our special guest this morning is berkshire hathway's ceo warren buffett. he is here with us right now ready to take on his situation, what he thinks is happening right now and the situation with washington. before we get to that, andrew is going to bring us up to speed on the latest headlines. >> thank you, becky. you guys are in the perfect place and we all want to hear what warren has to say about what's going on in washington. meanwhile, is senate is working hard to come up with a deal. while senate leaders are reportedly close toon agreement, the fate of the house remains uncertain. the senate is scheduled to meet at noon eastern time today, the house at 10:00. meantime, president obama is meeting with treasury secretary jack lew at the white house this afternoon. lew sad has said that the united states will run out of borrowing authority tomorrow if congress does not raise the debt limit. fitch now has put the u.s. credit rating on negative watch, citing an impasse in washington. this is a warning of a possible

downgrade. fwu given all of that, take a look at the futures right now. you may not surprised to know we have some green arrows across the board. s&p 500 up about 6.5 points and the nasdaq up about 8 points on an expectation that a deal does get done today. but, boy, things could turn around. we will see what happens. over, over to you. >> i know you're waiting. i know. >> we're watching and waiting. >> i know we're news people. >> come this afternoon, if we don't have anything -- andrew, when they said two weeks ago that these things will converge, the debt ceiling and the government shut down will converge, wa did everyone say? they'll probably wait until the 17th to do it. today is the 16th. >> but tonight, it's midnight tonight is the -- >> no, i know. you know that there's the slightest bit of breathing room. you know that. >> i think there's a decent chance we get to tomorrow and maybe the house votes tomorrow. >> look, and yesterday, once again, was humiliating for

boehner. remind he me of -- do you remember plan b? plan b collapsed because he didn't have the votes for plan b. do you really think at this point if the senate passes something, it's going the be mroftly clean, he'll brng it up. there will be enough republicans to get it done and we'll the put this off and we'll do it again in six months. >> joe, i love your outlook. >> it's just realism. the thing is, the republicans look the worst roit probably right now, but the president, you know, he doesn't want to be the first one that provided over a default, okay? so he doesn't -- he's not going to look great, either. and neither side wants to hurt the -- wants to burn down the house to save the house. that's wa i think. >> some people do want to burn down the house, but we'll talk about that. >> but not where you can't rebuild it. they think long-term entitle manies are important enough that the house is going to burn

eventually. so they think that eventually it's going to be destroyed and we're going to default based on how much we've promised. they're crazy, that's admittedly true. in other countries, six different parties, four of them come together on one side and two on the other. now we've got that here, but in different parties. but the house is supposed so be the -- you know, i don't want to call them the -- we talked about it yesterday. they're the omegas. they are the delts or whatever it was in animal house. they're those guys, they're going to be there causing prubl trying to keep power divided among the different houses of government. i think this is all fine. you'll see. >> i hope you're right, joe. i hope you're right. >> stokes, wouldn't you think that would be the most sensitive place to an actual imminent default? >> yes, but the application still is we do get a deal. >> that's what i mean. you've been -- you know, you wrote the column two weeks ago

sort of hoping that when there would be a default, remember? >> i'm hoping that i'm very wrong. >> but, you said don't be so sure there won't be a default. >> not a default, that we could go past the 17th and -- >> no, it was a default. >> i'll get the column for you. >> i didn't read it that day, but -- >> we have to talk to mr. buffett. >> let's do. let's get to becky. >> gentlemen, thank you. now let's get to the man of the morning, war b buffett, chairman and ceo of berkshire hathway. warren, you've heard the news. you know where things stand in washington. at least at this point at the look at the reaction in the markets, not much. wall street seems to be betting that there is going to be a deal. do you think that's a safe bet? >> i don't necessarily think it's a safe bet, but i think it's a perfectly okay debt to buy securities. we bought a $1 billion business about five hours ago. i think over at the uk. and we did not buy it with a condition in it that we could call off the deal if there was a

no vote on the deficit change. limit change. so if you can own a good business, a good farm, a good apartment house, you know the united states is going to be around five or ten years from now and you know it will be more prosperous. it's not necessarily a mistake to buy stocks because you don't know the outcome of something that's happening in congress. >> that's a great long-term view. and your view has always been no matter what happens, we will get through it. we got through the great depression. we got through world war ii. but what about the immediate? people are really concerned about what's happening in washington right now. >> it's a mess. and if you think about it, i used to tell my children when they were young, it takes 20 years to build a reputation and 20 minutes to ruin it. we've been building a reputation for 237 years.

the united states has become the reserve currency in the world in the process and people all over the world hold our paper. so to do anything to damage the 237 years of good behavior is idiotsy. i don't think it will happen. but if it does happen, it's a pure act of idiotsy. you might say that the threat to not raise the debt ceiling after you you've already spent the money is -- it's a political weapon of mass destruction. we used the atopic bomb back in 1945 and said we weren't going to use something like that again. the russians and the soviets the same way. there are certain weapons that are just improper to use against

humanity. and so to use this as a weapon against the american public, it is idiocy. it's too powerful. >> some republicans made the claim that, look, we are doing this because we are trying to save the long-term health of the country and we are very concerned about the path we are headed down. is that an unfair statement? >> well, we could have said in vietnam that we're trying to save the -- and we're going to use a nuclear bomb in the north. there's all kinds of times when you get frustrated in government about your lack of ability to carry out something. it does not mean that you're self-destructive. it's not a weapon that should be used. there's plenty of weapons to use. you can do various things. but you should not take an asset that we've spent 237 years building and tear it up.

over any kind of a fight. you can do it over abortion, do it over gun control, all kinds of things. it's an improper weapon to use. >> joe has made the argument this week that you don't burn down the house to save the house partnership guess you're making a similar argument. >> yeah. it is a -- it is something where you're going to destroid stroi an asset of the american people, 315 million americans to get your way on a specific bill. and it's such a powerful weapon that it my even work unless both sides say, this is off balance. >> so we've been treating tomorrow, october 17th, as if it's a hard deadline. do you think it is? >> well, i think it's crazy to find out exactly what the inflow and outflow of the treshly will be in any given month. you know it isn't sustainable when we're spending more than we're taking in to have it.

the treasury's flow of funds, i've snefr seen the exact dates on tax receipts coming in primarily when social security goes up. but it should be over. i don't care if it's two days later or that you actually would run out of money. who knows. the treasury doesn't know precisely. but forget it. this is like -- this is like poison gas. you don't use poison gas to say, well, people won't die until next saturday. >> is that a prediction that the market will react rapidly and strong tomorrow? if we don't have a deal by midnight tonight or when the markets open tomorrow morning, is that like we saw back in 2008 in the financial crisis? we were looking at issues every weekend that you want to resolve before the markets open. >> it could be. i've never felt i can predict what markets are doing to the next day, but it certainly has the potential for that. and it's idiocy. >> fitch put us on negative watch based on not the u.s.'s

ability to pay its bills, but the idea that you have all this wrangling in politics and the ideal of getting them p there. with them making this move, do you think the damage has been done? >> there's a tiny bit of damage that's been done. we have spent 237 years without people working whether we're going to pay our debt. even in the great recession, people do not worry about government bonds being used. we financed ours in world war ii. people did not worry about the fact that when the government said we promised to pay. isn't that something. anything like this arose just slightly, but the actual fact would be, you know, many fold. it is huge compared to this at that particular time we've seen so far. if we prove we're total idiots, i think that has an effect. >> we're on the here at fortune's most powerful women's conference. christine legarde, the former french finance minister was here

last night as the key note speaker. she raised the suggestion that the use has done enough damage, that it brings the idea of the dollar as the reserve currency into question. do you think that's the case? >> i don't think it's the case quite yet. it could be done very, very quickly. >> by next week, do you think? >> i don't think there's another reserve currency that would jump in next week. but it would produce chaos over time. i can't tell you exactly wa day it would be. like i said, the treasury opens their mail like we all do and hopes there's more checks in it than bills. some days there are and some days there aren't. but we know we're spending more than we're taking in. incidentally, the congress did it. it just -- it's so silly to sort of deny reality when you've spent the money and say, no, we're not going to borrow it. >> let's talk about that acquisition that you referenced earlier. this is a $1.1 billion argument

that bish yoch is placed. >> it's liquid disexpensing machines, like the machine i have at our office where i can get a coke and cooling equipment. all designed for beverage cooling and dispensing. >> so $1.1 billion, people look at that and say wow, that's an ee normal amount of change. not for berkshire. >> no. we've committed to spend $5.6 billion on mv energy. we'll spend about twice our depreciation on plant deployment. so we are sfending at a rate this year that's as high as ever. >> have you been looking for a big, big acquisition? you had in the past. you've always talked about how you have your elephant gun out and ready to go. >> right. it's met foficcal, but it's definitely here. >> but have you seen anything? >> yeah, yeah.

we always have a -- a little sighting. i wush to the clearing and can't quite locate the science. >> wuven that got away, you mean? >> well, i don't like to say it that way. >> recently? >> yes. >> how big? >> an elephant. heinz is something of an elephant. $12 billion is an elephant to us. but this was a bigger one. >> how much cash does berkshire have on hand right now? >> right now on a consolidated basis, but sclusing our railroad and utility, we would have about $40 billion. >> so that's more than the united states will have tomorrow, ard cooing to jack

lew. >> right. but they should not regard us as a source. >> have you sold anything? so no. >> first of all, do you own any short-term treasury bills? >> probably those that are due in less than a week. we always have a big rolling chunk of treasury bills. and i issued no special instructions in terms of getting rid of the shortest ones. i am fought worried in the sense of those treasury bills being paid. i'm worried about damage to an asset that we carefully cultivated for years. >> those short-term treasury bills, though, the rates have spiked on them, especially in the last couple of days. bill gross said he's a buyer over at pimco. are you? >> they've spiked, but you're talking about going from zero

yield to 35 basis points. but 35 basis points for three or four days does not amount to a bunch of -- >> in other words, you're not scraping for cash? >> i've got better things to have had although that date looked pretty good. >> have you changed anything you've done at berkshire as a result of what's been happening in washington? >> no. >> we have been at a derth when it comes to getting any signs of the economy, any reading on what is happening because you don't have any economic numbers coming out. you have a lot of numbers coming out every day. in your opinion, has the u.s. economy been hurt by what's been happening in washington and does it show up in your receipts? >> it has not shown up. but what will show up is in the world, united states citizens

lose some faith in the full faith and credit promise of the united states. that would be a momentous event. even if we said, well, we're slowing it for a week or we're putting out script or whatever, that would be huge. we have been spent 237 years building up our reputation for billing our bills on time. it would be crazy for me to say, well, i've been handlinging things and i've got these internal rules and things that we're just not going to pay for a few weeks. there would be a lot of damage to berkshire. that would be a thousand more damaged to the it's if they do it. >> but the economy, you have not seen any consumer confidence dropoff, you have not seen any spending decline even as the retailers -- >> no, if you look at our furniture stores and jewelry

stores and orders coming in on carpet and all of that, no. you know, this is not the last three or four days i've been traveling and but if this goes past tomorrow, we will see. we will definitely see something. it won't cause me to change what i do in life, but we will definitely see something. >> war b, if you will stay with us, we will slip into break and, joe, i'll send it back to you. >> thank you, becky. i bet you warren -- well, who has thought about this guy. guess what the symbol of germany's post war economic miracle. >> the symbol? >> yes. >> war b, do you have any thoughts of that? >> gummy bears. >> oh. yeah, they're from the black forest, right? >> it it was on the tip of my tongue, joe.

i'm sorry. >> hans reigel, he was the last great -- he died. he was 90. and gummy bears marched around. he just died. there's a big piece in the journal. >> the good gummy bears say they come from the black forest. >> reigel. he was worth $2.9 billion and it's a little bit sad to me that there is their most famous entrepreneur after tworld war two. anyway, he was 90 and we'll miss him. how is that, andrew? that's safe to say, right? >> my wife is a gummy bear -- >> can you imagine? >> life without gummy bears. he will be missed. >> yeah? >> good. he will be missed. >> u.s. equity futures trading above fair value. if we were up 50 we would be at

1 1,520. anyway, coming up, more on war b's surprise dinner. did you know about this? >> i heard about it. i am a fan of this person. huge. >> maria? >> i am a fan of hers, as well, but this is different. >> the st. louis cardinals beat the los angeles dodgers 4-2 last night to take a 3-1 least in the mls. boston is now up 2 of 1 is. now homer trying to gefg the tigers the win in detroit.

welcome back to "squawk box." it is now time for the executive edge. it's our daily segment focused on giving business leaders a leg up. we also want to welcome a special member of the squawk team to join this conversation, warren buffett. a new survey finds the population of a banking career has fallen. industries such as software and computer services has become much more popular. lloyd's, which conducted the survey said banks must change their recruiting techniques. guys, is banking dead? >> i mean, it goes to be -- how much of the s&p were financials a couple of years ago? this is probably -- it was around the world, too. did you see that? it was all over america, asia, the middle east, africa. and actually, the byline is in london. i guess it's good if you till want to get into banking, it's good that there's not as many

people trying to get in there. >> but becky, war b, good thing or bad thing? in 2008, people said before that there was such a brain drain from all sorts of industries that had done goo wall street. maybe it goes back the other way? >> maybe it's a good pendulum swing, as well. i can't say it's surprising at all. >> i'm getting excited about gumny bears, actually. >> think about it were warren. you own candy and you own darely queen. i mean, are you a gumny bear person at all? >> joe, i'm on it and i will tell you, since you tipped me off to it, i will definitely give you a gumny bear as a reminder. if you have any special colors you'd like to -- we make the deal. >> honestly, the guy owned half of the company now and a lot of times when a key employee like -- don't be surprised when we hear about this a couple of months from now. berkshire hathway finds -- >> don't be surprised if you get a gift box with a gummy bear in

it, too. >> i just want to happen -- >> i'm looking forward to this. >> you don't have to pay a royalty rate to his estate now, do you? does he own the right to all gummy bears? >> i think there are knockoffs, too. but warren, if an investment banker comes to you with an idea like this, what is the normal fee? >> more than one gummy bear. but that's my sharding position, however. >> all right. well, i wouldn't be surprised. this is kind of like your kind of company. plus, it's international. >> it is my kind of company, definitely. and if you say it's 2.9 billion and he only owned half, it's a pretty good deal. >> and 2 billion in sales, too, per year. i had no idea. but one thing a lot of people are pointing to, warren, honestly about was going on in washington, if you madeed a $1 billion acquisition without anything in -- you know, any way to get out of it based on -- and

if you haven't positioned anything else at berkshire for that, i mean, that speaks volumes about whether something is likely to happen at this point if the world's smartest investor hasn't done anything to repair for it. >> well, i think it's such idiocy for us to get beyond it. i can't believe that 315 million americans are going to let perhaps even a minority of the party in one house -- i think there may come out of some something that -- i hope both parties say, forget about that. this is off the table. we can all about all kinds of things, but we're not going to use a weapon of mass destruction -- >> i'm hoping something real good comes out of it, just like you. >> warren, did you ever think about making the acquisition, instead of making it in the past 24 hours saying, you know wa?

i'm going to wait a week just to see if case things go down? >> no. my partner, charlie and i have never had that discussion in any event. and there's been a lot of events over that time. it is election day in new jersey and cory booker and republican steve logan are fighting for -- >> steve who? >> longan are fighting for the senate seat vacated in june. what do you guys think? becky and joe live in new jersey. >> booker is up by double digits. but this is interesting because it's a microcosm of what's happening in washington. booker has said he would like to see washington settle this dispute. lonigan said he thinks they should stand firm. he would like to see a year extension on obama care. >> it was 16 points. i think it's ten now or something. some of the tweeting, i don't know, that was such a tempest in a teapot. i don't care who tweets me, i

ain't tweeting back. >> i actually -- i used to follow cory booker, but he tweets so much i unfollowed him because i couldn't 1257bd the amount of stuff coming out every day. >> i didn't realize that. then there was something in the paper that he hadn't lived in newark. >> that was false, i think. >> the video might have been false. i think he does live in new jersey. but anyway, we have a final story here this morning, one of my favorites. a surprise at the end of the laugh night's dinner, opening the summit, warren buffett, the man who is with us, making an appearance with glenn close. ♪ and let you break a little that's the story of that's the glory of love ♪

>> so, warren, how did that happen? we love glenn close. >>. ♪ cry a little >> guys, this was the thing that brought the house down last night. there was a surprise appearance. glenn close was -- we knew she was going to be coming out and speaking. we did not know that warren buffett would be joining her and that is something that definitely brought down the house when it happened. >> warren, just know, in the past, she's gotten a little -- i don't know. i mean, check your bathtub. >> i called michael douglas ahead of time. he said just one piece of advice, warren, don't get her upset. >> that's what i mean. don't get her too attached to you or anything. >> no. she got to pick the songs and everything. i did not -- >> isn't that horrible that one movie can, 20 years later, people are still talking about it? i guess the it's good if you were that great in that role.

>> that was a powerful performance. >> wives love that movie, joe. >> but i can't believe she's not really like that in real life because i saw it in the movie. i'm scared of him. i'm sorry. >> you should not be. >> is she one of your favorites, andrew? you have a lot of favorites. that's nice, though. >> she's absolutely terrific. >> we're going to have much more from warren buffett, the economy, the fed and the markets when we return on squawk. [ man ] on december 17, 1903,

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blackrock, reported third quarter net of 3.88. guess what the estimate was? >> $3.88. the analysts did their job. >> is that what happened? >> they got it right today. doesn't normally happen. >> the company and the analysts -- >> is there body language. >> and they talk to the company. you know, i got 3.89. no, no. >> if that's the case, the analysts would be more accurate. >> $3.88. the company, in talking about the current environment, says uncertainty is keeping many investors on the sidelines. in terms of assets under

management, $4.096 trillion. so, you know, jack lew, theoretically, could call larry fink and say i have a couple of interest payments, a couple of social security -- >> can you hang tight? >> margin of 4.067 trillion. that's a lot. i always knew it was above 3 there will, but they're now -- and they just passed 4.096 trillion assets in management as of september 30th. oh, this is interesting. larry fink, global growth at this point is dictated more by central bankers and elected officials than by business leaders. and i think he's been sort of in that camp for a while in terms of fed action, as well. and it doesn't help anyone that -- >> but look at what fitch said. >> it's still aaa. >> but fitch -- the -- putting us on watch was not -- they had whether we were a good economy or not. >> but they haven't even done

the original downgrades that already happened. >> s&p. s&p downgraded. and the real question will be well, what happens to moody's? >> operating margin, 39.1% for blackrock. let me just -- do we see? what is it? i can't tell whether we got any premarket trades at this point in blackrock. i can't tell where it's going to trade. but right in line with expectations and you can see that, wow, the -- pretty close on revenues, too. back to you, beck. >> joe, thank you. again, our special guest this morning is warren buffett. he's the chairman and ceo of berkshire hathway. warren, you heard those xlents that joe and andrew were just talking about. the comments coming from larry fink, too, one that uncertainty is keeping investors on the sidelines. larry fink going on to say it's the central bankers and elected officials who are driving things these days, not business leaders. would you agree with particularly that second statement?

>> i think business drives a lot. i think the juices of capitalism over time are more important. if you look at what built this country over the years, it's been -- it's been tens of thousands of people that want to live better tomorrow than they're living today and go to work on it. we're here with 400 of the most powerful women and every one of them is thinking about how to have their business be bigger and better next year. so people forget that there's a lot of natural juice to capitalism and the government is a big factor. but if you ask me what accounts for where the united states is today, i would say that the actions of american citizens that are the dominant factor. >> although, you know, gdp has been below what the fed is expected, below what a lot of economists expected, particularly coming out of such a deep recession. is that because of what's happening in washington or in spite of? >> i think it's because of what

happened five years ago. i mean, we had a shock to our economic system like we hadn't experienced since the '30s. i took a long time to come out of the '30s. although we've come out of it. and sometimes people forget. 2% growth with less than 1% population gains means 1% real growth per capita. in 20 years, that's 20%. if every generation lives 20% better than the general population before them, that's not terrible. but 1% real gdp growth per capita over a long period of time, it does wonders. >> are you telling us that we need to get used to this or is this a temporary rare thing and we're going to get back to what we used to expect? >> i don't know. i think it's very possible we get back to higher rates of growth, but i will tell you that this is not a disaster. i mean, if you -- just think about each generation living 20% better than the generation

before them. that is not terrible. >> it's not terrible and it's not a disaster. but if you're looking for 3% versus 3.5% growth versus what whooefb getting, you're fought going to have the problems we've been dealing with today in washington. that takes care of itself. >> it takes care of itself unless we start making new promises. we tend to make big promises. we're like a very, very, very rich family and then we don't stop getting rich at quite the same rate. but our promises, we just went overboard. and anybody can do that. >> that's an argument for entitlement reform, which is what some of the republicans have now -- i realize this argument started out with obama care and their objections to that. the center of the party has pivoted to entitlement reform and is now looking at that as a way out. what you just said sounds like it's an argument for that. >> i think there will be entitlement reform. and i think there should be.

we should have a sustainable path and people should understand that it's a sus staunble path. it can be a very attractive sustainable path. we start out as the richest country in the world and we keep getting richer. but a rich family can overpromise. but i don't believe that we should destroy the full banking credit of the united states or reserve currency or upset the whole world's economic situation. to get that or any other piece of legislative activity. i think you should take that weapon off and then you can find it out on entitlement reform. and they will. it will happen, i just don't know when it will happen. >> we had the former to president clinton. he said we feed another maybe 400 to $500 billion in new revenues. does that sounds like a right

blueprint to you? >> it probably does. the -- whatever it is, you want to come up with something sustainable over a lodge period of time with decent assumptions, but not ridiculous sumgs. so if you want to plug in 2% of your growth and figure out where that takes you, and if it doesn't work, you have to adjust one side or the other and more likely both. i mean, you should probably do both. but you have to -- they don't like to call them taxes. they call them revenues. you have to look at taxes and you have to look at expenditures. they call them entitlements. but you should start with realistic subjects. it's very important at berkshire that i be realistic. if i kid myself and think 10 billion more is coming in next year and i make plans based on it, we're going to have problems. and it's not a great problem to work out, actually. we are so rich that we can do a lot. we can't do everything. >> but tax revenues have been rising. revenues have been rising, taxes

have been coming in higher, the deficit has been coming down. these why things have been improving on their own. >> we've seen that. summer/fall of 2009 been but they haven't been accelerating. they've been moving at a couple percent per year. and we see that in almost all of our own businesses. but they aren't accelerating. and people have gotten very impatient on that. the stock market hasn't gotten impatient. it's gone up five years now. but in terms of employment, in terms of the way the average person feels, they feel the cover has been very slow and i can understand why. >> have we promised too much in terms of entitlement? do you think it bites us 10, 15, 20 years down the road? i know you don't look and analyze every one of these numbers every day, but you think

about this stuff and you're an actuarial in your head. >> we didn't know when the housing bubble -- he said we have to keep dancing and we didn't know when midnight would come and everything would turn to pumpkins and mice. and it was a lot of fun at 11:55. you can't fine tune this thing and you shouldn't try to fine tune it. proper behavior as a government is not the plan things for the best case, but to plan for what a sensible case and make adjustments if you find out that your estimates have been wrong. but we've got to make some changes. but we've got enormous resources, too. so it isn't like i'm prescribing sack clothes and ashes for the american people. we have the best situation in the world. but it's not quite as good as we promised. >> we're going to continue this conversation with warren buffett this morning. joe, i know you have some other things we're going to be watching, as well. >> always.

i think it's earnings season again, becky, isn't it? >> here we go again. it is. >> it dawned on me because we did citigroup and jpmorgan and wells fargo and blackrock. >> we've got bank of america coming up and warren owns a big stake in that. >> yes, he does. >> we'll talk about that. >> he said something that he's -- most of the stuff he says is mostly true, but even he can spend beyond his means. >> mostly true? >> even he can spend beyond his means. >> are you calling him a liar? >> no, not with the way you -- >> he didn't say he would. he said even a rich family can overpromise, right? >> anybody he said. there's no way, buffett. there's no -- you could send -- >> i guess it's true, if you promise all your money to a lot of charities. >> my family would not say i've overpromised in terms of them. >> no. and i wouldn't even as part of your extended family. because i've gotten a ketchup bottle, a brick, a croppy looking tie and i got a -- >> and a gummy bear.

>> a jet car ta doesn't work, which i can use to open a lock. >> and you got a personalized brick. how many of your friends have personalized bricks? >> right. thanks. okay. >> true. coming up -- >> thanks. he overpromises, yeah. coming up, a few stocks to watch this morning, earnings season is in full swing. fist as we head to break, check out the dollar. warren has like 60 billion of these. anyway, we'll be right back. (vo) you are a business pro.

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welcome back to squawk. a few stocks to watching this morning, yahoo!'s earnings beating the street by a penny. revenues were in line, but current quarter guidance disappointing investors. current quarter outlook revenue fell short and warned production of its upcoming broad well processor was delayed. also, earnings and revenue at railroad operator csx beat analyst consensus. its noncoal business did well and the railroad increased prices rose on that news and i imagine warren buffett who owns train might have an opinion on that, as well. jp portionan to pay $100 million to settle with cftc. it could come as soon as this week. also, apple reportedly told two suppliers of its low cost iphone 5c that it's reducing orders in the fourth quarter. that news raising concerns about weaker than expected demand for the new product. coming up when we return, we have much more warren buffett.

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good morning everybody. welcome back to "squawk box" we

are at fortunes most powerful women's conference. we're here with warren buffett today. we've talked about a lot of issues. what's going on at benjamin moore now? we heard an employee was you fired. >> benjamin moore has been around over a hundred years. i made a promise to the dealers that we were going to stick with that and would not go with the big boxes. >> meaning the home depots and so on. >> that was enormously important. i did a video so there wouldn't be any question. i found we were about to sign with one of the big boxes. i had to make a change. we have a commitment toll to the

dealers. we take care of them; they take care of us. i encouraged who was put in. recently we had to make a change for a reason i can't get into. >> you have seen the press coverage and stories out there circulating about this? >> yeah. we've got a new manager in there working fine. benjamin moore is making a lot of money. we paid a billion for it. we probably made a billion and a half pretax or so in ten years. it's earning close to record levels. dealers are feeling better now. they were worried we were going in another direction. we have a commitment to them. i think you'll see a lot of stability over time. with hurricane san i ddy we dide

a plant. articles also pointed to tracey brit who works in your office and responsible for a lot of companies. has the coverage been unfair singling her out in this situation? >> no. i participated in the selection of the ceo a year and a half ago. i made the decision to make a change. we couldn't go in the direction of leaving the dealers behind. i participated and made this decision. i participated in the selection. we interviewed three good candidates. one from one of our other companies. we decided on the present ceo who i understand is doing well. the company is doing well. >> thank you very much. we're going to continue this conversation with warren buffett. we have more to come and more of this morning's top stories. we've been watching what's been happening here in washington. any sign of a debt deal or not,

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from the government shutdown and the debt ceiling to how to make money now, it's a "squawk box" special. live from washington d.c. with warren buffett. good morning.

welcome back to "squawk box" i'm andrew along with joe kernen and becky quick in washington with ceo warren buffett. we'll hear from him in a moment. let's look at the markets. we have green arrows ahead of the news in washington maybe we get a deal or we don't. you have news joe. bank of america and the major shareholder -- >> he is. listening closely. 20 cents a share, ahead of expectations. just below that there's a lot of different metrics. global market revenues 3.8 billion. tooer one common equity 10.3. consumer and business banking revenue 7.52 billion. i don't see outlook yet.

i'm going into the actual release and see. net charge offs 1.69 billion. prevision for credit losses 296 million. by the way the third quarter number and i don't know what analyst took into account, there's a 2 cent benefit and 10 cents of charges. could be 28 cents. would that be it? you'd actually add eight to the 20. 18 cents was the estimate. i haven't seen comments from them. warren owns a lot of that. if is brian morning ham the right man for the job? s he doing a good job? compared to diamond, they equal to, greater than or less than?

>> i'm not going to rank them. brian has done a terrific job. you mentioned 1.6 billionle in charge offs for the quarter. that's before the reserve release it sounds like. that's an annual xized rate of charge offs. now you're getting down to 70 basis points a year. wells was under 50 basis points. this economy has come back in that respect. i don't think anybody expected chargeoffs to be as low as they are now. brian has done a great job. >> you're better than the analyst we have on. you did that in your head. he got to basis points on charge offs. the stock is up 14.38 to 14.41. you are a savant. that's why they call him the

oricale. if you had the worth for 700 million shares you probably would know how much they had in the cash drawer. >> exactly. you have the reason to know. you're more than a casual observer. if you're free we have sun trust coming. it's up to you. maybe not. >> warren, you still own shares of j.p. morgan right? >> right. >> you saw what happened with the earnings release. earnings were okay but it was the legal fees that ate up the earnings for the quarter and then some. >> yeah. basically i'm buying businesses and bank stocks for that matter in terms of what's going to happen in the future not for what's happened in the past. i can go back with bank of

america. i read a book 55 years ago. i can go back to the san francisco earthquake. they thought it was a down day and turned out to be a good day for bank of america. what really counts is the future. in the future, banks will have to carry, particularly larger banks are heavier capital. banks are in the best shape i can remember. they've built up capital enormously. portfolios are in good shape. big problem they have now is getting out more money. they have more money around than they would like. they are not reluctant to loan. >> i want to grab warren real quick on j.p. morgan. we didn't get to talk about it enough in chicago. i know you're a fan of jamie dimon generally. what do you make of legal cases against the company? people want his head. i've argued they shouldn't, but

nonetheless there is big cases. some say it's unfair for the government to go after them. what's your position? >> andrew, i'll get to that in a second. if a cop follows you 500 miles you're going to get a ticket. believe me you've had a lot of cops following a long time. they're going to write some tickets. if you run a major financial institution and i did for a short while. the government is pressing potential, pressing charges and have the potential of going criminal. a large financial institution can't take that. they have license in 50 states. so you are in a terrible negotiating position. i've been in that position. you know, if they want to take a pound of flesh, they can. if they want to take a ton of flesh, they can take that too.

>> further on this, and we'll do pepsi. when numbers come out, we try to figure out j.p. morgan's ongoing business because that's how we decide about the economy, decide what the bank's futures will look like. at the time you have certain left wing organizations or even main stream media saying we should have been focussing on a loss that was reported in that period and whether it should mean he should lose his job. isn't it -- that's in the rear-view mirror. isn't it upon us to try to figure out the results of the company when you factor out the litigation to see how you the underlying business is performing? >> it's the way i i look at it. >> frustrating. >> i put $2 billion in something called energy future holdings.

they go bankrupt within a few weeks. i go all by myself. i didn't have a guy in london to trade me. it was warren sitting at his desk saying this is a greet great buy. i bought a company called dexter in the 90s. the stock i gave them is worth $5 billion today. the shoe company is worth 0. you cannot be active in a big business without making some misstayinmi mistak mistakes. babe ruth had 60 home runs that year. i don't know how many times he struck out and don't care. >> 500 miles of a cop following you. you get a ticket. that boggles the mind. when you do get caught, there have been how many times when

you weren't -- >> the guy does not want to give you a warning. the cop does not want to if he's following you 500 miles. >> on the particular issue of the bear sterns, some people said they should have known better. others say they were heroes trying to save the country in the midst of the a crisis. >> they probably had a week to look at it. bear sterns had hundreds of thousands of contracts. the government loved it when lewis bought company wide and lynch. they loved it when jamie took over wabo and bear sterns. you can say they should have written different contracts that protected them against the things that happened in the past. the government wanted to get a deal done and needed to promptly or other dominos were going to

fall. i think it's a little stuff to be in this situation. jamie will survive fine. he knows how to run a bank. >> okay. stay where you are. we're going to come back to you in a minute. we'll tell you about pepsi flashings from the bottom of the screen. company reporting $1.24 x items against the estimate of 1.17. their constant currency bid went up 12 12% to date. organic revenue up 4% year to date. also reaffirming guidance in line with long term targets, there's a single digit organic growth and 7% core constant currency eps growth. >> warren probably saw coke the other day too. we're going to go back. we can still talk about that. coke, the u.s. numbers were better.

do you have a feeling on who's in better position with the challenges facing sugar drinks ands aper tame and everything else. is it good to still have a snack business. i know you like cherry coke. you don't even avoid the sugar, right? >> he's drinking it right now. >> boy, that's good. coke obviously has the better beverage business. pep i ssi has a wonderful snack business. in the 50s, lay offer had the business to coca-cola. if they made the deal, herman would have ended up with more stock than mr. wood rough. herman left atlanta and made a deal with pepsi. frito lay has a wonderful business, no question about it. >> we saw coca-cola had the unit case volume a little below

expectations. >> 2%. >> i think the big problems came in africa and developing markets. >> coca-cola since 186 has done a good job increasing you capital consumption over time. they'll continue to do that in my view. the rate of gains currently are not like they were 15 years ago. my guess is they'll have trouble getting back to those levels. >> because we didn't have all the -- now here you are again. you need to be available for a lot of these earnings that come out. becky, talk to him. >> i want to go back to the pepsi question. nelson argues the company should be broken up. i i know you're not a sharehold shareholder, but do you agree? >> no. if i owned control of the company, i'd keep both. one is a terrific business.

the other is perfectly good. why break them up? i believe in running a company for the shareholders that are going to stay rather than the ones going to leave. if you're going to stay, i think you like the idea of them having two businesses. >> speaking of investors, let's see a what carl has been saying to apple. what do you think about his requests or demands to buy back the incredibly large church of stock? >> the apple management did a nice job running the company. i wish i bought the stock years ago. i did advise the stock years ago. they've got a lot of money that's not trapped over seas. they'd have to pay a big tax to bring it back. they hope for free trade at some point so they won't have to pay the tax. >> carl is suggesting they borrow money to buy back the big

chunk of stocks. >> companies have done that including coca-cola. they're buying in stock. i've got -- i think the apple management and directors have done a good job running the company. i vote with them. >> versus what carl is saying? >> i do not think that companies should be run primarily to please wall street and largely shareholders going to sale. i prefer shareholders going to stay not those going to leave. >> mexico is pursuing this tax on beverages. you're talking michael bloomberg's focus leaving new york city at this point going to mexico. mexico drinks more soda than any other nation per capita. >> they drink more coca-cola

products than any other nation, 100% sure. >> they drink more soda than any other nation in the world. when you see a tax like that, is that a concern for a company? >> it's a minus. get 2700 or maybe weight level and tax them. whether i eat ice cream, cookie, candy, all of which i eat or coke which i drink a lot of, i don't think it should be important for the government to determine which ones they like that i eat. i'm not sure whether my candy bars are better for me, which i eat plenty, or the coke. we're going to eat a lot of calories and going to gain weight. calories are the problem. let's talk ibm. that's a more recent holding. it's come under pressure. i think shares are above where you bought in or a big chunk of

where you bought in. >> i paid more than some shares. >> earnings are out. what have you thought about the investment since you made it? >> i feel fine. the fact it's trading 185 or a number like that instead of 205. when they buy billions of in shares, i go up more. i love it. if you guarantee me i'd have 170 for five years i would really buy it. as long as they were buying in a lot of stochl. i own a higher percentage of it. >> are you buyi ining shares of? >> not right now. >> have you you been? >> we bought some shares this year, not a lot. >> what do you hope or expect to hear in the earnings tonight?

>> i talked to jenny. >> i saw her last night. >> i can't do anything. >> that's not to suggest you don't have inside information. >> i can have information and can't tell anybody. >> you know but can't tell us? >> you're warm. >> let's talk about other holdings. american express has been a holding of yours for a long time. we're interested for a lot of reasons. it's a good read on the company. >> good read on the world's economy. >> what do you know about that based on what you see from american express? >> i can't give specifics. they're doing okay. incidentally we have 70 plus businesses. one of those has 100 businesses. the world is doing okay. it's not galloping. the rate of gain has not accelerated or decelerated. every since the fall of 2009

we've had a slope that's like this. it doesn't flatten out or go like that. that's true until last week as far as i know. >> we're going to continue this conversation with warren buffett. i know you have other headlines andrew particularly what's happening in this town. >> no deal in washington not yet. ball back in the senate's court after house republicans failed to come up with their own version of the bill. minority leader mcconal and harry reid are hopeful of a vote today and holding a vote shortly thereafter after the u.s. inches closer. the triplea rating is on watch. the shutdown having an effect on the housing market. applications for government mortgage products dropped a six year low last week.

applications for mortgages to purchase a home dropped 5%. overall applications did rise slightly but that was by refinancing activity. >> did you have any estimate for the speaker yesterday? they can't get their act together. >> i feel bad for people who are trying. >> it was like plan b when he couldn't get it. he proposes and can't do it. >> it's embarrassing. he's got a fatal flaw. his flaw are the 20 guys. it's sad. >> i'm sad. >> you're sad for him? >> i think it's going to work out. we have much more. a check on washington and earnings recap from pepsi. we'll have all that when we come back. our special guest at 7:30

a.m. eastern. it's only on "squawk box"

. take a look at stocks to watch this morning. bank of america earnings beating the street 2 cents. revenue falling short. there were things in there. 2 cents here, 10 cents there. 2 cent benefit and i don't know

which analyst knew. whatever reason, the stock is trading up 19 cents. i loved buffett. the most important thing, charge offs and what they were back when things were bad and where they thought total charge offs would be in terms of basis points. he annual xized what they said. wells fargo down to 50 basis points. that's good. that's why i wish we could have him to call on some of this. pepsi earnings 1.24 were 7 cents aled of estimates, revenue in line. company is pleased with the performance despite the macro economic volatility. i love lays. >> love fritos. >> i love cheetos. keeping one eye on the hill and another eye on --

>> you can't close one eye? >> warren buffett is my special guest. is becky supposed to be reading this. we'll have much more from him throughout the show. fedex ceo fred smith on affordable energy, the economy and how he's handling the situation in washington. "squawk box" is back with more in a minute. since 1960, how many times has congress acted to raise e, extend or revise the definition of the debt ceiling? the answer when "squawk box" continues. yo, yo, yo. aflac. wow. [ under his breath ] that was horrible. pays you cash when you're sick or hurt? [ japanese accent ] aflac. love it. [ under his breath ] hate it. helps you focus on getting back to normal? [ as a southern belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. uh huh. [ under his breath ] i am so fired. you're on in 5, duck.

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now the answer to today's aflac trivia question. the answer 78 times. welcome back to "squawk box" everyone. we are live in washington d.c. at the fortune most powerful women's conference. our guest is warren buffett. since last time we talked to

you, janet yellen has been named the choice for the next fed head. what do you think about that decision? >> i don't know her. i'll wait and see. everybody says good things about her. i have no reason to doubt her. we'll see what the actions are. >> you wanted ben bernanke. he was your top choice. you figured you knew what he god and he was a known commodity. >> i've never pulled a hitter out of the line up. i wouldn't then. >> yesterday, we talked about based on what's happening in washington he doesn't see a chance. before the mess blew up in washington, he doesn't think the fed will be tapering soon. do you agree with that opinion. >> i have no idea. the economy has been getting better. how they make a decision on whether to pull back -- it doesn't enter into my thinking. i'll put it that way.

>> ben bernanke did make comments after the last fed meeting and said the trouble in washington was the reason they were standing pass for now. obviously he was right. look at what happened since then. at this point you try to figure out what pd in washington will have a serious impact on the economy. you haven't seen it in ub ins, but what's your guest in terms of if we were to get a resolution by the end of the week, how big the impact would be on the economy? >> if they get a resolution today, i think opinion of congress still will have diminished significantly. i don't think that will change the world or certainly won't change the people's feeling about the reserved currency. what would do the job, both parties say this is a weapon of mass destruction. we're not going to use it. we'll fight in trenches but not

going to blow up the world to get our way. >> that doesn't sound like conventionalism in washington. doesn't sound like what they're most likely to do. >> i'm really no good on congress. if you can predict what 535 are going to do, you're better than i am. >> i can't. >> i won't even try. again the market this is morning seem to be relatively complacent and calm ahead of the idea we are now looking at less than 24 hours eding into this deadline. >> we made this deal for $1.1 million acquisition. it's been this the process weeks. >> we signed it this morning. i wouldn't change the price a penny based on what's happening. i wouldn't want to get out of the deal. we didn't put in as a condition things had to get solved. if i were buying a farm today, i i would not change my mind.

if i were going to take on a dairy queen stand today, i wouldn't go a different way. >> you're a long term investor. >> most people are. if you take the people that own farms, that own apartment houses, most people are long term investors. thank heavens. >> if things sold off in a good way, you think that would be a big buying opportunity? >> absolutely. i made the first purchase of stock april 1942 and pearl harbor was four months past. we were losing the war. the dow was 100 and it's 15000 now. if i were guess aing along the time, i i may still be today. >> you thank you for that. we have headline this is morning. mostly about where you are now in washington d.c.

lawmakers are back in session today trying of course to forge a bill to end the government shutdown and debt limit debate. senate leaders reid and mcconnel hope to finalize the agreement after house republicans failed to come up with a deal yesterday. we've told you about bank of america and pepsi beating consensus. stanley black and decker, you wouldn't know it from the stocks plunge and pretrade this morning. the tool maker earned $1.39 per share a penny above estimates. the company cut the outlook for the year because of a slow recovery for profit margins as well as impact from the government shutdown. also, auto parts maker advanced auto part, $2 billion in cash. the deal creates the largest after market auto parts in america. the stock jumped following the

announcement. we have more from warren buffett live in washington d.c. when we return. also fred smith on energy independence, state of the economy, much more when "squawk box" returns after this. we're sending the "squawk box" team. don't miss a special edition of "squawk box" tomorrow live from the nation's capital starting at 6:00 a.m. eastern. americans take care of business.

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securing america's energy future hosting a national summit on energy security called o peck argo. joining me cochairs of the energy security leadership council. it is national security.

that's why when we see china try to buy an oil company it doesn't work. energy is something we can talk about in the same breath as defense and energy. i figure we are in a better place than the last three or four years. aren't we? isn't it astounding about our own possible efficiency? >> no question about it. when we set up the energy leadership council, this group of retired four star admirals, generals and ceo of oil using companies we were importing about 60% of our oil everyday. >> what happened to the light? >> today it's less than 40%. much progress. >> i know it's your job and a lot of guys that protect our nation, that's your job to worry. we are in a better position now to some day take that weapon

away from opec and people that don't like us? it must be gratifying. >> joe, that's well said. it is before. trend lines are encouraging. as fred mentioned we're still importing 40% of the requirement today. we believe that as a nation, we've got to work on it. eventually we'll achieve the energy security. >> i want to point out joe, when opec instituted the oil embargo 40 years ago to punish the united states in particular for support of israel during the war, we were only importing 35% of our oil. withholding oil supplies through the united states economy and complete chaos. >> yeah. you know, the advances we've made, we all know about natural

gas and fracking. the 90% plus is oil that we use. it's not going to change for at least 20 years or so. we still need -- natural gas can't solve everything. we're going to need oil, right? >> oil will remain the primary motor power for planes, truck, ships. for the first time, there's a chance to diversify a significant amount of transportation, electrification of light duty vehicles including the hybrids which are popular today, natural gas for heavier over the road central fuel vehicles. there's promise in bio fuels as well. diversification of transportation away from its

sole reliance on petroleum is the best thing we can do to prevent ou prevent ourselves have from having another shock on the market. we have to get to the point we're producing enough oil for our own consumption. we're still tied into the oil market. >> i'd like to point out the world market is not a free market. seven of the top ten oil companies in the world are state owned. price is driven as opposed to a result of supply and demand. >> fred, warren buffett wants to talk to you. i don't know what it's about. he usually has a checkbook. $38 billion is the current mark of fedex. i wouldn't entertain anything less than 50. >> joe is going to take a commission. >> i'm thinking fedex. warren, you love fedex right? >> he's paying you in gummy

bears. >> i wanted to make one comment. sometimes i'm accused of. the reason is really because of people like fred smith. if you think about it. fred 40 years ago, took two common ideas, mail and delivery and airplanes. somewhere in his head he dreamt up the idea of a business that's changed the lives of all of us. it's the fred smiths of the world that made america what it is and will continue to make america greater. it's far more important than washington. there are more fred smiths out there. i hope i find the next one. you just have to -- you've got to feel good about america when you see something like a fedex develop. an idea in one man's head and now employeei inin ining how ma thousands of people. i tip my hat to you, fred.

>> thank you. i'm complimented you would say weather. >> joe, can i add something a lot don't know about joe fred smith. he was the company commander in the vietnam war. >> that's not surprising. i concur. >> we all concur. >> we've said it so many times. the post office, you thought how could anyone take on the post office and deliver a package overnight anywhere in the world. it was impossible but some how you did it and made money. i don't know what that says about the post office. amazing. >> it could be a segway to the u.s. government. want to get your thoughts on the shutdown itself whether that impacted business, if you've seen it and to the extent you've made preparations or what you think about washington related to the debt ceiling? >> it's definitely had a minor effect on business.

as one example, we have tens of thousands of shipments held now that we can't deliver to the united states government and a lot of vendors shipping to the government are now ceased. on the margin, there's been an effect. i agree with warren though. i have confidence they'll come to a conclusion. our system tends to be pretty fracturous. at the end of the day it ends up in the right place. reid and mcconnel are good men. i think they'll provide leadership here. >> fred, we'll end with what we were talking about earlier. that is our energy needs here. the other thing i think is most staggering. three or four years ago the argument was made we don't need

to open up a lot of stuff here because we can never hope to generate that much more domestically. i think that has been the nail put in that notion of the coffin. we could do it. i think if we can we should. >> well, of course. the oil markets are the largest single market in the world. oil is at the center of everything that we do. the biggest single thing that happens if we produce more in the united states and use less and develop alternatives which are our recommendations is you allow the united states to have within our economy a half trillion more in gdp. we are looking for growth in the united states and greater employment. there's no better way to get that than to produce energy in

the united states and north america. there are high paying jobs. it allows us the flexibility to conduct international affairs and foreign policy without regard to being hostage to national oil companies that general con way mentioned. he and the other generals and admirals on this committee spent their career protecting those trades. >> i add with regard to energy, our nation is about to experience something no other nation can claim. that is we'll have more reserves in petroleum, natural gas and coal than any nation in the world. i think it harbors well for our nation's future. >> thanks general and thanks for everything your entire life general con way. thanks for appearing today and fred smith, great to have you on. when ever you're able, we'd love to hear from you. >> we all concur with what warren buffett had to say. before we go, let's take a check on the futures now.

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let's get back to our guest host, warren buffett chairman and ceo. you own stakes in a bunch of companies.

berkshire has connections people may not think about. one i'm thinking about is jcpenn jcpenney. the stock was at a low yesterday. the entire market cap in the s&p 500. you're a supplier in that sflieth. >> supplier in many respects. >> fruit of a loom. >> and also supply jewelry to them. >> there's a lot of questions about the health of the company. you as a former retailer yourself in the department store and now somebody that has a lot of retail business, you've been watching this. what do you think about what's been happening? >> it's very tough. the trouble with retailing is the competitor is always moving. getting your act together which they're doing is important. at the same time all others keep moving. it's just very tough.

i have this huge rooting interest. i worked there when i was 16 selling shirts $1.98. i sold men's clothing, childrens and i loved it. i have always loved the company. it's tough to run it. of course when you have to do something like selling out whether 38% or a large number of shares it makes it very tough. coming from behind in retail is very tough. >> we saw drops of 25 to 35% on a quarter basis and sometimes year over year. you wonder how and when they stem the losses. my question comes as a supplier, is there a point you've grown concerned enough? >> that's a good question. we do ship to them under normal terms. we're not worried about shipping to them. i don't know how much we have in the way of a receivable from

jcpenney. it's significant. we have not changed the terms cash order or anything like that. i'm not worried about them surviving. it's tough when you have to sell this quantity of shares at this price. that really hurts. >> let's talk about the health of the consumer. you've given us some inside to the economy. i know you have a good sense on things like the burlington northern santa fe. what do you expect? >> we expect to basically match by a tiny bit exceed the carloads. >> it's a few weeks away. >> goods coming in for christmas. we set the record in 2006 again in november. our projections are that we'll

hit maybe slightly above that record in a few weeks. it's come back. our furniture stores we have them in houston, boston, utah, california, nevada, idaho, nebraska. they have been very strong lately. sort of across the board. businesses continue to get better. i can't atell you about the last couple of days. i think it will continue to get better unless we totally mess it up in washington. >> what happened about the housing business? we've heard from home builders to this point, many of them and heard from bank of america, the dropoff of mortgages. many saw a slump when interest rates spiked. >> there's been some -- i've seen our figures for september on home sales. they're very good around the country. the median price is up and everything. it's true that refinancing -- that doesn't mean anything. we got in trouble refinancing

five or six years ago. it's great for people to refinance their mortgage and bring down cost. that increases consumer purchasing power. >> homsome home builders had to give away granite counter tops and things to get those homes sold. >> i don't know about specific markets, but i say the median prices we see in all kinds of markets. i've looked at price for september on our sales. they're up. volume pending sales are up. it may have slowed down a little. who knows in any given market. we're a lot better off in residential housing. the demand keeps growing. fundamentally things are going in our favor over the next three to four years. >> thank you. we'll continue this conversation with warren buffett.

in the meantime we'll have the latest in washington as the debt ceiling clock continues to tick. either way, what's it going to mean for investors? we'll be right back on "squawk box" . still to come from a one garment wonder, the founder of spanx talks business success. and another half hour with ceo warren buffett. "squawk box" is where business leaders turn first. it's only on cnbc.

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you might say the threat to not raise the debt ceiling after you've already spent the money is really a political weapon of mass destruction. lots more still to come from the oracle of omaha. and the developer of spanx sara

blakely. the third hour of "squawk box" starts right now. is that nickelback? what happened to them. welcome back to "squawk box" here. first in business worldwide. i'm joe kernen along with andrew. we got it. we hear it. ♪ >> becky is dancing. warren is going to start dancing. >> becky joins us live from washington. i sent you an e-mail. show that to warren and figure out our next step. we'll get back to them in a minute. >> did you see it? >> i'm just looking. >> here's the morning headlines. ask if there's anything we can do. >> here's a couple of morning headlines. bank of america earnings beating street by 2 cents.

provisions for credit losses and ex pensions fell. revenues short. pepsi $1.24 a share, ahead of estimates:the company says it's on track to meet financial goals for the year despite a sluggish economy. the u.s. equity futures now. we have green arrows despite the back and forth in washington. expectation that a deal gets reached today. dow looks like would open 58le points higher, s&p 500 up 6 point, nasdaq up 11 to 12 points. nobody is worried. >> nobel prizes this week, it was confirming the market hypothesis. >> one confirmed efficiency. shiller says no. >> this is what i love about economics by the way. they both get nobel prizes. anything else, physics,

literature even is good or stinks. you think the efficient market hypothesis is saying something will happen. >> are they saying something gets done today or in the next two or three days and it's fine either way? >> or they just listen to buffett. >> that could be it. >> let's talk about the debt ceiling and government shutdown. becky is in washington with our special guest warren buffett. i guess we're not buying gummy bears. did he have ideas how to budget out of a private foundation? what would his next step be. >> for viewers that weren't watching earlier, the guy that created gummy bears came up with this. >> it's perfect for warren. >> joe got to me first. we'll execute a letter of

engagement, joe. >> can you do that? >> it's going to have your name on it. you tipped me off. >> candy, dairy queen and he pays. >> 15 facilities around the world turning out a hundred million gummies everyday. it's him. any way. let's talk becky about washington. we'll do this later. keep him after the show. we'll figure out a strategy. >> good idea, joe. the top story of the day is one we talked about today. it does not look good in terms of what we've heard. smoke signals coming from the hill and the market is complacent that will will be a deal that gets done. is that how you're reading things too? >> the market feels nobody could this idiotic to take something

from the country that could be destroyed over this matter. it should never be used as a weapon, the debt ceiling. it's a political weapon of mass destruction. the threat of it is huge like a nuclear weapon would be. we don't go around threating countries. they could argue about abortion, gun control, about the budget. fine. but don't use something to destroy a 237-year-old asset of the united states to get your way on something. >> you pointed out this is a technique that's been used in the past in terms of people trying to negotiate around this. it is a nuclear weapon. the administration and others in washington have pointed out they think this time is different. they think there's a real intent

to go over the debt ceiling. we heard that from house republicans we've had on. i questioned whether the leadership in the house would go ahead with the move like that. >> i don't think they would. that's what the market is counting on. it's the threat of something like this that you're not going to do. there are some that would take it over the limit. they're not a majority in congress. it's a mistake to kind of suspend activity in the u.s. over something that's unthinkable to do. we say poison gases. we don't use it. if you're losing a war, you don't use poison gas. if you're not getting your way in a diplomatic engagement, you don't threaten nuclear weapons. this should be taken off the table. i say have statute of limitat n limitatio limitations. we realize it's stupid to use it

and neither side use it anymore. >> you're talking about an amendment passed by congress. hank paulson is thinks that too. >> if you vote to spend more than you're taking in, you're going to increase the debt ceiling. why use this weapon of mass destruction when a small government can do all kinds of things? we've had 237 years to perfect our democracy. on this particular point we've gone backwards. let's get it off the table forever. >> you've talked in the past about how you think that the entitlement programs need to be addressed. >> i think we need a situation where our national debt is not increased as a percentage of our gdp. >> we have not talked ability the affordable care act, obama

care. the roll out came. it got overlooked because of chaos that's taking place in washington. health care is no matter which way you look at it is huge. on its way up to 25% of the gdp. what do you think about the roll out of obama care and how do you think we can tackle that? >> i'm glad i wasn't in charge. health care is the tapeworm of the american economy. when you get to 17 or 18% and other countries have 10%. 7 or 8 cents from the dollar is disadvantage. we think we are disadvantage and we are. we talked about the $500 billion spent on foreign oil. we're talking about a huge, huge cost disadvantage against the rest of the world. we need to address it. we're so rich we can get away with a lot of things, doing things wrong for a while.

we can't get away with doing them indefinitely. >> we had the ceo of edna on. he believes about 30% of the money spent is wasted. one out of three almost is spent in poor ways. he thinks it's kept that way because of lobbyist in washington and established economic and political lobbies. >> when spending $2.6 trillion on something, that's a big constituency that doesn't want change. >> there's a lot of fraud. >> many think it's poorly spent too, wasted. >> i don't doubt it. it's not subject to the usual market forces. >> when i walk in covered by blue cross blue shield. i make no decisions related to cost. if you have people who are not paying directly themselves, market systems don't work so well. >> affordable care act doesn't

necessarily address that aspect. >> we've got a long way to go. >> you think that -- i guess when i talk to somebody like mark, he has simple solutions. like wow, if someone was listening, there are ways to quickly turn this around. >> i don't know about medicine. i asked people i respect and they say something could be done. they're not sure whether it's really possible considering the politics and huge vested interest. $2.6 trillion. if you you think sugar produce other e ers in florida, imagine the industry with $2.6 trillion coming in. that's $600 billion out of someone's pocket. that's tough to change and important too. >> we'll slip in a quick break now.

when we come back, we'll have more from the women's most powerful conference in washington. sara blakely the inventor and founder of spanx is up next. she's an amazing person. can't wait to tell you more. stick around. "squawk box" will be right back. change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade.

welcome back. in our headlines this morning, saw it yesterday marco up. senate moving along, reid, mcconnel getting along well. we hear one more try. republicans before they were going to take the senate's bill decided to try to put together their own bill and stick to medical device tax in there and other things. the senate, those guys said we'll postpone what we're doing. reid said this is a no go. we won't do it. boehner couldn't get the votes to do it. last night the senate said we're going to do it. you figure that's what's happening today. ball is in the senate's court.

they have to put something together. we have to make sure no one disallows it to go. we have to make sure ted cruz -- i can't imagine -- >> the filibuster could have enough to overcome that. >> one guy could still say no. they're hopeful coming up with an agreement. i couldn't imagine boehner wouldn't put it to the house. maybe that's the scenario. i don't know why the market is up 60. even yesterday it manage to have had close above. fitch still put the u.s. on negative watch to see what happens. maybe a downgrade in the offing

according to fitch. it would put it everyone with s&p. moody never raised the caution flag. we've had the individual on. he said no, we're not putting it on watch. we think they'll figure it out. >> we're going to get back to washington with becky and warren. they have a special guest with them. becky ask about an undershirt. i'm wearing one. >> i already heard. you talked to everybody about it. you talked her ear off. you definitely want to hear about this. we're at 15th annual most powerful women's summit. we have a special guest. this is an entrepreneur that turned her invention into a must have in every woman's closet. joining us now you sara blakely the founder and inventor of spanx. also ceo of berkshire hathaway warren buffett.

for people that don't know you, you've got an amazing story. spanx is something every woman has. how did you come up with this idea? >> actually my own butt was the inspiration. as a woman i couldn't figure out what to wear under my white pants. i don't know if warren had the same problem. a lot of women do. i was a frustrated con super that had no business background or retail experience. i knew there was a void between the traditional underwear and the heavy duty girdle. the moment happened to wear the pants in my closet. >> you made your own? >> i cut the feet out of controlled top pantihose one day and realized that worked better than anything on the market as far as smoothing. they rolled up my leg all night under my pants. i went home that night and said

i've got to figure out a way to keep this below the knee. >> it sounds so simple and obvious. it was something that had never been done before. for anybody that thinks you were somebody sitting around with a lot of spare time on your hands or born with a silver spoon in your mouth, tell me. you are the apitmy of the american dream. were you selling fax machines door to door? >> yes. >> how many years? i sold fax machines seven years. it was basically my only job out of college. you know it was a cold calling for a living. i got kicked out of businesses all the time for years. i did that until i cut the feet out of pantihose. i had $5,000 set aside in my savings. when i came up with the idea, i went on the internet and started researching hose ri and shape wear, where and how does it get

made. that started my journey of spanx. i found out that most of it was made in north carolina. lucky for me it was close enough i could drive there on weekends and take vacation days and go during the week. >> this wasn't an easy thing. i think your background as someone selling fax machines door to door helped. you heard no a lot. >> someone that grew up wanting to be a lawyer but basically bombed the l sat twice. i ended up at disney world trying out to be goofy. they wanted me to be 5'8". they wanted me to be a chipmunk. they hired me to sell fax machines. they would hire anyone. i feel very much like i em body the american dream. i feel lucky to be a woman in this country and to be given this opportunity. i have these pinch me moments. not long ago i was selling fax

machines. now i'm setting next to you and warren buffett. how did this happen to me? >> they another fred smith. she's the reason you have to be. they both saw a need. they took common ingredients to solve that need. they've been sitting in front of everybody else. she was thinking about what can you do to make the women's lives better. now she's got them for men. >> what are you holding in your hand? >> i'm holding a gift which promises to transform my whole public persona. i may go change while we're doing this. you'll see a new warren. >> this is your obsession. he's holding one of those undershirts. >> i'm wearing one of yours sara. i could take my shirt off. i'm wearing one of her undershirts now.

>> she makes -- >> you don't have the pants on? >> she makes two kinds of men's undershirts. one is a regular undershirt. another one has a little bit that pulls you in. any way, i'm wearing the regular one at the moment. >> that was good. you're hired. >> there's a serious point here. really. sara has just begun. other people will be inspired by sara to come up with things. america really works. this is where the growth you talk act is going to come in the economy. washington has its place, but it's much more important we have fred smith and sara blakely. >> you came up with the great idea, had the research and $5,000. getting from there to here was an pimpossible task.

you did this by yourself. >> initially i did it myself. i had no money to do it any other way. the first two years i was involved in every aspect of selling it, marketing it, trying to wear all the hats. i couldn't afford to hire anyone. when i could afford to hire my weaknesses or the things i didn't enjoy as much i did. i hired a fabulous ceo. she's been with me 11 years. that was a critical moment for spanx to recognize this is my gifts for the company. i need to find someone to really manage the day-to-day and operations. we've been a good team. >> that takes self awareness and confidence to say i'm the creator, founder, inventor, builder, but there are things i can't do. >> for sure i recognized that. i was eager to hire my weaknesses. i find that a lot of

entrepreneurs we tend to get in the way sometimes of our own growth. it's rare that the person who invents it, births the idea is the one that's supposed to grow it and operate it year over year in a very business type background way. i recognized it. it paid off. >> i want to talk about a couple of other things you did. i think one of the unique ways you approached the business was not doing things by the rule book. by going directly to some of these factories in north carolina. how did you -- first of all did you know you were a book you were supposed to be following? >> no. that was my greatest gift. what you don't know can become your greatest asset if you'll let it and if you have you the confidence to say i'm going to do it any way. even though i haven't been taught or somebody hasn't shown me the way. i actually talk about that a loot now within spanx. i always bring it up with the

team and said if nobody showed you how to do your job, how would you do it? go to that mental space. nine times out of ten you'll come out with a better way. a lot of times we're on auto pilot. the fact i had never taken a business class, had no training, didn't know how retail worked. i wasn't as intimidated as i should have been. i went into an industry on a 15 year decline. a few weeks after i made the invention i called neiman marcus on the phone. i ran into people that had their own products. they said how did you get into neiman marcus? i would say i called them. they would literally look at me like what are you talking about? >> i said why, what do you do? >> they said we've been going to trade shows six years setting up a booth hoping the buyer comes by and we get our shot. i didn't know there were trade

shows. that example throughout the process of spanx worked in favor in a lot of cases. >> let's fast forward to the giving pledge. you're now in a position to be able to -- you've got to be a billionaire, have at least a billion and agree to give back at least half of that. >> she looks like a billionaire. >> thank you. >> what are you focused on with charities? >> it wasn't a hard decision for me. since i was a little girl i've known i wanted to help women. i've had gratitude since i was young being born in the right country. i was given this great opportunity to fulfill potential because of where i was born. when i invented spanx it felt like okay this is the platform of where i get to where i ultimately want to be. when i got the call from bill gates and he explain what had the giving pledge was and asked

if i would meet with him and other potential jointers, as soon as i heard about it, i thought this is exactly the right thing to do. women need help. i am so excited. i have the opportunity to do it. i was making $40,000 a year not long ago. giving away half of what i have now i can live off of and be comfortable. i'm fortunate of bill thinking of this. if to bring thought leaders in one room that have made money in different ways to sit and brainstorm and discuss this topic is amazing for the world. >> i know we have to go. i want to point out one thing. i've shown your videos to our girls. i think you're an incredible example of never giving up and letting failure overcome you. you told me something your dad

used to say to you everyday that challenged you. >> my dad growing up encouraged me and my brother to fail. wide come home at the dinner table. my father would say sara, what have you failed at this week? if i didn't have an answer, he would say you failed. the gift he was giving me for me failure is not trying versus the outcome. it's really allowed me to be much freer in trying things and spreading my wings in life. >> with amazing results. >> i want to thank you so much for joining us. >> joe you have something? >> i was thinking, if you were still trying to sell fax machines -- i'm so happy you're not trying to do that anymore. has one been sold this year, do you know? >> we still have fax machines. >> i know. you don't really need them.

you said first was your butt. spanx to me sounds -- did you know that word was going to be austin powers. you got it from a comedy club right? from a comedian or something? >> no. i actually got it -- i dreamed it up sitting in traffic in atlanta. >> but that with butts, that all fits in. you're a quick you the i did putting it all together. you're exactly right. i did stand up comedy as another spreading my wings and being willing to fail. i experimented with that. i met a lot of people in the industry. i think a lot of my writing i did for r several years helped in all my marketing. i knew i invented something in a really boring category. who cared, shape wear, nobody talks or thinks about it.

by naming it something people wanted to laugh and talk about, it became news worthy. people are still laughing about it. >> are you going to kill me if i ask one more question. can i get away with it dave? they're going to kill me. when you went to london, for joe's benefit, and you were first again doing it yourself. you were giving your own promotion in the market. what happened? is this okay for morning tv? >> when i did my international expansion, i jumped on a plane, went to england with my backpack. i got the opportunity to be on the bbc which was a huge opportunity for me to explain my product to england. the gentleman interviewing me says sara, tell me what spanx can do for women in the uk.

i said well it's all about the fanny. it smooths your fanny, lifts and separates your fanny. this man lost all the color in his face. i had no idea but a fanny apparently means vagina in england. >> that i did not know. >> there you go. you can imagine. my international expansion is off to a great start. >> very nice. >> they're quiet aren't they. >> thank you. >> i somehow feel responsible for this. >> you are responsible for this. that story is too precious. >> i took it to butts. it didn't know we were going to take it there. >> sara, thank you very much. becky, thank you. warren is going to be sticking around. joe we're going to get you a

shirt. you're buffed now but will be more buffed when it sucks you right in. before we go to a break real quick, take a look at shares. stanley black and decker is trading lower in the market after earnings a penny higher than estimates. cutting it down for the year. slow recovery of profit margins. and the government shutdown, more stocks to watch when we return. so we talked about her options. her valuable assets were staying. and selling her car wouldn't fly. we helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today... and tomorrow. so let's see what we can do about that... remodel. motorcycle. [ female announcer ] some questions take more than a bank. they take a banker. make a my financial priorities appointment today. because when people talk, great things happen. i know what you're thinking...

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welcome back to "squawk box" right now let's get back to your special guest warren buffett and becky. i heard you had a question you wanted to ask warren. >> i had a quick question. we were talking to david yesterday. you were talking about the giving pledge. i raised this question about peter your son that wrote over the summer about if i ran tloep i. there was suggestion it was about image enhancement and making you feel better about yourself. how did you feel about it after you read the piece? >> i felt fine. peter was explaining the various

motives that go into philanthropy. he's a great component of it. there's a fair amount. they sell buildings with names on them. i'm fine with that. if that causes a bidding that a wonderful teacher will be in the next 100 years, i do not have a problem with people's motives. it's how the money gets spent that counts. he was saying there could be improvements. philanthropy is tougher than business. i encourage my kids to fail because if they're not failing, they're not trying things that are tough enough. >> you've got to fail to succeed a lot of times. >> some famous philanthropist

said this and i agree. it doesn't mean after he died the russell sage foundation didn't do great things. >> looking around at what's been happening in washington. markets again don't seem to be concerned about what's happening. there have been people who have said, look the dollar and its safe haven status as a currency. the dollar is the reserved currency would be at risk. last night, christine la guard said perhaps that damage has been done according to where she said things are in the world. she even talked about countries that moved. do you see that becoming to be a deal if we don't get a deal this week? >> it's a problem at some point. near term, i don't know exactly when that is. it would be a colassal

readjustment of the world. it's basically unthinkable. i don't think it will happen. even to play around with the idea is totally irresponsible. i think it should be banned from the arsenal of both parties. both parties have been guilty in the past. it's not just either one. it does not belong on the table. i hope this example teaches us that. i hope we don't need a more extreme example. a credit worthiness can be preserved but not restored easily. it is crazy to play around with it. >> we go from sara blakely to you on these things. >> she opened it up. it's not my fault. >> if we take a look at where things stand. you told us recently on the program you think stocks are fairly valued at this point, harder to find deals. >> we still have our money. >> if we are looking at an

environment where the fed does not taper for some time to come, the economy continues to chug along. we get through the most recent crisis in washington. does that make the stock market more attractive. >> the stock market compared to most asset classes in my view is the most attractive place to have your money over the next 20 years. over 20 days or 20 weeks i don't know. we have our money in businesses. we all all of some businesses, parts of some. we call those stock. we think that's where value lies. >> we had mark as a guest on the show yesterday. he laid out the argument about just by looking at formulas, playing the averages, that we are due for another correction at some point. you never know when or how that's going to happen. it was an argument for not getting caught up in the euphoria of the market and

making sure you were diversified. do you think we've reached the stage in this market people have to worry about bubble levels? >> no. we could at some point. no. stocks are not selling at bubble levels. i think it's a terrible investment compared to equities. so you're going to have your assets in something. good businesses held for a long period of time are certain to deliver good results from this level. >> for an average investor in the past, you advocated investing in a stock index. if you're not somebody to sit down and evaluate every single company. >> if you don't know enough play against pros. you have a very good alternative available. you want to own a bunch of good businesses at very low costs. an index fund makes the most sense. over the recent decade, more and

more money went to index funds. >> could we switch gears and take a look at the american dream in this country. we had fred smith on the show, sara blakely on the show, you another self made billionaire. you are all examples of the american dream. is the dream still attainable today? >> it's more attainable than others. your zip code is a predictor of your destiny. it isn't the total predictor. there are more stories that come out of different zip codes than others. there's opportunity in this country. there are a lot of people that aren't going to share. it's terrible. we are a very rich country. the bottom 20% do not have a great chance in this country. >> do you think that's different than it was 20 to 50 years ago? >> somewhat different. i think a market system produces a huge abundance of goods and

services. it's the greatest service we've seen turning out lots of tough. as it gets specialized, more get left behind. it's still the best for turning out lots of stuff. >> we'll continue this in the meantime, joe we'll send it back to you. >> okay. we've got suggestions. i don't think we should do this. do you think we should change rise above the lift and separate? that's not -- we're getting a lot of comments about that, becky. my whole world few has changed. we've got to think long and hard when we talk to people from other countries. >> that's why you were so quiet the last conversation. >> i was. we were both listening. what's this story going to be about. you knew exactly. i blame myself. i did spanx austin powers, took us right there. normally it's at 6:00 a.m.

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this morning. let's look at stocks on the move in the trading this morning. yahoo rising despite the current quarter outlook falling below estimates. yahoo reported 34 cents per share, one cent above estimates. also announced it would hold the larger than expected state in china commerce company. looking forward to ipo soon. free market trading up. rail operating earned for the third quarter, 3 contributes

above estimates. twitter isn't trading but when it does it will be on the new york stock exchange. it announced yesterday it is going on the big board. it is expected to price november 14 and begin trading the next day. coming up, we're going to hear more from warren buffett. first we'll check with cramer for stocks ahead the move. we'll be back in a moment. >> joe is going to washington. we're sending the whole squawk team to talk to lawmakers and politicians about the ongoing negotiations and the repercussions of hitting america's debt limit. don't miss the special edition of "squawk box" tomorrow. live from the nation's capital starting at 6:00 a.m. eastern. i am today by luck.

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a billionaire based on -- and i thought about it and i think i understand. so you don't want the panty lines, right? so pantyhose make sense.

it seems so simple. i'm trying to figure out something we could do together for men. >> remember when spanx was on donnie deutsche? i it was a million dollar company. you have a good business idea, can you go pretty far. >> did you hear bank of america, did you hear buffett said annualized it's only 70 basis points and wells fargo is only 50. did you see how fast he did that? >> don't forget, they solved a lot of litigation problems. they did a that an right. i like the wealth management business. it's very, very strong. the commercial loans are starting to get stronger. >> stanley black & decker, did you ever get negative on that? >> i got negative but for the wrong reasons. i thought it was going to be europe. i did not think it was going to

be security, which is really, really terrible. this is a shocker to people. the margins were bad, this division they bought obviously not working, they have a lot of work to do but it's not tools. don't sell hope depot off of stanley black & decker because that was not the weakness. >> good info, jim. thank you. >> coming you, we'll get back to becky in washington for the last word from our special guest, warren buffett. he's got advice from the republicans when we return. at a ford dealer with a little q and a for fiona.

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welcome back to "squawk box." it's time for the last word with warren buffett. we're in washington, d.c. it is 15 hours till the dead line. you're the master negotiator. what advice would you give to the republicans this morning? >> i would give this advice to republican because they've dug the hole. i'm not saying the democrats haven't done it in the past but this particular hole belongs to the republicans. i think if they were wise, they do not want to be remembered as the party that destroyed a reputation that americans built up more than two centuries. i think i would tell them to follow herman hickman's advice. when he was a coach at yale, i

believe it was herman who said if you're getting run out of town, turn around and make it look like you're leading a parade. i would suggest the republicans do that. >> how do you do that? i know we're almost out of time. >> it's the hardest line in the world but they made a mistake. they can fight out the budget, they can fight out obama care, everything they want, on other grounds but they can't do it by holding a nuclear weapon, which in the end they can't use. >> ultimately you think we do get a deal this week? >> i think so. >> i want to thank you for all of your time and for joining us this morning. guys, we'll send it back to you. >> what a great three hours. >> it really was. >> a little bit of everything.

>> we should take a quick look at futures. >> a little over 11 points as well. >> i will see you tomorrow in washington, d.c. >> we'll see, we'll see. "squawk on the street" begins right now. zvlgs i i'm carl quintanilla, david faber and jim cramer with me.