then fairly steady. the yellow line that's accelerated is payroll taxes. payroll taxes have gone from a

very small percentage of gdp up dramatically. at the same time, the red line is corporate attacks as a percent of gdp which were over 5%, if you go back a long period, and 4%. like i say, they were 1.2% last year. corporate taxes are not strangling american competitiveness -- >> is that because people were able to write off -- >> you can see the financial -- that last dropoff right there is the financial crisis. if it were to go back -- i mean, right? >> no. but if you take 2011 corporate profits were a record. >> right. but, for example, ge, which, you know, is the poster child because, you know, people can c conflate what ge did, they had a lot of tax laws, taxes carried from from ge losses in 2008 and 2009, it reduced the taxes in

those squeubsequent years, 2010d 2011. if you were to normalize it without the financial crisis it gets back to 4% or 5%. using -- >> no, no, no. >> where does it get back to? what does it get back to? >>. >> you can normalize it all you want but you can go back to 1980. you haven't had a figure much above -- you've had three a couple times. a a all these numbers at 2, 3%, nothing like 4%. the corporate tax rate was 52% of the united states and people paid it. our tax rate at berkshire, we didn't have any loss carried forward, we didn't have that much foreign income. our taxes in terms of taxes paid last year, a little higher than the national average. but because of 100% writeoffs and things like that, we paid $2 billion. we paid more than 1% of all the corporate attacks in the united states.

but our tax rates on u.s. income got down to taxes paid got down to 15% or 16%. >> there are plenty of companies, especially small businesses we hear from all the time, that are paying much higher rates. the way the tax code is set up right now, they are the ones who get settled with paying these exe high rates. >> if they're s-corporations and they make a fair amount of money, they will be paying at 35%. now, they may be getting accelerated deappreciation, 100% deappreciation, too. 23 they buy fixed assets they aren't paying that rate. >> if you're self-employed, have a couple of employees working for you, you're in a difficult position to find any loopholes that work for you. >> people making small amounts of money are at a huge disadvantage to people making huge amounts of money under the present tax system. >> not only that, they pay their

own payroll taxes, 30-plus percent. >> the system, all have you to do is look at that payroll tax that's moved up dramatically. that is not paid by the super rich. my payroll tax, you know, last year was -- i guess in 2011 would have been $13,300. it was nothing in relation to my tax liability. >> as the world gets more competitive, could you argue -- maybe you don't think that's a fact, that the world has gotten more competitive, but as we have to compete more with china and a lot of emerging economies with their cheap labor, i mean, probably some people that say we need to -- you know, it's not 1930 or 1940 or 1950 anymore and that we want our corporations to be the best in the world and the leanest and the quickest to move. you know, there could be an argument -- i've seen people argue corporation shouldn't pay any taxes because their shareholders pay taxes, their employees pay taxes.

i mean, you just dismiss that out of hand or -- >> well, like i say, last year was 1.2% of gdp. incidentally, i mean, the place where we are very high cost compared to the rest of the world is ceo pay. our ceo pay is considerably higher than if you look around the rest of the world. nobody mentions that in items of competitiveness. you know, we are exporting as a percentage of gdp twice as much as we were back in 1970. our goods and services have -- we've really had a lot of export success. the other side of it is, we like to import a lot. we've been able to print money which lets us import, so we exchange little pieces of paper for goods around the world and that's a lot of fun. >> we're going to slip in a quick break here. when we come back, much more to come from omaha. stick around.

weight loss progre expensive. so to save some money, i just got the popular girls from the local middle school to follow me around. ew. seriously? so gross. ew. seriously? that is so gross. ew. seriously? dude that is so totally gross. so gross...i know. there's an easier way to save. geico. fifteen minutes could save you fifteen percent or more.

good morning and welcome back to "squawk box" on cnbc. becky quick is in omaha this morning with warren buffett and we'll get to her in a minute. first, some of your morning headlines. home improvement retailer lowe's reporting 26 cents a share, 2 cents ahead of expectations. refuse new was also coming in beverage than expected. the average price of a gallon of gasoline has jumped 18 cents over the past two weeks. latest lundberg survey shows a

gallon of regular gasoline at $3.69 nationwide. they say if oil prices say high, pump prices could go higher. san diego has the highest price now at $4.24 per gallon. american airlines is warning union workers that major changes in labor contracts are needed and quickly. it says it needs those changes to save about $1.25 billion in employee cost savings so it can successfully emerge from bankruptcy. let's take a look at futures. red arrows across the board. if we opened up now, dow would be off about 57 points. percentage basis, down about 0.44%. nasdaq down similarly and s&p in the same league as well. let's get to becky, who is in omaha this morning with berkshire hathaway chairman and ceo, warren buffett. becky, i was -- i don't know, leading into the last break i was thinking about -- i don't know if you saw baron's.

there was a piece that was troubling to me. i wanted at some point ask warren about -- >> why don't you ask him now. >> warren, his basic thrust is that our middle class has been getting more and more decimated over the years as a lot of the cheap labor is found in the rest of the world, where obviously the standard of living is not as high and it's just been a natural progression to send a lot of the jobs overseas. as a result, the middle class has had to borrow to fund a lifestyle. that's one of the reasons that the consumer is so strapped at this point. it's very negative piece where basically looking for another seven years or so of subpar growth because of this. i don't know what the answer is. i think re-education or more to try to become -- to, you know, become more competitive, or at least better than the rest of the world at doing things for our labor force. do you have an answer for that?

>> yeah, the answer is in our market system has worked well for 200-plus years. it's working well now in all areas except home construction, those related to home construction. and we're sitting here with a market that's doubled three years ago from when we were sitting here. this country is remarkable. you have people -- in our own company, tony nicely at geico figuring on you out how to serve customers, matt rose trying to plan fort future of railroads in ft. worth today and tomorrow. you've got people at apple come up with new products you and i haven't thought of yet. american capitalism is dynamic. any time you look at it on a static basis you can get pessimistic. i got out of school in 1951. the two people i revered most in the world, my dad and ben graham, told me it was a bad time to start in business. you know, you can sit down at

the start of every year and write down 10 or 20 reasons why, you know, things are terrible. but the truth is, this economy works wonderfully. it's working wonderfully now. it isn't working for everybody at this moment and it's coming back from a terrible shock that it received in the fall of 2008. look how far it's come back. and it continues to come back every day. it's been doing it now since the fall of 2009. so, you know, it is -- it is a terrible mistake to get pessimistic on america. it has not worked since 1776 and it's not going to work now. >> we touched on this the last hour, but just the idea -- you bring up that the stock market has doubled over the last three years when we've been sitting here. again, there are many people who now worry that the best and easiest gains are over. you said yourself in the last hour that it's not springtime anymore. does that change the way people should be looking at the stock market as a potential investment? >> they should be looking at funds they're going to save. those are the only funds you say

you invest with, and figure out what is the best thing to do with them. buy farmland, apartment, duplexes, buy businesses, buy businesses through stocks, rare stamps, gold, or they can stick it in money market accounts. they've always got all those options. and i've written a section in the annual report why i think that businesses are the best option. now, the nice thing about businesses in this country is you can buy into all the best businesses in the united states virtually. you can buy a piece of them. you don't have to buy, you know, if you don't understand company xyz you can buy company abc. it would be nicer to buy them at the prices of three years ago, but they are attractive relative to other assets. that doesn't mean they're going up. but i will guarantee you that over a 20 or 30-year period, they're going to perform very well. as i mentioned a little earlier, actually, single family houses bought on a distressed bases and

financed at these interest rates may be the best investment of all. if i knew anything about real estate and i was working with a relatively small amount of money and i was seeing distressed houses around me that i could rent out, i would buy them and put on a 4% mortgage for 30 years and, you know, three or four or five years i'd probably sell it at a very substantial profit relative to my equity. >> okay. you know, warren, we left off in the last break talking about taxes. your role in this tax debate has become very central and very polarizing. just the last week, governor chris christie of new jersey weighed in on this and weighed in on what you've been saying. take a listen to what he had to say. >> warren buffett keeps screaming to tax more. >> he should just write a check and shut up and keep contributing. the fact of the matter is, i'm tired of hearing about it. if ept to give the government

more money, he has the ability to write a check, just write it. >> he's not the only person that feels that way. we got a lot of viewer e-mail that came in. we've been sitting down and doing this ask warren session for the last four years or on. this year more than any year there were a lot of e-mails that came in that similarly echoed what chris christie had to say. >> i hope they were a little more eloquent than that. you know, it's -- it's sort of a touching response to a $1.4 t l trillion deficit. first person to come up with that was senator mcconnell. i really -- it's sort of astounding to me that somebody that has the responsibility to being the minority leader in the senate would think that you attack a $1.2 trillion or so deficit by asking for voluntary contributions. since he did, i offered to triple his. that's a side show. the real problem we have is

we're taking in too little money and we're spending too much. that's not going to be solved by voluntary contributions. what we need is a policy, a tax policy. to give you an idea of how extreme it is, just take a look taish ta -- take a look at what i labeled a-1. you can find this on the internet. the figures i circled in 1992 showed the 400 largest incomes in the united states that year, adjusted gross incomes, were18 billion. if you go down to 2008 it's $108 billion. that's $270 million a person. from 1992, the 400 top incomes went from $45 million to $72 million. which is not bad i think. now, if you go over to a-2, you will see that during the same period those top 400 saw their tax rates drop from 26.3% to 18.1%.

at the same time that was happening. what's even more startling is if you go to a-3, and you will see that in 1992, six people among those 400 paid at a rate that was less than 10%. that's just two-thirds of what the average person pays on payroll taxes. and that went up to 30 over that period. the number paying from 10 to 15 went from 10 to 101. so, 131 of the 400 largest incomes averaging $270 million each, 131 out of 400 were paying at a 15% rate or below. and the payroll tax for people making less than $100,000 up until this year was 15.3% they were paying. so, solving that problem -- solving the problem of me paying the low tax rate i pay is not going to solve the fiscal

problems of the united states. but to ask other people to be making sacrifices during this period, and we're going to ask them to make sacrifices. we're going to ask them to make it on the revenue side and expenditure side, so to leave this group asloan a travesty. >> you can't fix the deficit by going -- >> after any one revenue or expenditure item. and you certainly can't fix it by asking for voluntary contributions. >> this is something you think for the optics of the situation or just for the appearance of fairness, the president says all the time. >> i think it should be incorporated into a revision which going to have to happen on both the revenue side and the expenditure side. i certainly think it's important to incorporate this into a revision. this is something that can be done immediately. a minimum tax on people, there's 131 people that file those returns that showed 15% or less. my cleaning lady mary has a

payroll tax of 15%. >> joe? >> i just don't -- i don't know why you harp on it so much, warren, when you know it's -- it's not going -- it wouldn't solve anything. maybe we need to fix it for the optics of the situation, but what -- i guess the real question is, what do we do with dividend income and capital gains income? because let's say that you work your entire life paying ordinary income and you're not -- let's say you're not getting carried interest. let's say under your normal situation, you're paying ordinary income at 30% or 35% and you do very well. you're very successful. at that point in your life you're 60 years old, 65 years old, you invest in dividend high paying stocks and you have capital gains which lowers your taxes to that rate. you've paid taxes once already. i mean, we need to decide what the correct rate for capital formation is for long-term gains and for dividend income. it just seems -- i don't know. to keep bringing it up -- look at this, look at this.

it's not fair. it's not fair. when you know it has to do with long-term gains and dividend income. let's do something -- let's find the right rates for dividend income and long-term gains and stop pointing fingers at these people. >> i'm not -- i don't think i've named an individual. >> no, you haven't, but it's a matter of public record. you only have to look up 130 of them. >> but the real question is this tax code of the united states should be proud of -- >> i don't know if -- now we're back to emotion again. we're proud, we're not fair, we're not this. we have a huge problem. this doesn't -- this won't scratch the surface of the problem. carried interest you need to do -- you need to do something with carried interest as well. maybe if there's an optical -- if there's that optics there. the real problem, and the reason simp simpson/bowles is so hard, people don't want medicare or social security touched and that's the hardest thing we'll

deal with in the deficit. not taxing 131 that makes you feel better about yourself. >> the numbers here -- just think about it, joe. the numbers here probably come to $40 billion. that may not sound like a lot to you, but $40 billion is almost $2,000 apiece for 20 million families. if you take -- >> i know. >> if you take the bottom 20% in the united states, there's 20 -- almost 24 million households, households, and their top income is $21,000. now, if you -- to those people, $40 billion divided by their 20-some million is real money, $1,000 or $2,000. i don't argue with you. it's going to be tough to take away promises we've made. we're a rich family that's overpromised. but to not start at the top -- i mean, this is something we can do something about right now. >> but how do we do it, warren? shouldn't we try to figure out

what the best rate for the most competitive and the rate that brings everyone the most benefit in dividends and capital -- we have to have that discussion. isn't that more important? to just like put -- like a surtax. i'm asking you, why can't we just tax you at 10% of your wealth. that didn't go over very well. 10% of that wealth, i figure we'd get $5 billion from you alone, right? >> yeah, that's true. actually, you know, wealth tax is tough to enforce. it's very hard to say what -- you know, what every farm is worth or every business -- private business is worth. i don't particularly favor a wealth tax but i would have no objection to it. i mean, if 10% of my wealth and 10% of everybody's wealth went to the government, i don't think that's the best system.

>> what should we do with capital gains? you think -- is 30% okay? what about dividends, they're taxed the first time when a company is -- you say it's taxed at 1.2% anyway for corporations, but they do pay taxes once. what should the dividend rate be? i mean, you must have an idea where capital gains and dividends should be right now, tax rates. >> yeah. incidentally, that point about double taxation has been made. i just thought it would be fun to take a look at my own situation, because if you go back to -- i made these calculations in the office three times where my rate was half of everybody else's rate. if you go back to 2004, if you put up -- what would be that number on that? >> warren, what do you think about dividends?

is there a rate that's acceptable if they went to 25%, 30%? >> the best period we had in our post-war history, the '50s and '60s. in the '50s and '60s, the tax rate generally on capital gains was 25%. and the tax rate on ordinary income got up to 80% or thereabouts. and our country prospered very substantially. i mean, the stock market did well, investors did well, the economy did well. so, that was a rate that worked very well. corporate tax rates, then, were 52%. and people paid them, incidentally. >> should capital gains and dividends be the same rate as ordinary income? >> that depend on what the ordinary income rates are. i mean, you can go that either way. that's what they were in 1986. i mean, that was the -- under reagan we went to 28% on everything. i don't have a problem with that. i think that's -- every tax system is going to get criticized but i would not have problem with a 28% rate. there would be a lower rate on people with lower incomes but --

so it would still be a graduateded rate. the idea of taxing capital gains and dividends at the same rate, we've done that in 1986 and people thought it was a wonderful improvement on the tax code at that time. >> joe, does that answer your question? >> yeah. now we're having the discussion. maybe that's what we need to do. and then we need to just, you know, hear from certain people that just say, you know, for competitive reasons you don't want to raise taxes -- you've heard all the stuff before, but at least we could have an actual discussion. because that would take care of this whole issue that your secretary pays less than you. that wouldn't happen if it -- if you were -- if your income was taxed at ordinary income rates. we'd be finished with the discussion if it was 28%, warren. >> yeah. she wasn't paying -- well, you've got to integrate payroll taxes in there, too. >> i know, i know. >> yeah. >> and you must be -- >> but let --

>> it would be nice if you would give her a little raise then we wouldn't have to worry about it all the time. you could probably pay her half a million a year, right? >> well, but that -- >> dealing with you must be worth $500,000. >> no question, she's worth it. her tax rate -- it would still be double mine. it doesn't -- >> because yours is all dividend income. you don't pay yourself any ordinary income. i wouldn't pay myself anythingfy were you either but i would sure like $60 billion. >> well, 131 out of 400 people came in below 15%. >> i know. they got -- now we're going in circles. we're back to -- we have to figure out how to do that. and then the carried interest thing, which is also -- you know, when you say someone has worked a lifetime and then is enjoying the fruits of their lower tax rates, if you made your entire income from the carried interest, then you've got -- you know, then you are to explain that away. that makes it tough. that optically is bad.

>> we had this fellow,ed to combs, he was running a hedge fund before that. he did exactly what he was doing at the hedge fund before. he had people working for him. he came to work at the same time, read the same papers and he got taxed at more than twice the rate than he would have had he done exactly the same activities at a hedge fund. that does not strike me as making any sense. >> all right. wow, we are -- i'm getting -- you know, i'm getting a lot of e-mails coming in to me personally from -- i heard of some of these people. anyway, thanks, warren. we'll be back to talk more with the oracle of omaha, chairman of berkshire hathaway. right now, data that could move the marks this week, tell you what you should be watching. tweet your questions or comment to warren buffett.

the other office devices? they don't get me. they're all like, "hey, brother, doesn't it bother you that no one notices you?" and i'm like, "doesn't it bother you you're not reliable?" and they say, "shut up!" and i'm like, "you shut up." in business, it's all about reliability. 'cause these guys aren't just hitting "print." they're hitting "dream." so that's what i do. i print dreams, baby. [whispering] big dreams. so -- tell me again what happened. i was downstairs making coffee, and we heard it. it just came crashing through the roof, out of nowhere. what is it? it's our ira. any idea what coulda caused this? maybe. i just sorta threw a little money here, a little money there. and i loaded up on something my dentist told me was hot. yeah.

♪ refinanced that congress

welcome back to "squawk" this monday morning. we'll be back with warren buffett but first a look at the economic front. today at 10 a.m. eastern we'll get pending home sales data

released. at 10:30 the dallas fed survey is out. tomorrow a big number at 8:30, durable goods data is out followed by s&p/case-shiller home price index. wednesday, the beige book is released. rounding out our busy week on the data front, thursday we'll get personal income and jobless claims data that's out. at 10 a.m., the ism manufacturing data will be released. let's take a quick look at futures right now. we're still in the red. dow would open up about 53 points lower. nasdaq would be off about 13 point. if you have any comments or questions about anything we've been talking about this morning, anything you've heard, you can e-mail us at squawk@msnbc.com. a lot of you have figured out that e-mail address and follow us on twitter. the handle is @squawk.msnbc.

take a look at lowe's beating expectations. revenue came in better than expected, too. you can see that stock is indicated to open higher, 27.80 to 28 after closing at 27.16. if you. listening to "squawk" earlier this morning, you know warren buffett is bullish on housing. you said this is maybe the best place to put your money, maybe better than the stock market? >> if you have a way to manage a single family home. single family homes are selling at very attractive prices in many places. and the mortgage financing you can get is unbelievable. it's a great way to short the dollar. >> all right. we'll have a lot more on that conversation and much more. "squawk box" back right after this quick break. without the stuff that we make here,

you wouldn't be able to walk in your house and flip on your lights. [ brad ] at ge we build turbines that power the world. they go into power plants which take some form of energy, harness it, and turn it into more efficient electricity. [ ron ] when i was a kid i wanted to work with my hands, that was my thing. i really enjoy building turbines. it's nice to know that what you're building is gonna do something for the world. when people think of ge, they typically don't think about beer. a lot of people may not realize that the power needed to keep their budweiser cold and even to make their beer comes from turbines made right here. wait, so you guys make the beer? no, we make the power that makes the beer. so without you there'd be no bud? that's right. well, we like you. [ laughter ] ♪

it saves us so much time and money. postage meters are a lot more expensive. can you print only stamps? no. first class. priority mail. certified. international. and the mailman picks it up. i don't leave the shop anymore. now it's all under my control. and i like that. [ male announcer ] learn more at stamps.com/tv and get a 4-week trial plus $100 in extras including a scale and free postage to use during your trial. go to stamps.com/tv and never go to the post office again. welcome back to "squawk box" on cnbc.

i'm joe kernen along with andrew ross sorkin. becky is in omaha as we spend three hours with berkshire hathaway's warren buffett. first, a quick look at this morning's headlines italy's borrowing cost, their lowest level in 17 months, which is really good news that the country's latest debt auction sold 12.25 euros in six-month bills paying the smallest interest since 2010. whatever happens in greece, we can at least point to italy as something to feel good about. we are watching the shares of metro pcs this morning. somebody is. we is a strong word. david favor reporting friday that sprint turned its back on a nearly final deal to acquire metro pcs. the company's board rejected it despite an endorsement from ceo, the guy in the trench coat in the dark walking around central

park. >> new york city, going over that bridge. have you ever seen the back of the car? >> yeah. i see a guy at night in a trench coat in central park -- >> in black and white. >> yeah. the whole thing is disturbing, isn't it, andrew? you know what i'm saying. you've been -- have you ever been in central park at night? how often -- >> i don't want to go there. let's get back to warren buffett and becky in omaha this morning. i've got a question. if you'd indulge me, warren, i've been doing a little research while you've been talking, not just the tax rate, which you've talked about the higher tax rate in '50s and '60s being 62% but effective tax rate on the 0.1%, and there's a study, i'll send it to you, says the effective tax rate on the 0.1% back then was actually 71.4% in the 1960s and 74.6% in the 1970s. my question is, would those rates fly today? what would the impact on the economy be? i ask that in the context that

in the '50s and '60s, a number of people e-mailing already, suggesting the wind was at our backs, if you will, when you think about the economy during that period. >> well, i don't think -- they probably wouldn't fly today. i don't think they necessarily need to fly today. what you really need to do is raise the taxes people pay. i think people have generally thought that people with $270 million of average income were probably paying a rate equal to -- it isn't just the secretary in my office. it's everybody in my office. i think they thought they were paying in the 30s or something like that, until you look up the figures. if you go back to 1992, almost all of them were. it's just that the code has gotten to favor more and more the extremely wealthy. and that's why the wealthy have seen -- they've seen their net worth, the net worth of the forbes 400 since 1992 has gone from $300 billion to $1.5

trillion. you know, we have a system that has drifted toward favoring the ultrarich. you know we -- but i don't think we ought to go back to -- >> i keep getting this question. you own roughly a third of berkshire hathaway. why don't you consider that the $2 billion that you pay -- that berkshire pays a certain tax bill. you own a third. so, basically that income that berkshire gets, the $2 billion, why don't you consider that as something -- that would skew your tax rate a little higher. you include it in your net worth. why don't you include that $2 billion -- your pro rata share of berkshire's tax bill, since you don't pay ordinary income, or minimal, why don't you consider that as part of your tax bill? >> i'm going to give away every share, every single share of berkshire i have. so, that really belongs to philanthropies. you can argue they -- >> or pay $2 billion. >> i've heard the double

taxation argument a lot. actually, i have governor romney's tax returns here as well as my own tax returns. it's interesting. here, for example, in 2004 i had d $46 million of capital gains. you can put up the last page of that return. you'll see on that return that millions and millions of dollars of capital gains. a few thousand of that was doubly taxed. a made a lot of that -- millions and millions of dollars from profits in treasury inflation-protected bonds. no double taxation there. there's no double taxation there. here the same figures for 2006, when i had $40 million of capital gains. here's the last page of my schedule d there. every single one of those stocks in which i was making millions of dollars was a korean stock. they didn't pay a dime of united states federal income tax. if you look at governor romney's return, you see he made

substantial capital gains from conditions where the companies themselves went public but in some cases they pay no federal income tax and other cases it paid minor federal income taxes. it is true there is some double taxation. there's an enormous amount of double taxation with my secretary. if they gets salary of "x" -- you'll use anybody that gets a salary of $100,000. they are paying 13.3% this year, 15.3% in 2010. they're paying 13.3% in payroll taxes and that same income gets doubly taxed and gets taxed for income tax purposes. they get no deduction for social security taxes in computing their federal income tax. we have double taxation for tens and tens and tens and tens of millions of people who are making very small amounts of money. >> warren, let me ask you this, though. by continuing to push this, we did get a lot of questions, presumably from shareholders. one that came in was from david

saying, having political positions are part of public life but for the life of me i cannot understand why the ceo of a publicly traded company would antagonize half of the political power in this country. don't have you a d. >> no, i don't think if you're a ceo that you put your beliefs in a blind trust. i don't think you give up your citizensh citizenship. we have 270,000 people that work for berkshire. not one i've asked about their political views or not one i've told in any way to refrain from expressing their beliefs, whether religious beliefs or political beliefs. and i think that my cleaning lady, mary, does not have a voice. she doesn't have a super pac. she can't spend $10 million influencing free speech. free speech for her is something in the first amendment. it doesn't mean a thing.

i have a ability to speak out. if you have an ability to speak out and you see things you think are wrong, you ought to talk about them. >> let me ask you how this has gotten played in the political debate. another question from larry in cleveland, ohio, control room number 40. he says, it seems like the president has expanded the tax increase proposal you had, yet still attaching your name to it. i thought the proposal you made was much more narrow than what the president is has talked about when he talks about the buffett tax proposal. can you explain the idea you originally how and how it's more narrow in scope than what the president's talking about? we had a lot of people who said the 250,000 rate versus -- >> i never said 250. "the wall street journal" sort of implied i said 250 in an editorial so i can see how people may have gotten that idea. i have said above a million and i said a minimum tax. there are plenty of people that make over $1 million, over $5

million, over $10 million that pay normal tax rate and would have no effect on them at all. it's only people paying low tax rates, like me. some of my friends and some of the 131, that were paying less than 15%, those are the ones i'm talking about. i would have a minimum tax above $1 million and perhaps a different level above $10 million. now, senator whitehouse of rhode island has introduced a bill that is largely along that line. but it is -- it does not apply to people at $250,000, does not apply to everybody that makes $100 million. >> what's your understanding of the president's understanding of -- >> there's not been a specific bill, as i understand it. senator whitehouse has a specific bill. his bill phases it in at a 30% minimum tax, counting payroll taxes, starting at $1 million. it phases in so if you make

$1,000,001 it's no different than if you made $999,000. >> we get something like number 9, control room, tongue in cheek, but is there a tax you don't like? this was a twitter that came -- a tweet that came through. when did this start? and you're aware there's another side of the balance sheet? what do you say to people like that? >> i don't like any tax. i have my tax return from when i was 13 and i paid $7. i can tell you i did not like paying $7 at that time. but the reality is that we are going to have to raise 18.5% or 19% of gdp and revenues. i certainly think people who are very wealthy should do more than people like my cleaning lady. i'm not going to like it, you know, when i sit down and write the check for whatever it may be. i'm not going to like it. but i also like this country. and i think that what this country offers is wonderful and i think a very rich country should take care of the people that get the short straws in

life. i believe in things like social security, which is paid for by taxes. i believe in a good public school system, which is paid for by taxes. even people with no children i think should be paying, particularly if they're well to do, i think they should be paying for a good school system for society as a whole. i believe in good medical systems. you know, that does not come free. and taxes are what we pay. >> there are a lot of people trying to figure out the economy. we could talk more about that in a minute but overall your view of the economy is that it continues to improve. >> the economy has been getting better since late summer of 2009. i said it was getting better then. we still have 70 plus businesses and we're seeing it in every place except those related to home construction. >> okay. joe, we're going to talk more about that in just a moment. but i figured this is a good time to look at what the economy is seeing and what mr. buffet b sees. >> a lot more with warren buffett after the break. let's check on futures this morning. trading lower most of the session.

the pre-market session, better than they were, down 50 points. ed making headlines, u.s. economists see more reason for optimism. a new survey says forecasters have raised their expectations for unemployment and also for new home construction and business spending this year. we'll have more headlines and some stocks to watch coming up in just a bit. "squawk box" with three hours of warren buffett will be right back. oh! [ baby crying ] ♪ what started as a whisper ♪ every day, millions of people choose to do the right thing. ♪ slowly turned to a scream ♪ there's an insurance company that does that, too. liberty mutual insurance. responsibility. what's your policy? ♪ amen, omen

welcome back to "squawk box" we're live in omaha at the "world herald" freedom center. we're speaking to warren buffett, chairman and ceo of berkshire hathaway. for people just tuning in, we should tell them we're here because the "omaha world herald" is an acquisition berkshire hathaway just made. >> i've been reading it since i was about 6. i study these things before i write a check. you know, it's a terrific newspaper. i've read it every day throughout my lifetime. it was employee-owned and cash

problems in terms of cash redemption within the system so it was advisable to look for a new owner. >> someone did write in and wanted to know if you had any say over the editorial content? >> zero, zero. my guess is next year they will probably endorse somebody for president and i'll probably vote for the other guy. who knows. let's get back to the economy. we have talked an awful lot about how you see things going along. in berkshire's 70 businesses -- or 70-some businesses, you have continued to see slow and steady gains. is there a sign in any of those businesses yet that there really will be a turn in housing or is that something your gut tells you at this point? >> if you were really looking for, it you might find a flicker someplace but the important thing is, if you take our five largest businesses, and they're big, the aggregate earnings are over $9 billion. and they're baveng businesic bu- >> outside of insurance. >> outside of insurance. >> every one set earnings

records. i think every one will set an earnings record this year. they earned over $9 billion pretax last year. these are big businesses. you know, the people are hiring in those businesses. people don't have to worry about their jobs in those businesses. the economy is coming back every place except home construction. and it will come back in home construction. i can guarantee you that, i just don't know when. >> there's an impression businesses are not investing in the united states. and that's something a lot of people have said. but you point out in your annual letter that berkshire is spending a lot of money on capital expenditures. $8.5 billion. >> we spent $8.2 billion, which was an all-time record. it broke our record by $2 billion. 95% of that was in the united states. and that $8.2 billion we spent last year will break that record again this year and almost all be spent in the united states. there are all kinds of opportunities in the united states. and we have the cash to take

advantage of those opportunities and american business has the opportunity to take advantage of those opportunities. there's not a shortage of investment funds in the united states in any way, shape or form or not a shortage of opportunities. >> do you believe the recent jobs numbers we've been getting a look at that indicate that hiring is starting to pick up a little bit and the unemployment rate is starting to come down? >> yeah, hiring is picking up. it's picked up in our businesses, unless they're related to housing construction. i pointed out in the report, the housing are down from the peak of 58,000 to 45,000 people. when housing comes back, we'll be hiring at those five companies. but a lot of jobs that aren't called construction jobs in the united states are tied to construction. so, when we go down 8,000 people or so in our carpet business, those are not called construction jobs. but they're related to construction. same thing with insulation and other things. >> you know, warren, we talked to the ceo of the gallup organization. he pointed out some things they've seen in their weekly and

monthly polls that they run. they're constantly talking to people. his concern is that we will see the jobless rate or unemployment rate pick back up to about 9% when we get the next monthly report for jobs. would that surprise you? >> it would surprise me, but what counts is over the next year, two years and three years. we've been coming back. i mean, we -- you know, it was september of 2008 when i was on cnbc. i called it an economic pearl harbor. i never used that term before. i mean, we went through something that this country hasn't seen before. in the way of a financial panic. the country almost stopped. that financial panic bled over into the general economy very quickly and very severely. we've been coming back now for three years from that. we continue to come back. but i will predict that our businesses will have more people working for them at the end of this year than at the start of the year.

>> joe, have you a question, too? >> i do. i'm amazed at how much mail we're getting on a lot of this. go back one more second, warren, and we'll get back to this current line of thinking. this gentleman writes in, why would i ever consider sending more money to washington given the inept policies and investments of our government? would warren continue to send money into a business black hole if it had a similar track record? i was thinking, if the government was a business and berkshire was looking at it, there's no way besrkshire would even take a 1% stake in the government with their track record of investments. i've gotten to you admit in the past that one of the reasons you think the gates foundation will do a lot better with your $50 or $60 billion is because even charities have a better -- a much better reputation for watching how money is spent and for doing more good.

so, with all that in mind, can you at least see how someone might be sort of just on an i e intellectual basis opposed to given a check to that organization? >> when an organization is as big as the u.s. government they're not going to be as sufficient, obviously, as smaller organizations. eve heard that argument since the late 1930s when my two sisters and i sat around the dining room table and my dad presented it day after day. it's been true every day i've been alive. on the other hand, we've successfully defended the country, built the greatest industrial machine the world's ever seen, the richest population the world's ever seen. we've done that -- >> but the government didn't do that, though. >> oh, no, having -- >> but the question -- warren, if there's only so much capital, only so much capital in the world, and you look at where it's going to do the most good or where it's going to be treated best, shouldn't we at least in the back of our mind

think that the private sector is a better place to keep it than in the government sector? because every dime you give to the government, it's not necessarily going to help the people that you're talking about, warren, for education. it's going for political decisions, benefiting cronies or benefiting ill-conceived venture capital type investments. there's a vast amount of waste. >> and, joe, that's been true throughout your lifetime. you take the 60 years or so since world war ii and we have sent 18% or 19% of our resources to washington and they've been treated just like you described. and we have had an economy that's been wonderful. it has a market system. >> but is it in spite of or because of? >> both, both. >> right. >> no, i'm not kidding. it's both. i mean, you know, you would not -- you would have loved what the government was doing, you know, on december 8, 1941.

you would not have said, let's send less money to washington. >> i agree. >> it's in spite of and because. but the truth is, we can have a country that works wonderfully with 19% or so of revenues going to washington and spending 21%. >> so many different ways to get there. i mean, we were there -- we were there in -- with the current tax rate, we were at 18% or 19% in 2006 and 2007. even after what you said decimated our revenue ten years ago. so, there was even you are not the current -- when we had a good economy and low -- you know, everybody was working at 4%, 5% back in '06 and '07, we were getting 18% or 19%. >> the point is to average -- the point is to average around 19% and spend around 21% and have policies in place to do that with the greatest degree -- i mean, one way or another -- with the greatest degree of fairness on the revenue side and the greatest degree of efficiency on the expenditure side. there's going to be a lot of slippage on both.

>> oh, slippage, that's like shrinkage or leakage, neither is good. >> that's true. the bigger you get, generally speaking, the less efficient you get in more ways. there's certain advantages to scale in other respects. >> you're not going to want -- i'm not going to ask if we should go to 100%, are you? 70 is not high enough. >> i was going to save warren from you and change the entire direction of the conversation. >> save him from me? how can you -- you don't need to save a guy -- you know what, never feel sorry for someone who has a private jet. that is one -- someone told me that long ago. that's what i live by. never feel sorry for someone who flies private. >> warren -- >> keep preeshing that, joe. i'm with you on that. >> warren, i wanted to get thoughts about the banking business. i know we don't have that much time. i'll start with one question and maybe we can bleed into the next hour on this. as i was reading your letter and comments about bank of america, i also noticed that you -- and

you've done this now several times. you've praised jamie dimon at jpmorgan and yet i realize you're not an investor in jpmorgan and i'm curious, why not? >> well, we own stock in wells fargo, we have the bank of america situation. i'll let you in on a little secret. i own some shares of jpmorgan. >> personally, right? >> personally, right, right. you just got news from me, andrew. what i specifically reference, and this is important, jamie dimon, i think, writes the best annual letter in corporate america. i think you will learn -- i think every viewer will learn something by reading his annual review. i'll learn a lot by reading hi annual report. he's -- he thinks well and he writes extremely well. and he works a lot on the report. he's told me that. that's an annual report worth reading. most annual reports aren't worth reading but that is. >> why would you buy that stock

for your personal account instead of berkshire? >> what i can buy without having any possible problems with conflict. >> we're going to take a quick break here. when we come back, we'll have more from warren buffett after this very quick break. by the way, keep your e-mails coming. we're going through them, taking a look at all of them. don't forget, you can tweet your comments and questions include hash tag. right now warren is a trending topic on twitter. i didn't know that. they've been lighting up twitter universe. by the way, tomorrow on "squawk box," we have another big lineup for you. including pimco's mohamed el erian who will be sitting down with us for two hours and roger althoughman and a new segment we're rolling out, "trump tuesday" donald trump joins us. optionsxpress, where you can trade your favorite products,

all in one account. keep watch on the markets.

or use our exclusive tools to help find ideas. it's powerful, easy-to-use technology for trading stocks, options, and futures. keep trading whether you're at home, in the office, or on the go. optionsxpress, the broker smart traders deserve. open an account today at optionsxpress.com.

still to come, one big hour with warren buffett. covering businesses, politics, taxes and much more and the latest market-moving news you need as we get you ready for the trading day ahead. take a look at oil as we head to a break. "squawk" is coming right back with warren and a lot more.

with a new view of the market, you could see an investment opportunity you didn't see before. fidelity's next generation ipad app lets you see what's trending around the world, as well as what over a million fidelity customers are trading throughout the day. and advanced charting lets you customize your views and set up your own comparisons. our ipad app can help refine your strategy or even find a new one. i'm velia carboni, and i helped create fidelity's next generation ipad app. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades and explore your next investing idea. carfirmation.

only hertz gives you a carfirmation. hey. this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz. welcome to a special hour of "squawk box." inside the oracle of omaha. >> he cequities are relatively cheap. >> another hour with warren buffett. >> if i had a way of buying single family homes, i would

load up on them. >> the third hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with andrew ross sorkin. becky's not here but she's with us. she's in omaha. she's with warren buffett. first to today's top stories. u.s. equity futures about where they have been most of the premarket session, down about 46 points. and you can see down about 0.35% is what's implied. in our headlines, shares of lowe's rising before the bell. reporting better than expected quarterly sales and offering upbeat guidance. average price of a gallon of gasoline has jumped 18 cents over the past two weeks. latest lundberg survey shows a gallon of gasoline is $3.69 nationwide. san diego, though, has the

highest price, $4.24 per gallon. american airlines is warning union workers major changes in labor contracts are needed and needed quickly. it says it needs those changes to save the $1.25 billion until employee cost savings so it can successfully emerge from bankruptcy. let's get a quick check on the european markets. european equities falling today as investors worried about high oil pries hurting company earnings and global growth. let's get back to becky. who is live in omaha. becky, i have stolen joe's read. he's giving me a look. >> thanks, joe. >> thanks, joe. it's great. >> you're here -- >> thank you, joe. >> you're out there he does it, you're here he does it -- >> it all ran together. >> we're a big family. we all share. we all share. it's all good. >> this is freudian, though. it's not really a slip. i mean, you know, i'm just wondering if it's accidental at this point, becky. it's okay.

>> no, he's doing it just to rattle you for the morning. anyway, we're back with warren buffett. we've had a chance to ask you about a lot of different things going on. andrew picked up with a line about the banks. this say good time to ask you about wells fargo which you own a major, major stake. what's the percentage of the shares outstanding you have? >> we have a little over 400 million shares. we're well over 7% of the company. >> we had john stump in recently to talk about how things are going at the bank. a lot of people have said they think that is the best run bank in the country. we had analysts on that day who said that as well. you own now a stake in bank of america, too. if you had to match these banks up, what do you think is the best run banks? >> banks are not going to earn as good a return on equity in the future as they -- as they did five years ago. their leverage is being restrained for good reason. in many cases. so, banks earn on assets but the ratio of assets to equity, the

leverage they have determines what they earn on equity. it's still a good business. and the american banks are really probably in many cases in the best shape they've ever been in. around the world banks are not in good shape. but the american bacnking syste has had a remarkable comeback in the last three years. >> you didn't answer my question. >> which question? >> which bank do you like the best? >> of the ones we own? >> yeah, of the ones you own. >> well, i would say that if i had to just own one bank, i would probably own wells. >> wells fargo is in the news today. there's a story in "the financial times" that says the company is looking for acquisitions in terms of wealth management. they're looking to get into some higher income gain. is that a good move from your perspective? >> well, if they execute it well, it's good. and what wells has done very well is to sell a wide variety

of services to a huge deposit base. the biggest single asset that wells has is its deposit base, as is true at the bank of america. they have a consumer based small business type base that's just huge. more so than will be the case with morgan or citigroup. that's a terrific asset. it really isn't of big value now because you can't put money on it. over time it's a terrific asset. they sell other products to that group. and the more products they have that they effectively can deliver to those clients, the better. >> well, that brings us to a question we got from our viewers. again, we have a lot of questions that have come from-n from our viewers. this comes from charles in new york, new york, control room number 84. he picks up on this idea about the low rates. he says, if the employment picks up substantially this year, do you think it will prompt the fed

to reconsider its considerably low rates policy? would that, in turn, end up helping those financials? >> if it picks up enough -- if the economy started roaring, the fed would act sooner than 2014. they'll respond to what they see in the economy. i doubt if it picks up at that rate. i think it will get better as the year goes along, but who knows. you get a lot of surprises in economics. >> you don't necessarily worry about inflation before that? the fed is looking at its best forecast and it says 2014. does that jibe with what you see? >> not necessarily. but i just -- i don't think i'm great on some crystal ball. i can tell you businesses are getting better, getting better the last three years and i think it will keep getting better. i don't think anybody knows the pace at which -- it will really start improving when housing construction picks up significantly. >> if you had to bet, you don't have a crystal ball on this, but if you had to bet, do you think it would pick up enough if you had to bet earlier or later that

you'd say, 2013 or 2015? >> i think it will -- i think it will look strong before 2014. interest rates will pick up some. you know, we have -- we have sewn the seeds of a lot of inflation for the future now. whether we can unsow those seeds and pick it up again, that's not easy to do. it's easy to talk about. >> i know you said you don't like gold or a lot of other places to put your money but john merrill writes in with a good question. he says, would you rather have, all the gold ever mined or all the paper dollars ever printed? the choice is between two monetary assets. either of which can be used to buy exxon or farmland. what's your answer on that. >> i definitely don't like paper money. i like physical assets, so i

would -- but i wouldn't buy gold or rare stamps. i wouldn't buy paintings although a number of them appreciate. i would buy something that's productive. i bought a farm in mid-1980s. that farm is more productive now in terms of -- it actually -- farming technique have improved somewhat and prices are asomewhat higher. that farm will always be a good asset. and i don't get a quote. i've never had a quote on it in 25 years. i've never turned to the farm channel. but it will be a productive asset. i would rather own that than own some asset that just looks at me. >> andrew, you have a question, too? >> warren, just going back to banking because i was listening to your comments about wells fargo and praise for bank of america, reading your comments about brian moynihan and one company that wasn't in there -- actually, you may still be an investor -- well, preferreds have paid back.

goldman sachs, i was curious, how you see that business model and how you look at lloyd blankfein. i know you praised him in the past. >> unequivocal in my praise of lloyd. i think he did a terrific job in bringing the company through a crisis. he's a fine human being. he's very smart. he's straightforward, decent -- >> what's your take on the business model? >> it's not as good as it was five years ago. that's true for all the investment banks. it's true for the commercial banks. you know, they are subject to much more scrutiny and particularly in terms of leverage and in terms of activities they can engage in. that will reduce the profitability, the return on equity they get now compared to what they could earn five or six or seven years ago. our position is we own warrants on about 43 million shares or thereabouts at 115 that are good

for about a year and a half or just a little more. >> warren, why haven't -- why haven't you just bought a whole fertilizer company? >> well -- >> i mean, not that you don't manufacture enough yourself as we've seen today, but -- >> oh, wow. oh, wow. >> i knew there was a reason for that question. >> oh, no. i really wasn't planning on saying that, but i listened to you -- >> no, i mean, listen, i'm in the factory. >> no, but honestly, you look at -- everything i read in the back of that piece in baron's, you think about the long-term trends and demos for fertilizer companies or any kind of ag related. i'm just wondering, you never know what to do, that money keeps building up, you buy a whole railroad. i'm surprised that at some point you haven't decided to do something like that. >> i don't rule it out. none has ever been offered to us. we tend to buy businesses that are offered to us.

i do not go out prospecting very often. but it is -- it's a commodity business but it's a commodity business that takes a long time to bring out additional supply. the demand will grow but the demand will grow for corn and demand will grow for twhewheat soybea soybeans. as you know, fertilizer prices have moved around a lot over the last ten years. >> warren, why don't we talk about something you talked about last time you were on. ibm. i believe you own 5.5%? >> we call it haloram around the office. 5.5%, yes. >> have you continued to buy shares of ibm? >> we bought the tiniest bit the other day. you'll see in the first quarter, we just bought a few shares. i was willing to buy a lot and then it moved up. but anything we own with the few -- we can't buy in american

express because it's a bank holding company. it's again the rules. anything we own is at the top of our mind in terms of when we buy something additionally. i measure any new purchase against what i like least in our portfolio now. and unless it -- unless it meets that test, i'll just buy something in the portfolio. >> have you been buying more wells? >> yeah, we buy more wells year after year. >> and coca-cola? >> we bought more wells and a few shares of ibm. if we like something, the money does keep coming in, so we'll look first at the things we own. >> the new ceo of ibm, management changed even since you began buying that, jenny, have you met or talked with her? >> she was out here for lunch a month ago and she was also making sales calls. >> what did you think after meeting with her? >> i think she's terrific. but i would expect that. i mean, you know, ibm is a very

well-run organization. i didn't know who she was, you know, a year or 18 months ago. and i knew that sam was going to -- they tend to retire early there so i knew he was going to retire early. i did not sit there and write to sam saying, i can't buy this stock unless i know who your successor is going to be. i knew they would make a good choice. they did. >> are there any other new companies you've been delving into? >> there are always things on the horizon. >> would i be wrong in assuming -- well, is ibm a one-off in the technology field? a lot of people who did not expect that. you've never invested in technology companies. is that still -- does that standard still apply for the most part? >> probably for the most part. if i think i understand enough about the future of the business and i like the management and i like the price, and it's big, because we need sizeable ones, we would buy it. but as i've told you in the past, microsoft is off limits

because people would think i had some kind of inside information if anything good happened so it's a no-win situation from our standpoint. but it's unlikely we do a lot in that area but if i felt strong enough conviction on something and i like the management and price, i would do it. >> okay. when you take a look at bank of america, people have written in wondering what you think about brian moynihan's performance there since you -- >> he got handed a -- it was a terrible situation he got handed. i mean, you know, all of the problems, particularly countrywide more than anything else, but some of their own, too. so, he was handed a mess. fortunately, he was also handed, you know, as great as deposit base as exists in the world. and that deposit base continues to exist. you know, they have a contact with a significant percentage of all american homes. that's a huge asset. and what he has done is he's working through the problems he inherited and he can't do them

in a day or a week or a month. particularly those that involve litigation. he's pared off some assets that aren't central to it. he's done exactly what i would do if i was in there. it's going to take him a significant amount of time from this point forward. litigation can't be pushed. if you say i'm willing to segments with anybody, you'll be a patsy, so he has to weigh the costs of diversion of time and all that that's involved in litigation. >> that stock right now we saw is at $7.85. you bought in at 6% preferred but you also got warrants, 700 million? >> yeah. >> to buy below 750 i believe -- >> 714. >> any time between now and 2021? >> yeah. they were ten years from the time we got them. >> so, again, you feel confident in that investment, not necessarily because you're buying in the open market but because you have a different deal? >> no, no, we like the preferred and we like the warrants.

we will be there for a long time. now, you know, we are prohibited from selling. we don't have something that we can turn around and sell tomorrow, like somebody buys a stock in the market, they can change their mind. if it goes up a point, they can sell it and make a quick profit. we cannot can't do that. we have to make our money out of the fact the business will do well over time. i think it will. >> you brought up apple earlier when you were talking about tim cook as successor there. you're not somebody who has ever bought apple shares, correct? >> no, i've never bought apple. i wish i had. >> you have talked to steve jobs in the past. >> yeah. steve went on the board of gri grinnel college. i saw him a few times over time. he called me -- did call me a couple years ago. it was an interesting conversation because i haven't talked to him for a long time. he said, we got all this cash, warren, and he says, what should we do with it?

so, we went over the alternatives. it was kind of interesting. >> what were the alternatives you laid out? stock buy back dividends, acquisitions, what else -- >> and sitting with it. >> and sitting with it. >> and he had many, many, many billions then. i said -- i went through the logic of each thing. now, he told me they would not have the chance to make big acquisitions that required lots of money. i mean, they were internally. that's exactly what they should be. and then i asked him the question, i said, you know, i would use it for acquisitions if i thought my stock was undervalued. i mean, i would use it for repurchases if i thought my stock was undervalued. i said, how do you feel about that? stock was around 200 some. he said, i think our stock is really undervalued. >> i said, what better could you do with your money? and then we talked a while. he didn't do anything. of course, he didn't want to do anything. he just liked having the cash.

it was very interesting to me because i later learned that he said that i agreed with him to do nothing with the cash, but he just didn't want -- he didn't want to repurchase stock. although he absolutely thought his stock was significantly underpriced at 200 whatever it was. >> he was right. it's over 500. >> i said if you buy dollar bills for 80 cents, you know the dollar bill, its not a counterfeit, it's your dollar bill, i said, go to it. the truth was he didn't -- he didn't want to repurchase stock. he was certainly right about his stock being undervalued. >> you have said in the past you would never do stock buy-backs or issue a dividend at berkshire. last year you broke the idea of stock buy backs by laying out how and whether you would buy back stock from berkshire and are starting to buy some back. >> i never said we would buy stock back. in the 2000 annual report we announced we would buy stock back. i said it makes great sense when you're buying it at a significant discount. now, there is that ethical question about you're buying it

from your partners. i mean, the first line we have in our economic principle is that although our form is corporate, our attitude is partner -- partnership. so, we want to be sure if we're buying it back from our partners at a discount from what it's worth, they understand what it's worth and why we're doing it. but there's nothing like buying your own stock back at a big discount. one of the things i will like about ibm is the fact they have aggressively bought their stock back over time. that's made their shareholders richer. and they've announced they'll continue to buy their stock back big time and that will make stockholders even richer. i love it. >> there is a viewer who wrote in on this exact question. chris from freeland, michigan. he says in the letter released on the 25th, you indicate that you don't enjoy cashing out partners at a discount when you repurchase berkshire shares yet at the same letter you prefer ibm buying stock from your fellow ibm partners in the lower prices the better. why do you have the -- >> i say if we buy our oeven

stock, the lower the price the better. we're running the company for the shareholders. i don't think there's anything wrong with ibm buying their stock at all. they have laid out a plan. they laid one out five years ago, a road map and they laid out another road map. they told their shareholders exactly what they expect to do. if the shareholders elect to sell the stock at a price attractive for the company to buy it, there's no moral stigma in the least attached to them buying it. i'm all for it. >> we have a question from hunts point, washington, a lot of people wrote in similar questions. even though the book value as well as incremental stock price is increasing, why not now give a dividend? >> well, a dividend essentially would have hurt berkshire at any time since i've been there. i mean, every dollar that's been reinvested in berkshire has turns out to have a greater than $1 value. so, what's the sense of paying out somebody $1 that's worth $1.10 or more in the business?

we say we'll buy it at $1.10. >> we've got more to get to. keel take a quick break. back to you in the studio. we'll talk more about simpson/bowles and other issues, too. >> as becky just said, coming up we'll get more from the oracle of omaha. he's answering your e-mails and tweets and big news on the twitter front. warren buffett is trending in the u.s. right now. right behind the artist and meryl streep. today is a very special day for our colleagues at "squawk on the street," unveiling their new set at the new york stock exchange. we'll get a sneak peek in the next half hour. "squawk" coming right back. i'm freaking out man. why? i thought jill was your soul mate. no, no it's her dad. the general's your soul mate? dude what? no, no, no. he's, he's on my back about providing for his little girl. hey don't worry. e-trade's got a totally new investing dashboard. everything is on one page, your investments, quotes, research... it's like the buffet last night. whatever helps you understand man.

i'm watching you. oh yeah? well i'm watching you, watching him. [ male announcer ] try the new 360 investing dashboard at e-trade. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. tspark card from capital one... spark cash gives me the most rewards of any small business credit card. it's hard for my crew to keep up with 2% cash back on every purchase, every day. 2% cash back. that's setting the bar pretty high. thanks to spark, owning my own business has never been more rewarding. [ male announcer ] introducing spark

the small business credit cards from capital one. get more by choosing unlimited double miles or 2% cash back on every purchase, every day. what's in your wallet? this guy's amazing.

welcome back to "squawk" this monday morning. the futures looking down across the board. down about 50 points. if we opened up right now on the dow, we've got a couple stories we're watching, including shares of bp today. the trial to decide financial responsibility for the 2010 gulf oil spill was to have begun today but it's been delayed for a week. the postponement will allow further settlement talks between bp and the businesses and individuals affected by the spill. we'll keep an eye on that.

the military drama act of valor was tops at the box office taking in $24.7 million in moert american ticket sales. i was looking at the promo for the other day. tyler perry's "good deeds" was second. coming up, we'll have more of your e-mails and tweets for warren buffett. when you lose all your money you're attempted to be in an illegal ponzi scheme. when you hatch an illegal ponzi scheme, you end up with this guy as your cell mate. >> don't do anything i wouldn't do. >> don't end with this guy as your cell mate. watch "squawk box." an investment opportunity you didn't see before. fidelity's next generation ipad app lets you see what's trending around the world,

as well as what over a million fidelity customers are trading throughout the day. and advanced charting lets you customize your views and set up your own comparisons. our ipad app can help refine your strategy or even find a new one. i'm velia carboni, and i helped create fidelity's next generation ipad app. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades and explore your next investing idea. ÷?ñññ÷oñwññ/?kñññç

live from omaha, here again, becky quick and warren buffett. >> welcome back to "squawk box," everyone. we're live this morning in omaha with warren buffett. warren, one of the subjects we

discussed this morning is simpson/bowles and what needs to happen or what you think needs to happen. we've been talking to ceos, to business leaders and to personalities over the last several months and asking them about simpson/bowles. i thought you might listen in for a moment when we hear what clint eastwood had to say about simpson/bowles just after that super bowl halftime ad that he had. why don't you listen in right here. >> have you seen simpson/bowles and some of the ideas they put forth, the panel, the president convened and it's gone away since then? >> yeah. i like the idea. in fact, i was kind of amazed when they took the simpson/bowles and assigned them to this research and came back with a recommendation, which was exactly stop spending and then everybody said, that's enough for you guys, go home. and i thought, that's a waste of money, waste of time, waste of effort from everybody. wasn't very spirited for the country. when people would see that. i think simpson -- i think both

of those gentlemen are smart and they certainly worth listening to. if you've gone ahead and assigned them to this project. >> warren, clint eastwood has been a long-time republican. ran as republican for mayor of carmel. you echoed similar sentiments. >> i agree with him 100%. and i think that -- i think that simpson -- i hope they put it into -- draft it into legislation or legislative form. and i think that it ought to go to congress. and i think that congress ought to take a vote on it. we can see whether they like it or not. the american public, i think, are entitled to have that happen. for congress to say, you know, we can't get anything done because it's an election year, i would say if they feel that way, let's skip paying them this year and let them come back next year. but they're not going to work on it. i would love the idea of the american public, whether it's through business leaders, whether clue clint eastwood saying, you know, let's just

have a vote on it. these fellows worked for ten months, they're conscientious, smart, decent, come from both sides, people on both sides to agree on it. let's have a vote on it. everybody's going to dislike something in it but the question, is it better than what we're doing now? >> you think a vote like that would pass congress? >> yeah, do i. if there was enough pressure -- if the motivation came because for congress to take it up, came about because virtually every ceo in the country, labor leaders, educators, everybody else was saying, give us a vote on this, and i think if it went up there next month, i think it would probably pass, yeah. i don't think -- i think they'd be thinking about the next election. if they voted against it, maybe -- if the people wanted it and they voted against it, they might not vote for those legislatures. >> it sounded like you were blaming congress just now for not bringing that to a vote. other people blame obama and his administration for not forcing the issue. >> congress initiates legislation. that's their function under the

constitution. you know, they take an oath to support the constitution. it's their job to bring forth legislation which they think is beneficial to the country. here you couldn't have had a better group work on it. they've come up with something. congress certainly hasn't come up with something. so let them take it up. >> is there anything that you would do to try to force that issue? >> well, i think there may be some efforts going on. i'm not part of them. but i would certainly sign on to anything. if clint eastwood presented something that said, give us a vote, i'd sign it. >> okay. let's talk a little bit more about some of the issues coming up with this november. i know that you are a supporter of president obama's. you've raised money for him. you also told us when we sat down with you in november that among the republican candidates you liked mitt romney the most. is that still the way you feel? >> yeah, i think -- i would say that if i -- among the four candidates republicans have, if one of them is going to be

president, i would probably prefer it would be mitt romney. >> why is that? >> i've looked at his tax returns. i have his tax returns here. they're about six times as long as mine. i just think that he would be more likely to make more sensible decisions and less -- and less -- fewer nonsensical decisions than any of the other three. >> what did you find in his tax returns? >> i found that he was paying a very low tax rate. his tax -- >> we knew that. >> his and mine are the only out there from the super rich. it's a limited sample at the moment. his return, kind of interesting. we printed it on both sides of the paper. here's -- this is on both sides. take a look at it. it's a lot of pages. and i don't fault him for anything in this tax return. he is doing exactly what the

u.s. congress told him to do. i do fault the u.s. congress for writing a tax code that allows that kind of a return to be filed. >> and, again, this is some ground we've covered earlier today already, but your point is that the tax laws should be changed, especially for the very richest americans? >> yeah. i don't fault him, though. but he is paying a much lower tax rate, counting payroll taxes, than anybody in my office, except for me. >> and -- >> we will have people working on these presses here at the "world herald" and they'll pay a higher tax rate -- they come in the middle of the night and they pay a higher tax rate than governor romney or me. >> and that's what you would like to see changed. >> i think that should be changed. and these people have no voice in getting that changed. >> all right. let's talk about some other issues, too. we have touched on a lot of the different companies you hold. another major one is johnson

arched & johnson. they've also seen a management change, bill weldon will be the manager but not the ceo. how do you feel about that particular change? how do you feel will johnson & johnson lately? >> johnson & johnson has messed up in a lot of ways in the last few years. you know, my friend jim burke used to run that. it does not have the reputation now that it had, you know, a few years back. still has a lot of wonderful products and wonderful balance sheet and all that, but there have been too many mistakes made at johnson & johnson. >> what went wrong? >> i don't know. i wasn't -- but clearly, they have not lived up to their own standards. >> you have not been selling your stake, though? >> no. we haven't been buying more either. >> why haven't you sold? >> well, we might. i mean, there are things i like

better than j&j. the four biggest ones i've named. and conceivably -- we've got a lot of cash run, so i don't need to sell things. we still have 30 some billion of cash around, so i have lots of extra cash so i don't focus on selling things. johnson & johnson is still an attractive business at its price, but if i needed money that would be on my sell list as opposed to wells fargo or the others i've named. >> on the prowl for a major acquisition above $10 billion? >> you bet, you bet. yeah, we -- yeah, that's my job. and the money does keep coming in. i like buying businesses better than anything else. the best one we've made in recent years, obviously, was bnsf. but i love the idea of buying big businesses for berkshire we can own forever. as i mentioned in the annual report, we have -- we now own

eight companies that each by itself would object the fortune 500. 492 to go. i've got the names of every one in my mind. >> andrew, you have a question? >> warren, we got a number of e-mails from people why you haven't dubed down and bought more shares of coca-cola. you look at the way the shares have moved even since the financial crisis. it's actually gone on a huge run. what's the answer? >> it's a wonderful condition. it's our -- at market, it is our single biggest investment. at market we have almost $14 billion in it. so, it already -- it is our number one investment. and it's not inconceivable we would buy more, but in the last year i bought primarily ibm, among marketables, i put $11 billion in that. i regarded those as more attractive than coke last year, but that could change.

i mean, i always think in terms of the ones we own presently as to whether we should add to them. coca-cola -- muhtar has done a terrific job at coke. i mean, he's been a fabulous manager. pepsi has given us a little help. >> you know, warren, let's talk also about what's happening in europe. we've talked to you over the last year or so as we've watched the european situation play out. you noticed that very early, that it was going to be be a big problem. are you convinced that europe has turned the corner in terms of dealing with its financial crisis? >> well, it turned the corner in terms of its funding crisis for its banks a few months ago when the ecb said they would give these three-year loans at 1% and they gave almost 400-some billion euros, which translates to maybe $600 billion. i mean, they opened up their window. so, they -- the european banks were facing a funding problem.

and they get less of their money from deposits and more from essentially bonds than the american banks. they're in far different shape than american banks. they had this huge funding problem that was really coming down the pipe pretty fast. the ecb solved that temporarily. that does not solve the solvency problems of european banks and does not solve the imbalances of fiscal imbalances of countries that cannot print their own money. the basic problem they have is they gave up the right to print their own money, the 17 countries part of the euro monetary union. so, you can't believe how fundamental it is. if you own money -- the difference between print your own money and not print it is night and day. they are wrestling with the ini. the action by the ecb gives them more breathing space on that. but the problem hasn't been solved yet. >> and the expectation is more

money will be needed. this weekend the news was that the g-20 kind of gave them the stiff arm in terms of looking for more money there. they would like to see germany and some of the other european countries raise more money first. >> when you're spending more than you're taking in, which is true for the european monetary union as a whole big time, when you're spending more than you're taking in, and you can't print money, you have a problem. and you are dependent on the confidence of the world to keep lending you more and more money, even though you don't -- you're not able to print the stuff to pay them off. people are very happy giving the united states government money because we can print it to give to them. how much it's worth is the question. the danger is inflation. the danger is not getting back dollars. the danger is europe is how does a country spending more than it's taking in, can't print money -- if it loses the confidence of the market, the game is over. >> joe, you have a question? >> yeah. we got the big primaries coming

up, the ones in michigan, warren. i know you've seen all the debate being reignited about the auto bailout. you've got romney and santorum talking about it in one respect. we had steve rattner, you can't turn on the tv without seeing him somewhere defending it and saying there would have been no dip financing. "the wall street journal" weighed in over the weekend. i thought it was an interesting piece, the op-ed piece. just talking about that maybe the whole bailout made the auto industry -- it's still there, stocks above zero, still running, but maybe didn't set up the future that great for the auto industry here. would you ever consider buying a stake in gm or ford at this point? >> well, i've always felt it's too hard in the auto industry to predict who the winners are going to be. there were 2,000 auto companies established in the united states in the 20th century. what have we got left, you know? a couple. so, it's very hard to pick -- to

pick winners. i don't -- there will be a big industry auto industry, 5, 10, 20 years from flow. we'll sell lots of cars. i just don't know whose cars they will be. >> the journal said -- >> i will say this -- >> yeah, go ahead. >> i would say this. i was on the fence about the auto bailout for quite a while. it kind of went against my instibs but i will tell you, steve rattner is 100% right when he says there was not a dime of private capital that would have been available for a managed bankruptcy absent government help. i mean, it's very clear to me in hindsight. it wasn't clear to me at the time but very clear to me in hindsight that the auto bailout was one of of the best things that have happened to this economy. the dominos that would have fallen -- you know, we saw dominos fall in september of 2008. we saw them fall so fast, such big ones. we did not need a repeat of that with what would have started with the auto industry. but i do not claim any great

foresight on that. i have mixed emotion. >> the "journal" delicately dances around that and says in hindsight it's tough to say if the government hadn't been there and there hadn't been crowding out, nobody knows who might have come forward. they also go on to say -- they also go on to say that some of the foreign automakers that now build cars in this country would have been interested in all of the assets if it had been done in a normal way and they may have bought -- maybe we would be making toyotas in detroit or something right now. they make the point that the steel industry was able to come back after the normal paths were followed and it's been rationalized and that the future is much brighter because they were able to deal with all the legacy issues. i guess rattner and others say legacy issues were dealt with but the "journal's" point all these balance sheet issues would have been rationalized more with a better future. now we have cafe standards that

will go to 50 miles per gallon, you know, very quickly and it will be a tough -- very tough future for our automakers to try to hit those and give americans things they want to buy. >> i would just say this, joe, in all of the steel -- the big ste steelmakers, you know, 90% of of the american steel capacity, if in march of 2009 it was all running out of cash simultaneously, believe me, there would have been no private solution. and i got a call in the spring -- or maybe it was late winter of 2009 from one of the automakers, looking for capital. there wasn't anyplace they were going to get a dime. i mean, it would have been crazy to put capital in unless an overall solution was going to be engineered by somebody that really had the capacity to write checks. and that was the federal government. like i say, i didn't -- that's

not a philosophical answer. that is just a pragmatic answer of what was going on in the world at that time. it would have been devastating. it would have been unwound the progress we had been making from the fall of 2008. >> they're still too big to fail then, warren. we would have to do it again. the precedent has been set. we will still -- they will never go under. i don't know. you wonder -- philosophically it's not good to talk about, but sometimes you do need to talk philosophically because capitalism doesn't work if you know it's going to happen every time. >> it's too big -- it's too big to fail all at once. i mean, it's just like -- you know, general electric was in line in september of 2008. they didn't do anything themselves. they were just one great big domino and right next to other dominos that were toppling. but what we learned in 2008 is that when dominos topple in this society, when big ones do it, when you start off with two biggest institutions, freddie

and fannie, the united states government with 40% of the mortgages insured and they go under conservatorship you'll find out there's an awful lot of dominos in line. you've got to have a fire wall someplace. the only person that -- the only entity that can come up with a fire wall at that time is the u.s. government. incidentally, there's not great moral hazard in doing what they did. the shareholders of aig, of citi, of freddie, fannie, you name it, they got creamed. it isn't like they got rewarded for the fact that they had their investment in it. they got totally creamed. they are not there sitting, goody, goody, i want to do this again. so, the moral hazard thing can get misinterpreted. >> joe, i think we have to sneak in a break here. >> oh, yeah, we definitely have to do that. or i will have moral hazard if we don't -- i've been told that personally. coming up, more from warren buffett, he's answering your e-mails and tweets. keep them coming, warren buffett is trending on -- what does that

mean? people are watching as we speak and writing about this interview. >> what does trending mean? >> means there are thousands of people putting the word buffett in their tweeting, which means -- >> they're not headed to a buffett? >> they could be but more likely they're watching "squawk." >> i don't think any twitter people go to buffets, right? >> they're oall in the buffet line tweeting. >> it's trending, a lot of trending going on, woo, right behind "the artist" and meryl streep. >> right. >> first, we'll get -- we have to get this -- a sneak peek at "squawk on the street's" new set. ♪ oh!

[ baby crying ] ♪ what started as a whisper ♪ every day, millions of people choose to do the right thing. ♪ slowly turned to a scream ♪ there's an insurance company that does that, too. liberty mutual insurance. responsibility. what's your policy? ♪ amen, omen the the new spark cardnth from capital one. spark miles gives me the most rewards of any small business credit card. the spark card earns double miles... so we really had to up our game. with spark, the boss earns double miles on every purchase, every day. that's setting the bar pretty high. owning my own business has never been more rewarding. coming through! [ male announcer ] introducing spark the small business credit cards from capital one. get more by choosing unlimited double miles or 2% cash back on every purchase, every day. what's in your wallet?

that was wrong? >> yes, complete. >> down to the new york stock exchange. an exciting day for cnbc there. i'm trying to figure out -- so you guys are not sitting. that's it behind you. carl, melissa, jim and david joins us, prepared to unveil the new set on the floor today. wow.

whoa. it's stark treky, isn't it? >> whoa, spoken just like the dude would say, jim. >> it's a big day. we'll talk about buffett and g-20, big day in the german parliament. first order of the day is ribbon-cutting as we introduce our new set on the floor of the new york stock exchange. we rehearsed it saturday. >> we got to get it right and we sure hope we deliver for. >> you we'll be joined by duncan needer hour, our own boss, president of cnbc. bill and maria anchoring in the afternoon. we should mention the set, two years in the making and we'll walk you through all the technical aspects of this television fek nolg use in some case tools that have never been used on a television set before. you'll make wicked use of the telestrator as well. >> i can't imagine. >> i mean, this is -- we're in

the 21st century ourselves. and we're ready. >> we are. >> when i first looked at cameras, i didn't know they were cameras. they're about this big. you'll see them. we'll introduce you to everything. >> joe, great show, today. unbelievable stuff. not just lighting up the wires as you mentioned, twitter. when warren buffett is trending on twitter nationwide, that's a big deal. >> there have been major trending. major, major -- >> you have no idea what we're talking about. >> no. >> more controversy about the stocks he's talking. more controversy about his view of the market and his view of buy backs was, frankly, antidiluvian. >> what does that mean? >> antidiluvian. >> i think thinking that. if the stock goes up, it's great to do buy bock. if it doesn't go up -- i think of kodak and how much they bought back. it's good when the stock goes up, though. >> ibm says it's bad when the

stock goes up. i find a twisted analysis. once again as david just mentioned anacaristic. just being critical. >> coming up, final thoughts from warren buffett. don't mention "squawk box" tomorrow. our guest host is pimco's mohamed el erian. we'll talk moments, multispeed economies from around the world. >> he's going to give us a new -- i want a new one. >> you do? >> a new line i can use. >> all right. evercore chairman roger altman and "trump tuesday," donald trump will join us tomorrow at 6 a.m. eastern. "squawk box" coming right back. we were just driving along,er comin' back from the lake,ng.

and all of a sudden, ka-plam. it blindsided us. what is it? our college savings account. how do you think it happened? not sure. i think something we bought a while ago turned out to be something else, annnnnd, i remember a lot of other stuff in there had the word "aggressive" in it. is everyone okay? well, now, yeah. who knows later. ♪

we are back with warren buffett this morning. a last few minutes of questions before we're finished up here. warren, jim cramer was making comments about your view on stock buy backs, especially owning ibm. in your annual letter you laid out your cause for why you would be happy to see them buying back stock and you're not necessarily looking for that stock to go up

over the last few years. that's a little controversial. >> i don't know if it's going up or not. i'm saying, if they're going to buy back stock, they'll buy back a lot of stock, they've announced they're going to do that, if they buy it cheaper and i'm a continuing shareholder, i'm better off. i mean, if three people own mcdonald's stand and you can buy out -- one of the three for a fifth of the total value of it, the other two are better off at the end. any time you -- any time you buy your partner out at a discount, you benefit. now, there's no moral problem attached to that in the stock market because markets set prices. you wouldn't want to do that in a private partnership. i'll love it if ibm buys a ton of stock. the cheaper, the better i'll do over time. >> let's talk about gas prices once again because we did have a lot of people who wrote in who said they are feeling the pinch of gas prices already. i guess gas prices up around $3.80, somewhere in that realm. we could very likely see it push back above $4. there are people, again, writing in who say they feel it and it

could end up cutting into what they spend in other places. could it eat into the economy? >> well, it is a minus. there's no question about it. if you spend more on gas, you have less to spend on other things. we have -- you know, we had $147 a barrel oil, too. we've lived through it in the past. $30 a barrel was a shock in the '70s and it had an effect on the economy. any time an important part of the american's expenditure goes up in price, whether it's food or gas, you know, it has an effect on everything else, no question about it. >> i know you look at a lot of different factors and overall you're very optimistic about the future not only of this country but also of the stock market. if you have a list of worries, what's at the top of that list? >> the biggest worry is nuclear, chemical and biological attack of some sort. whether by a government or by a rogue group. that will happen some day in our future and it will be anything from a large tragedy to an

unbelievable tragedy. >> right now it's not on the forefront of americans' minds although a lot of things happening in the middle east are creeping back up there. >> yeah, it will happen some time when it isn't on our mind, just like the attack on 9/11. i mean, this are people that wish us ill and they wish us a lot of ill if they can pull it off. so, nuclear, chemical and biological knowledge has spread. there are plenty of people that would like -- wish us ill, so that is the biggest worry we have. in items of the economy, the luckiest person born in the history of the world is the baby being born in the united states. in items of the outlook for their lives, they are going to live better than john d. rockefeller lived or better than i lived and so on. i mean, our country's future is just -- it's fantastic. >> warren, if had you to compare the stock market and how you feel about it right now versus where you did back in october of 2008, when you told people to buy stocks you were, how would you briefly sum that up? >> well, they were cheaper at

that time. it's become clearer now that the dominos aren't going to fall. so people are less worried now. but the time to buy stocks is when people are most worried. and october of 2008 was a better time than now. this is a better time than ten years will be. >> warren, we want to thank you very much for joining us here this morning and being so generous with your time. >> thanks for having me. >> we appreciate it. guys, back to you in the studio. >> you won't come to the correspondents' dinner with me. that's fine. >> i'm sending you another brick. it's in the mail. >> i'll ask bill murray. if you're not coming, i'm asking bill murray. but i asked you first. the. >> if i took ed asner, that okay or off limits? >> i think he got overlooked in the oscars. i'm amazed. >> he's a little more -- they have no judgment of talent. >> he's a little more conservative than you are. >> than you -- >> than you are, andrew. a meeting of the minds. >> we have to