nnual meeting in omaha in 1973. you want to talk about humble beginnings, we're sitting with the same table that was here those years ago sitting on the same chairs and looking at the same vending machines that are here as well. our special guest today is the man behind it all berkshire's chairman and ceo warren buffett. thank you so much for joining us. >> thank you for coming. >> i know this is 50 years since berkshire hathaway has been under your control. we have a lot we'll be talking about with that this morning. >> we'll do it day by day. >> we will. 50 years it's coming. we have a lot to talk about in a moment. by the way, you reached out across many social media platforms. warren is ready to answer your questions. first, before we get to that joe and andrew are back in new york. they have a round up of the day's top headlines. >> one day at a time. you're right. we have the bro mans happenmance happening. i don't know why you haven't taken becky's seat. >> why don't i?

>> here are the big stories we're watching china central bank cutting the bench mark interest point. the move giving stocks a boost in asia today. and then this one is deep. a big deal. check this out. nxp, andrew is buying free scale. check out the nxp price. it's in cash and stock about $12 billion is what they said. no premium initially because it closed at $36.11 free scale did. and they're paying $36.14 in cash and stock. look what happened to the acquiring company nxp is up 14 or 15%. so the tieup between the two companies are getting more valuable by the second. but it's more than $40 billion. both make a lot of things for cars. you know, some mobile stuff but i think free scale was mostly microcontrollers and nxp has

recently gotten into stuff for payments, too. which is getting -- both have been in private equity hands and come out. freescale used to be motorola's semiconductor and nxp was part of philips. you know this? >> i did. >> did you really? you're acting like everything i'm telling you yeah yeah yeah. i was almost boring you with some of that. >> i read the papers. i read the papers. >> that's where i got it all. >> and twitter said it is working with law enforcement agencyies to investigate an alleged isis threat to cofounder jack door si. the post in question depicts a man's face in cross hairs and the message is addressed to dorsi directly and condemns twittertwit twitter for having shut down isis-related accounts and warns we always come back.

it it. >> let's take a quick check on the markets. futures at this hour take a look see what is going on with the opening bell. we have a couple of hours to go. nasdaq up about 13 points and the s&p 500 up close to three points. among the stocks lumber liquid daters. they sold flooring with higher levels of formaldehyde. they said it complies with regulations regarding the products and argues they are driven by a small group. >> let's get back to becky and warren buffet. i need to thank warren buffet for giving me a lot of reading over the weekend. >> yes. a lot of us with a lot of reading over the weekend. this is a big year andrew for berkshire hathaway. part of the reason the letter was longer because 50 year anniversary. there was more in the letter

something about -- 50 or 60% more words than average. >> yeah. normally it's 12 or 13,000 words. the letter itself was then another 8500 by me and another 2500 by charlie that looked back 50 years and 50 years. >> that is an amazing feat. we're live at the national company lunchroom. the reason we choice this location is because when you first started holding annual shareholders meetings in omaha. this is the location you choose. how did you pick this room in particular? >> we wanted something grand that would impress the shareholders. it was larger than the office i was working on at that time. and we expected eight or ten people so we could get ten chairs in here and preside. we had vending machines to supplement the income. and we still have the vending

machines. >> eight to ten people would sit around here and it was the annual shareholders meeting? >> it was my. my uncle fred and aunt katie were regulars. there would be a couple of others and, you know, the meetings didn't last long. but just like today, we held it for questions as long as people asked questions and my aunt katie would ask if i was coming over for dinner on sunday. that was about it. >> we looked at video what the annual shareholders meeting has become i think 40,000 people showed up. >> i think we'll top it this year. >> no longer being able to use the lunchroom. one of the things that jumped out from the letter you talk about national indemnity. you said it was one of the best deals you made. you paid $8.6 million for this company back in 1967 it now has a gap net worth of about $111 billion. how did you get from there to here? >> one day at a time. it was a business i like so i

was always looking for ways to add on to it, and at various times we got pretty good sized jumps. we developed a reinsurance operation which probably added $30 to $40 billion over the net worth to indemnity over time. it's a combination of having good people in the insurance business and compound interest and the industrials worked out well. so one way or another the number got up to $111 billion. it's carried at a price considerably less than it's worth. you could say the real net worth is substantially higher. >> that's an odd construct. why is the burlington northern owned by national indemnity. >> we bought some stock through national indemnity. we had an significant investment

here. it was decided when we made the offer to do it through national indemnity. it put even more financial fire power into the insurance company. so it seems happy there. >> you know you brought up jane and your letter and charlie's letter in addition to that kicked off a fire storm of people trying to figure out what the success of berkshire hathaway is. there's a story in the money and invest headline. a jane and able story. you say clearly in your letter that the board has one person in mind. charlie went out of his way to say that both jane and greg able would be excellent managers. in fact even better managers than you would be in some prospects. what is the story? the journal said this is creating some sort of a jockeying position between the two. >> no there's not jockeying

position at all. charlie and i each wrote our individual letter about the last 50 years and the next 50 years. we kept to it. neither would change a word of their own letter based on what the other had written. when charlie's letter came in it referenced greg and jane that was news he was writing that. and he's right. they're very very good. each one of them. incidentally i wanted to see what charlie had written. he had no interest in seeing what i had written. >> you didn't change anything the other wrote. by putting those two in even though you say there's no jockeying between the two it creates that public perception. do the two of them know who the next successor is? >> no. no. the board has talked about at every meeting for i don't know how many years, and we have a

precise plan in mind. very detailed as to what happens later today if i pass out on this show or something of the sort. so it's all in place. and it wouldn't take 24 hours to implement, and, you know, it's knowing everything about it in place. >> each would have a role in the new company. you envision both being key active players. >> they would be key. as key as anybody. >> let's talk about the letter that both you and charlie laid out. you've been working with charlie for how many years now? >> well, we've been partners ever since we met in 1959. charlie didn't really join berkshire until we merged in 1982. but and i talked all the time. he knew what i was doing in

berkshire and he didn't own a share in berkshire until 18982 when we merged. but it didn't make any difference on me. i like having a twin brother or something that you talk to all the time. he's doing one thing and you're doing little bit different things. he had a huge impact way before that and how i managed berkshire. but like said when we merged blue chip stamps. which we had an interest in charlie had an interest in. at this point, he had a lot of berkshire stock instead of blue chip stock. he became vice chairman. we formalized a little bit what had been going on for a long time. >> we got the chance to talk with charlie, and i have lot of people have sent in questions, charlie included. if you don't mind. here is one question he sent in for you. i hope you'll listen to it for a moment. guys, this is charlie monger

vice chairman of berkshire hathaway. here is his question. >> do you have any regrets about using berkshire hathaway in an effort to teach a wide audience? >> i spoke with charlie about it. what he's talking about is using your annual letter. he pointed out you wanted to be known as a teacher. he just -- that was his question for you in terms of the annual shareholder letter? >> i like teaching. i started teaching formally when i was 21 what was then the university of omaha, and done it off and on. in fact on friday i had eight schools, one from canada and harvard was out here and we had 160 students. i've enjoyed teaching. i regard the annual report -- i regard the annual meeting as a teaching venue. and i think charlie does too

incidentally. i think he thinks he's teaching me. he probably is too. >> in the past when you disagreed -- >> it's simple. he said, warren we never argued when we disagree he said warren you'll end up agreeing with me because you're smart and i'm right. >> a good comeback to give to someone. >> a little hard think. i don't want to argue with that. >> on the subject of teaching we have a question that came in from twitter. this question is from a viewer. he says are you a better investor in your mid 70s to 80s than say, your 40s to 60s? zbl>> no well i would say this. i've got a different investment problem at this time than i had 30 years ago and more so 50 years ago. the universe of things i can invest in can have a significant

effect on berkshire's net worth is very limited. let's assume we're going to buy a 5% position in a company. if we're going to give 1% of berkshire's net worth in that company, that would be roughly $2 billion. that means a $40 billion cap company. that's just to give 1% of the net worth. if that stock goes up 50% we've made a half percent pretax and about -- 30 some basis points after tax. so i don't have the opportunities remotely that i had particularly if you go back to when i was in my 20s and 30s when anything would change my net worth. >> is part of the reason you were explicit in the letter who should be buying berkshire shares and who shouldn't. if you're not looking for a five year time verizon stay out. don't buy the stock. >> i've always felt that way. i don't know and i don't think anybody knows. i certainly don't know. charlie doesn't know. we don't have the faintest idea

what stocks will do next year or what berkshire will do next year. we know over time we're doing enough things that make sense and compound first of all, takes effect. so if you pay -- if you don't pay some terribly excessive price over a five-year period that, you know, at that point value takes hold. but we don't have any idea what berkshire stock is going to do in the near term or intermedia term. we never have. it doesn't make any difference either. >> you have a lot of stocks you've been purchasing. some in particular like ibm some people have huge questions about. if you don't mind we're going to slip in a quick break now. when we come back we would like to talk about the investments. some of the biggest investments that berkshire ones. ibm has been the worst performing component for the last two years, despite that others have been running for the

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it occurred to me the music we're playing this morning is

the year 1965. the music is just a reminder that is this your anniversary. we're here today. you have a lot of news that people have been waiting to hear more about you. very recently we saw the filings. the fcc filings that showed that you've been buying even more shares of ibm. there were huge questions about this. while the stock was underperforming people assumed maybe you made a mistake and backing out. your holdings grew. why are you buying more ibm? >> i'm buying it because i like it. it's been doing exactly what i like. ever since we first started buying it. there were a billion shares outstanding when we started buying. and a fair number of options out there. maybe 40 million shares or something like that. that overhang has been reduced

significantly and the number of shares is 990 million. i actually wrote a couple of years ago when we bought it the best thing that could happen if the stock did nothing for five years because they were going to buy in a lot of stock. and the cheaper they bought it the more share in this case bought. >> you've done even better. the stock has gone down. >> yeah. people have the conception -- misconception when we buy a stock we like it to go up. that's the last thing we want it to do. we're going to buyieuy billions of dollars in stocks in companies we like. if it goes up i'm unhappy. sometimes i kick it out. what we like and particularly the company itself is buying the stock as most companies are, you know our interest in the company is increasing day after day and the company is buying it we're not laying out a dollar. if we're buying it we're laying out some money. we're buying it cheaper. and i like buying anything. i like buying things cheap.

look around the room. there there's a reason that the stock has been going down. there's a reason the market doesn't like it. the revenue has been declineing substantially over time. i know jenny said because they don't like the empty calories the stuff they're not making any money off the revenue. but if you look at the company it has declining revenue that continue to borrow money to buy back shares and there are some who say it's a huge problem. how do you combat that? >> we expect the revenue to be going down. we expected a year like this where foreign exchange will take a big whack off revenues. but they also dispose $7 billion in revenue last year. there have been no surprises at ibm since we started buying it a few years ago, and the pleasant surprise is stock has gone down and that therefore, they've been able to reduce the shares to 990 million. if it stayed at $200, you know there would be a billion or 20 million shares outstanding, and

you bring the shares down far enough we own 77 million shares or something like that. i'll be happy. >> you've said that you don't understand technology. so what makes you think you understand ibm's competitive mode. >> i don't understand it. i don't technology as well as i understand the railroad or insurance. i don't understand every aspect 77of insurance. same thing with the railroad. i've made -- i know a lot of things about parts of the railroad that lead to an economic conclusion. but there are a lot of things i don't understand. and that's true of industry after industry. we competed -- i personally was chairman of the board of a company that competed with ibm for ten years in the 1960s and i didn't understand all of ibm's business. we did quite well in the

business i was chairman of. i think i know enough to make an investment decision. but whatever -- >> remember you said we were competing in the tab card business. this is the punch cards. it's not the cloud it's not the stuff -- >> it changes. it changes and ibm changed with it. there was one time when they didn't change so well then they made enormous progress under lou. >> yeah. >> so the business -- the insurance business has changed. i mean, we used to sell by direct mail primarily and then it went to phone then the internet and now mobile. companies have to change. but i think they've done a great job of fostering change at ibm. it doesn't happen overnight. >> andrew has a question as well. >> hey, warren. talking about the stickiness issue and the mote. one of the theses i think you

presented when we talked about this a couple of years ago on this show was that you felt it was one of those businesses that was so sticky. if it was a big enterprise company draft used and had a contract with ibm it would be so difficult to get out of that contract just because of the pain and cost involved. have you -- you said you weren't surprised. have you been surprised over the past couple of years how easy or less sticky that business is and that relatively cheap or cheaper to jump into the cloud with competitor? >> well, and ibm is helping people jump to the cloud or with a hybrid cloud. we have 70 some businesses at berkshire. we have investments in other. if you take a wells fargo or american express and you'll find they're doing a lot of business with ibm as our direct subsidiaries are. it changes. and we've actually put in something a hybrid cloud.

but there's a lot of reasons why we stick with ibm. but it's not a winner take all business with the cloud. there's some businesses that are winner take all. but i -- that's not true in i.t., in my view at all. and like i said i see company after company after company with which we're associated doing significant business. but it's being done. it'smy grating to different forms that these companies. i think if you check with the ten largest banks, i think you'll find they're doing a lot of business with ibm. and if you ask them whether they'll be doing a lot of business with ibm ten years from now. they will say yes. >> one more question on the subject it comes from facebook. facebook question that came in from mark hall. this is again, in the same thing. he said i own ibm and it stinks. why are you buying more and why should i hang on to my shares which i've had for decade. give me some hope, please.

the follow up question are prngsz areare you buying more shares? i'med in the business of giving hope. you should only own stock if you think you have reasons. whether you own berkshire hathaway or not it's an individual decision. the last thing in the world is you should own it because somebody else own it is. i said it one time in college. it was an annual meeting in jersey city. i was 20 years old. there were only four of us at the meeting. a fellow named lou green a famous figure in wall street said why do you own the stock? and i said i own it because ben graham own it iss it. he said strike one. it was not a good answer even though ben graham was the dean -- it's not a reason. you don't own a stock because somebody else own it is. you own it because you do your own analysis and you decide where the future will be. if you don't know the answer you don't own it.

it's a terrible mistake it to own it because somebody else does. i've never bought a stock, except for that in 1950. i've never bought a stock because somebody else owned it. >> that was me joe. you must know your exact cost or average cost on ibm. do you know offhand what it is exactly? >> well, i can come within a dollar or two, probably. probably around $170 a share or something like that. i'm happier to have it at $150 or $160 now or whatever it is. i'll happy to have it at $160 than the $200. >> i'll tell what people have said to me. that is that you've, you know, for the stock coming down that much you haven't bought it with both hands even though you got it cheaper than your acquisition. it almost looks like you're

tiptoeing in to say i've bought more so it wouldn't indicate that you were enthralled with it. how would we know that you're going to sell the entire stake and throw in the towel? if it's the worst performer in the dow. it's not something you're going marry forever if it happens year after year. >> it's hard to tell joe. i mean the lower it goes the more i'll buy. i'll run an ad when it happens. >> they continue to lower the flow. it kept getting cheaper and cheaper, too. >> that's true and they went out of business and i make all kinds of companies. incidentally a stock like that when it went down i sold it. i'm capable of selling a stock when it goes down. i'm capable of buying a stock when it goes down. it depends on the underlying

facts. >> i just don't -- i haven't heard you make the case for the actually fundamentals of the turn around and it's been turned around a couple of times already. and it gets harder and harder i think, we were talking last week. i think old tech now is google. new tech i don't know what it is. i have to talk to andrew about it. ibm i don't know what it is anymore. it's almost like a service stock or something >>well, that's up to you. that's nice thing about stocks. you look at the company and hopefully the way you do it is you look at the company and try to evaluate it and look where it will be in five or ten years. if you think it's cheap you buy it. and everybody should do that. that's exactly what we do. and we don't, you know, if we decide we like it then we like it better as it goes down. if we decide we don't like it we sell it. so it has nothing do with a

movement of the stock determining what we think of the business. >> all though -- >> berkshire hathaway three times while i've run it has gone down 50%. in 1973 and '74 it went from 80 to 40. i bought stock at 70 60 50 04. i loved it. on the other hand i've been in business, you know, been headed for the junk yard and i've sold stock and losses when they're going down. i bought stocks when they're going up-and-down. it doesn't have anything to do with the price action except what it offers you in future value. that's what every investor has to make a decision on. >> warren, can i ask you about another stock in this last go around that was missing from some of the fcc files. exxonmobil. >> yeah. >> people assume you sold the entire stake. i've seen commentary people

wondering are you buying more and kind of holding off on telling people? can you tell us, did you sell it all? >> we stole off in the fourth quarter. >> why? >> we thought we might have other uses for the money. exxonmobil is a wonderful company. it's current earning power, obviously, is diminished significantly from where it was a year ago as is true with all oil companies. but exxonmobil has been one of the great investments of all time. >> one of the reason you sold it -- >> i think i may have some use for the money. >> are you talking about other stocks or --? >> both. >> all right. that's a good tease. why don't we leave it there and we'll ask you a little bit more about it. >> it still may remain a tease. >> when we come back we'll try to dig more information out of warren on what he was talking about. we'll talk about from going from one major stake in iibm to another company. we'll ask about the latest

purchase which is deere.

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welcome back to "squawk box." we're live from omaha, nebraska this morning with a special guest warren buffett. we've been talking with mr. buffet about his investments, because we've seen the fcc filings, warren that show the latest purchases and sales you've made in stocks and securities. people very interested about that. one new -- not a new stock but one you definitely added to your position i think you went from $360 million in deere at the end of 2014. what attracted you to deere?

>> it's a good company and they're going to have some tough years coming up and in the end ten years from now it will be worth more money than it is now. and that stock actually was bought by one of the other managers and me. i mean that was something we both bought. >> that actually leads to a question from twitter. someone wrote in how do we know if it's you, todd, or ted who is buying a selling a position. how does anyone know? >> they don't. yeah. ted and todd are separate portfolios. they occasionally buy the same stock themselves. they might occasionally buying a stock that i would be buying. i don't look at their tickets every day. i do not see their orders placed or anything of the sort. at the end of the month, i get a sheet that shows their holdings and they don't change them much.

nor do i change mine much but i give them a few things that they shouldn't buy because there's some rule we might trigger or something of the sort. >> what do you mean? >> well, like if we were let's just take wells fargo or something where we're 9%. we need the fed's permission to go over 10. i don't want to wake up some morning and find i've broken some rule with the fed. there are occasional rules like that. very few, and it's conceivable we could be working on a deal on something and i wouldn't want them, obviously, to be buying stock. then they wouldn't know about the deal. so we have a few little checks to make sure that we don't break any rules but, i mean, they are there free agents in terms of what they're doing. and in the case of john deere. one of the managers was buying

it. >> who was the other manager buying it? you don't want to tell us? >> it's up to them. >> there was another question that came in on this. a question from a viewer on twitter. what is the major upside of deere compared to caterpillar? the current levels for long-term position? >> i'm not the investment advisory business. you really shouldn't ask other people their opinion about stocks. because let's say i give an opinion on the x, y dz and i could change my mind. you have to have your own reasons for buying a stock. you should make your own judgments in stocks. we've always made our own judgment in stocks. >> is deere a long-term bet on the strength of agricultural and

the need for more and more food to feed more people. >> obviously people are going to eat. you can say that about ten other farm implement companies, too. it's not one variable. again, you should make your own decisions. if you don't feel capable of making your own decisions you should buy an index fund. it's that simple. you should not try to pick up stocks from listening to me or anybody else talk about this company or that company or why they bought it. they may be doing something different the next day. if you haven't made the decision for your own reasons, you're going to be subject to somebody else saying something negative, you know, a week later. it's just bad to try to pick stocks based on commentary by this person or that person when you can do well buying an index fund and forgetting about it. >> you realize that people watch very closely what you're buying and it's not uncommon for people to buy things simply because they've seen you move it. >> i can't help that but i don't encourage it.

>> do you think that you owning shares of ibm has boosted that company right now? >> it might be something a little higher. we knew it was selling lower. >> so you can buy more. >> we can buy more or if the company is spending it. companies spend many billions of dollars of buying their stock. our ownership goes up dramatically more we don't like companies buying their stock. we like it when they buy it below what they're worth. we're making money without laying out a dollar. >> how much do you think ibm is worth right now? [ laughter ] >> it's time to slip in another quick break. still to come we'll be asking more warren buffet will be answering more of your questions including the issue of succession. who might run berkshire hathaway in the future? stay tuned. "squawk box" will be right back. it's more than the cloud. it's security -

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welcome back everybody to our annual ask warren show. the questions have been pouring if in are the berkshire boss. we have a number of questions that have come in and here is one from a surprise guest that came in via video. why don't you listen in. >> warren in preparation for this year's meeting, i was reviewing prior years annual reports, which reminded me of a question that has been troubling me for some time. one of the problems with gap accounting is reported financial results could conflate the perception of actual performance. namely from the disparities that emanate from a cruel versus cash

account accounting. it this can be particularly exacerbated in insurance results which can be viewed through gap or statutory accounting. i'm curious how you reconcile this in looking at acquisitions or your own insurance business. >> glenn close. she has been doing her homework open the stuff. >> i just saw her a few weeks ago but i'm glad she didn't grill me then. i finished the last couple of days watching seven hours of damages. it's great. she's great! accounting is the language of business and you have to be as comfortable with that as you are with your own native language to really evaluate businesses. and accounting tells you a lot and it can be used in many ways to deceive. you saw it in enron, for

example. in fact in the seven hours of damages i'm watching one of the characters is playing around with accounting dramatically. but you have to understand what can be done with accounting when it gives you correct answers and when it gives you wrong answers. particularly with insurance companies, over the years there have been a number of insurance companies that have played games with reserves and any time you play a game with a liability account like a loss reserve, you're playing a game with the earnings. and there have been some no or ittous examples of that. my job going back to when i was 20 years old and used to go to lincoln, nebraska to look at the big convention reports and analyze to determine whether people were giving me honest numbers. i have to know enough about the business to be evaluate that. most people don't.

>> okay. we're going to continue this conversation in a moment. when we come back next. we'll be talking about berkshire. to say it's big would be a huge understatement. up next we'll break it down. we'll talk everything from trains to cars. a rapid fire session on berkshire's businesses when "squawk box" comes back. barbara just bought a bike. she wrote a tweet about it. you can't learn much from that. but take data from millions of tweets combine that with your company's supply chain and sales data. apply ibm analytics and expertise, and all of a sudden, you can learn which bikes to build what to make them from, where to sell them. because barbara and the world just told you how to build a better bike.

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good morning everybody. welcome back to a special edition of "squawk box." we're live in omaha, nebraska with warren buffett this morning. morning. we've talked about a lot of things this morning. but one of the things people look forward to in your annual letter is to lay out a breakdown of the company and where things stand. you've been building bigger and bigger companies. at this point you point out you have 490.5 -- or you now have 9.5 of companies that if they were stand alone would be large enough to be in the s&p 500. so you said -- >> in the fortune. >> i'm sorry. i say this every time. in the fortune 500. you point out that leaves 490.5 to go and that our lines are out. what does that mean? >> that means i'm not going to be happy with 9.5. and i hope that this year next year somewhere along the line that we have more that join us. we probably will over time. >> do you have a specific target in mind right now?

>> well we always have something that we see swimming out there. and whether it comes to our lines or not. but they're -- we always see a few fish in the sea. we don't see 490.5 fish in the sea. but there's usually something big swimming around. and we'll find out if they go for our bait. >> you do go out of your way to point out the good news and the bad news in every report. this year you point out that burlington northern disappointed many of its customers. what happened? >> well, what happened was that in terms of on-time performance in terms of our coal customers, they never ran out of coal. but they got lower in terms of what they had than they would have liked. if you're running a utility and your coal gets down to 10 or 12 days of supply you're worried. if there's a blackout you're going to get blamed.

not the railroad. so we made sure they got their coal but we worried those customers. in terms of fertilizer, you know, need to get that in time. and there were enormous demands and we got it there. but there again, it was a last-minute situation with many. and then in terms of the -- we had this huge grain harvest. and in terms of getting cars in that case or the big shortage of grain cars you know farmers worried if they can't get the crop to market. so we had much more congestion. we had a slowdown of the trains. other people experience this too. but ours was particularly severe. canadian pacific had plenty of problems too. and we spent a fortune. we spent more money in 2014 than

any railroad had spent, to my knowledge, trying to solve problems. and we're spending even a lot more money this year. and that means double tracking and doing various things. but you can't double track 60 miles overnight. and the very act of improving service sometimes slows it down because you're working on the track. but it's our job to foresee that sort of thing. we got the money to do things. and it's our job to have satisfied customers. the metrics of the last three months have been significantly better in terms of on-time performance and reduction of bag logs and all of that sort of thing. >> okay. >> but i want it to get even better. >> i know joe has a question as well. joe? >> warren i can't believe it's been a year since last time we talked about something. and i don't know whether you found out a way to slow time down as we get older.

for me, i know is it because it's 1/59 of my life. anyway, you're very wise. and i'm not sucking up to you. you're very saged. do you remember a year ago you said that the insurance business hadn't seen any adverse effect of climate change in the past five years and that you can't expect any adverse effect over the next five years. do you remember saying that? >> well i certainly remember saying something like that, sure. i've said it many times. >> all right. just summarizing the year and i'm just -- i love the way you do with your hands like this after that hurricane season from about ten years ago. 2014 there were only eight named storms in the atlantic. that's the fewest since 1997. only one major hurricane made landfall and that was the first one, hurricane arthur. and it was a two. in terms of your property casualty results with hurricanes last year you absolutely cleaned up didn't you, for

insurance? >> well we didn't write that much last year because the rates had come down a lot. it's been remarkably benign particularly in florida. in the united states you think of florida first and then texas. but florida is the big kahuna. and florida's gone a number of years now without any severe hurricane. so the rates have come down a lot. so we did not write a lot of cap business in the united states. we wrote a fair amount of cap business around the world. new zealand had a couple of quakes a few years ago, so there was a demand there. and thailand had the floods a few years back. so we wrote more around the world than in the united states. and we're not writing much this year. the rates are way down this year. >> are you at least amused or bemused or thankful to climate alarmists that keep your rates high? i mean this is the biggest problem facing humanity.

are you seeing anything to validate that in terms of insurance claims in the past five years. >> no. i would say there was a category five over in queensland just in the past couple of weeks. we had some insurance over there, but it's nothing huge. >> but you know what i'm saying. >> yes. >> at times you listen to what mainstream media says. >> i listen to you, joe. you have been telling me i'm not going to have a problem and i haven't had a problem. so thanks. >> well that's bad because i was listening to you where i got my info. that sounds a bit circular. but thank you. >> virtuous circle. anyway, we have already covered a lot of ground with warren buffett. we still have much more to come. up next we'll talk about berkshire hathaway's plans. and we'll have more juicy

nuggets from his annual letter. and you know mr. buffett likes cherry coke. that's his favorite drink. also one of his favorite stocks. we'll ask him what he thinks of the company now. stick around. "squawk box" will be right back. we are live from omaha, nebraska. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

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welcome back to a special edition of "squawk box." it's the 50th anniversary of the berkshire hathaway annual meeting. >> there's been no surprises at ibm since we started buying it a couple years ago. the pleasant surprise is the stock has gone down. >> and becky is live in omaha with warren buffett. this hour the oracle of omaha with his stakes in american express and costco. his read on the economy. ditching energy stocks.

and possible successors. the second hour of "squawk box" starts right now. ♪ welcome back to "squawk box" here on cnbc first in business worldwide. i'm joe kernen along with andrew ross sorkin. as you know becky is live in omaha with warren buffett. we'll get baa tok them in a moment. but first andrew has the top stories. >> the big deal this morning, the semiconductor world, nxp buying freescale in cash and stock. the price tag for that deal $12 billion. the tieup value in the combined company more than $40 billion. we're also watching this morning's shares of lumber liquidators. they had higher level of

formaldehyde than in the safety standards. they said they comply regarding its products and argued that hacks are driven bay small group of short sellers. we will see what happens with that stock this morning. down 11.5% already. it is jobs week. economists expect an increase of 235,000 non-farm jobs in february and a decrease of .1% in the unemployment rate. futures at this hour indicated up a little bit at this point. and the s&p up 1.5. the nasdaq up about 10. i cannot believe it's jobs week. we just did it. i asked that question about time flying. i think february was exactly four weeks this year right? >> sure. >> let's take a quick look at crude. crude is at $48.78. i don't know. you know warren wouldn't say -- you know he had 490 companies

or how many he could have sold to raise money for an acquisition. didn't have to be exxon. does he think it's staying at 48? he could have raised money anywhere. why exxon. does he think oil is staying down here? >> we're not running a stock advisory service at berkshire. exxon is a wobblenderful company. >> if you sold your entire stake of exxon you wouldn't be that positive about crude. >> i've been a very very long time since i -- i think back in the '90s when crude got down to $12 or something we bought some. but commodities are something i think in 50 years i can't remember more than two or three trades in those. i have no opinion as to what oil is going to be six months from

now. the forward curve is i think the $48 spot contrasts with $61 or $62 12 months out. and do i have a better insight where it should be than the market? the answer is no. >> so why'd you buy exxonmobil to begin with? >> i thought it was attractive. and i still think it's attractive for a ten-year deal. but there's other things i would be buying. >> let's talk a little bit more about berkshire hathaway and suck e session. again, this is one of the huge questions people have been following berkshire for a long time. you gave more hints in your annual letter this time than ever before. you pointed out there is one person in mind that the boshdard is looking at to keep in mind as the next ceo of berkshire hathaway. talked about ajit jain.

and abel. how -- in the past the reason you had not named a successor is because you didn't want to horse race. how does this not create a horse race? >> there's not a horse race. and that story comes from charlie saying that those two are world class, which they are. in fact, he said describing world class was probably an understatement. i would totally agree with that. either one of those men could run just about any company you could name. wouldn't just be berkshire. they are incredible managers. and we are lucky to have them. and as charlie said in his letter and he wrote his letter without me seeing it. that was our deal ahead of time. that we would not look at the other letter. he said in that letter that not only were they world class, but

they weren't going to go any place. i believe that too. they love berkshire. and berkshire loves them. we are very lucky to have those two. >> you criticized some of burlington trying to keep up with demand and other things. matt rose has been listed as a potential candidate to run as the next ceo. does this mean he's out of the race? >> no. we've had tough years in insurance. if you go back and read 50 years of the annual report we've had tough years in insurance. we've had tough years in other businesses. i mean that happens in business. it particularly happens in a business that's really an outdoor sport. i mean the biggest thing that i really worry about with the railroad is floods. you know they're -- we could have floods that there's nothing we can do about it. unfortunately they tend to build railroads along river beds. we have 13,000 bridges. i mean can you imagine that.

so there are things that can happen with a railroad. you can't expect every bridge to work right all the time. but over the years, both in terms of safety and in terms of derailments, in terms of all kinds of factors, the railroads have run better and better and that's the case. but last year you know we had too many trains that didn't come in on time. >> andrew has a question as well. >> hey, warren. on bnsf because in the letter you did seem to be so disappointed, what do you think the screwup was? was it avoidable? and secondarily given all of what you are going to spend, is there a way to measure what return you're going to get on that capital? >> well we have to spend the capital whether we get a return or not because we've got an obligation on service. the history would be that we would get decent returns.

and the railroad business is a good business. it wasn't for a long time. it's like the chicago cubs. had a bad century. but then it's really improved dramatically since the act 30 years ago by every measurement. and it's a very decent business. it's very capital intensive. but obviously if you had your entire system double tracked, you'd have a whole lot fewer problems than if you were single tracked. and there are all other kinds of variables. the big thing i think over the next ten years that's going to be a real problem for the industry is chicago. because the rail system you know was designed 150 years ago, gets modified all the time. but chicago is where everything went. and things got switched there. . i think 40% or so had of the interchange takes place at chicago between the east and the west. so as the city grows, i mean you just run into real problems. and they're expensive to fix. and in the case of something like that, it takes a lot of

coordination among all the railroads that go in there and city and county and you name it. but to have the railroad system we want to have 20 30 40 years from now, we will have to do some big expensive things in chicago. >> wow. you know warren another thing we should bring up are two of the managers who you also talked about. obviously the investment gurus who have been doing a lot of the investing. there's a question that came up from twitter. this is from jim ladd. he says are they value investors in the same way you consider yourself to be? >> they're value investors. anybody that's -- i always say if you aren't investing for value, what are you investing for? and the idea that value and growth are two different things makes no sense. i mean, growth is part of the value equation and a company that grows and uses little capital is obviously worth more

money than one that doesn't grow. that doesn't make the one that doesn't grow valueless. so they have a very similar approach to investing than charlie and i do. but it's not identical. but essentially they are trying to figure out what a business is going to look like five ten years -- if you were buying a farm you'd like to see what they were going to produce years from now. if you buy an apartment house, you think what will it produce years from now. that's what we do with stocks. they're just pieces of businesses. if we're right about the business, we're right about the stock. and so they are doing the same thing. they are looking at whatever company they're looking at and they're trying to figure out where that company is going to be five or ten years from now. and many companies, they will say i can't figure it out which is exactly what charlie and i say. but you don't have to figure every company out. just figure out a few companies. and they're doing the same thing. >> todd and ted came here because they wanted to learn from you.

but are there things you've learned from them too? >> oh sure. as i mentioned the annual report, we bought two smaller companies in the last few months and i made each one chairman of one of them. because you learn something from actually running a business. interacting with people. i mean people are part of a business. and the better you understand human nature and are able to distinguish between different types of individuals, the better type of investor you are going to be. it's all worked out very well. we have lunch once a week and they tell me some things. you know i talk about some of what's going on with me. we're learning all the time. >> okay. we'll continue this conversation in just a moment but andrew right now, we'll send it back to you. >> okay. thank you, becky. we're going to dig into berkshire hathaway's portfolio and ask warren about some of the company's big holdings including $13 billion in the major credit card companies. we'll be back in a moment from the 50th anniversary of the

berkshire meeting. back in a moment. at ally bank no branches equals great rates. it's a fact. kind of like mute buttons equal danger. ...that sound good? not being on this phone call sounds good. it's not muted. was that you jason? it was geoffrey! it was jason. it could've been brenda.

welcome back everybody. we are live in omaha, nebraska where we are speaking with

warren buffett. the chairman and ceo of berkshire hathaway. we've been talking about some of berkshire's ownership stakes in different securities. one of the things we haven't got to talk to you about is american express. it's been in the headlines because it lost exclusivity with costco. what did you think of that? >> obviously american express and costco that have been linked up for well over ten years, each in terms of negotiating an extension of a contract that runs out march 31st of 2016 that american express made their best offer and costco thought they could do better elsewhere. it's simply a question. >> the question on the street has been that a lot of people didn't understand just how important that relationship was to american express. there have been some people that even said the company wasn't

completely straightforward in that relationship. would you agree with that? >> i just read the public material but the costco relationship obviously you knew it was an exclusive -- anybody that shopped at costco could not use another credit card. they could use a debit card. but clearly if you have a retailer with the size and scope of costco and you've got the exclusive credit card, you know that's a very important relationship. and of course that brand of card gets used outside of costco as well. in fact, a majority of it comes from outside of costco. but costco did not renew in canada on december 31st of 2014. so already the knowledge that is out there that at least in canada they have not come to terms. and now it's become apparent that they have not come to terms in the u.s. >> you're stake in american express increased but it's because the company was buying back shares. >> we have an arrangement.

we -- american express has become a bank holding company since we originally bought our stock. we're over 10%. we can't buy another share. but because american express buys in its own stock, our percentage interest has gone up. and we love it. they're getting very close to a billion shares outstanding. when they get to a billion shares, we'll own 15.2%, i think it is. >> you have about $12.5 billion in american express shares? >> we have 150 million shares. we have about $12 billion, yeah market. >> guys i know there was a question from back in the studio. >> yeah. i wanted to ask on amex specifically, some people believe over time it's going to erode the margins of the company given they're going to have to compete more on price with potentially visa and mastercard. did you agree with the decision? do you think they'll win on appeal?

and what are the implications to the business? >> well, i -- if you ask me i do think they'll win on appeal. but they also have a period of time when they can suggest a remedy to the court. and if the court accepted that i guess the justice department probably would have to too. so there's a possibility still of a negotiated settlement at the trial court level. and i think if they don't get that, there'll be an appeal and that will probably take a couple of years. but i've read some of the material in connection with the case. i think american express has a very strong position. actually i think in a sense losing the costco account might even further strengthen that position. >> you know warren let's run through some of the biggest holdings. you point out in your annual letter the biggest are

coca-cola, american express, and ibm. the four giants? >> the fabulous four i think. and our -- we -- the bank of america. >> bank of would be your second or third largest. >> it depends on the day. right now we have -- we can exercise that using our preferred stock if we want to. so i don't know whether if it's 16 or 17 you're talking $11 billion. >> that you pay about $5 billion for. >> exactly. but we're not obligated to exercise. we get 6% on the preferred which we might use as a -- as the medium of exchange in order to exercise the warrant.

>> but by all guesses you're going to exercise this. >> yeah. i think the odds are very high we'll exercise. >> i think that's something that people forget that that is equally up there and just as big of a position. >> yeah. it's up there. our share of the earnings of the -- i mean we get the 6% or 300 million a year there. but we have an interest in the undistributed earnings and that's building value for us. >> we're going to continue our conversation with warren buffett in just a moment. when we come back we'll get his take on the economy, tax inversions and the economy. stick around. "squawk box" will be right back.

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welcome back to a special edition of "squawk box." we are live in omaha, nebraska, with warren buffett. when we talked about a lot of things this morning. but what we generally hit you up for first and what we haven't gotten to yet even though we've been here for an hour and a half this morning is what you think of what's happening in the economy right now.

you have incredible access to all kinds of statistics and numbers and figures that other people don't. how do you see it? >> since the fall of 2009 we've kept coming back at a moderate pace. and people occasionally get very excited and think it's going to spurt much faster. sometimes they get worried and say it's going to be a double dip. we see it in virtually all of our businesses. if you see the top earners, i think 17 of the 20 had improved earnings. looks to me like most of them will have improved earnings.

if you think about it population grows 1% and you have real growth of 2%, that's 20% in a generation. 20%. 20% is another in real terms of household incomes. that's fantastic. and we have a terrific economy right here in nebraska. they've got an employment that's 2.9%. our businesses are doing well. housing has come back at a slower rate than i would have anticipated. autos have come back in a faster rate than i anticipated. >> 2% growth though isn't great when you consider what we've been able to do in this country for some time. productivity gains are down. are you surprised we haven't grown at a faster clip? >> not really.

i know what you're saying but in my life time it's been 6 for 1. i mean the numbers are incredible. but at 2% it'll be -- for a baby born today, it'll double in their lifetime. and that is not bad. particularly when you start from where we're starting. >> but do you think 2% is just the way it's going to be in the united states? >> i don't know that. but i would be surprised if it's less over time. i think it'll probably be better. but our economic machine really works. it's worked since 1776. and it's worked throughout my lifetime. we've had depressions and wars and panic after panic. but look at where we are now compared to what we were. any milestone you want to pick in the past. >> you mentioned those gains

will not be distributed equally. there's a question that came in from twitter saying yellen remarked that the greatest risk to the u.s. is income inequality. how would you combat this ever-increasing problem? >> i would change the earned income tax credit bigtime. i think that the nature of a market system is such that results become less equal over time. if you go back 200 years and you had a society, had the best person in town in terms of ability and they both could work on the farm and the best one would do somewhat better in terms of productivity. but both had jobs and there was not a great disparity. and then you went on to henry ford's assembly line and ability differentiation.

and their top income is a little over 21,000. and that's happening in a world where the average household is 125,000 or so. so that isn't because anybody's either or or anything of the sort, it's just the economy becomes more specialized. the rewards are more and more at the top. and more and more people get left behind. education will not solve that. it will help. the minimum wage distorts. takes care of those who didn't have the wiring to participate in the economy. >> i talked to progressive economists that would say sure we're happy with the earned income tax credit. but we think it should be done in combination with the higher minimum wage. >> it does at some point.

otherwise we change it. we have a whole lot of people that wouldn't have a job. and markets are very effective deployers of resources. but a more specialized market deploys those more than a total a aguarian. i don't quarrel with a change in the minimum wage but i don't really think that's the answer. i think it does result in less employment. >> we've seen some companies, though kind of taking it on themselves. etna walmart. saying we're raising wages on our own. that's the market. >> that's the market. i think walmart obviously made a good decision for walmart.

i think if you set them at a certain level, at 20 bucks, you're going to have a whole bunch unemployed. but you can earn something to give people whose talents, they're not valued that high in a market economy but they're doing useful things. it's just not high value stuff. they're good citizens. you want them feeling part of the system. you want them contributing. and as long as they work an earned income tax credit could give them a better life they have now than with messing up the market system. >> andrew back to you and joe in the studio. >> great. thank you warren and becky. back to you in a moment. coming up a closer look at the berkshire hathaway annual letter. we'll tell you about it when we come back this morning.

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welcome back to "squawk box." another tune from 1965. that is 50 years ago. deduced that. that is when all this started with berkshire. and we'll be back with warren buffett and becky in a second. but let's look at futures indicated up higher. dow up about 18 points. the s&p up about 1 point. and the nasdaq 9. in our headlines, iraq's army has launched a campaign against strongholds north of baghdad held by isis. it's the biggest military operations there since isis fighters seized that territory last year. and this has been awhile in coming. and both sides a lot swirling around. israeli prime minister netanyahu's visit to the united

states. he accepted invitations from republicans to address congress tomorrow. and he will warn against doing a possible nuclear deal with iran. israel fears that such a deal could allow iran to develop atomic weapons. but i don't know. kerr are i and the president are -- really want to try to get something done diplomatically. let's get back to becky and warren buffett in omaha. i bet you 50 years -- i worry about this. this is one of my things becky. how quickly time is passing. i'll bet warren remembers 1965 like it was yesterday. >> warren? >> it moves fast. the good news is that you can have just as much fun at 84 as you were having at 24. >> oh do tell. >> charlie's 91. he's my canary in the coal mine. >> i was thinking about that. exactly.

because i think you're 25 years older and i was thinking hey, if i could be -- i'm not going to be rich. but i think we're rich in just being healthy and living long lives, warren. that's what we shoot for. you watch your kids grow up and watch your grand kids and everything. it's all good. i'm trying to take a positive view. >> warren let's talk a little bit about dividends at berkshire hathaway. back in 2011 at the annual meeting i asked a question the shareholder had written in about dividends. your response at that time was i think the day berkshire declares a dividend is the day when the stock goes down as it should. this year in the annual letter you wrote a different take. you said you think some time in the next 10 to 20 years there will come a day berkshire has more cash than it can adequately figure out how to properly invest to get a better result on it. so you think they could try to

determine whether they should pay dividend or buy back more shares. how did you change so drastically on the idea of the dividend. >> the numbers keep going. i think what i said was is it going to do it some day, yes. because because of compounding numbers. there's nothing magical about the 10 to 20 but when i was writing that section, it seemed to me i kind of project in my mind how much cash we'll have coming in in that 10 to 20 year period. it would seem to me it would get difficult to deploy it all in the business. and then you have a decision to make between dividends and repurchases or both. and to me that seemed to be simple. you're doing the shareholders are going out of favor and you're doing the shareholders

are in favor. and nobody's getting cash that they don't want. so i would hope at that time that huge repurchases. >> i guess it's a tax retraction for those who don't want the cash out. >> and they enhance their interest in the company and they do it at a modest price. it's a wonderful equation. >> let me ask you this. because i can't figure out exactly what i think about this. but it's something i've been kicking around. if you think that in the next 10 to 20 years, if you think berkshire won't have enough cash to deploy it properly does it still make sense for the insurance companies to be part of berkshire? because obviously the insurance companies have done very well. you've been very smart about where you've written policies. but i think one of the biggest advantages to having insurance companies is it creates this massive float. you can take the money now,

invest it wisely. and even if you have to pay out those returns, two years, five years, ten years down the road you've made up more money because you invested it smartly. if you have more cash than how to invest it does it make sense to still have the companies? >> oh yeah. even when you're paying out a dividend or repurchasing shares it still has value. it doesn't have as much value as obviously if you can't use it all in things that are intelligent other than paying dividends or repurchasing shares, it's not quite as attractive as it has been for us over the years. but cost-free float is always valuable. >> does it change the nature of the insurance business and some of the contracts that you write? because jane has come up with some clever business waves that nobody thinks of. some of those, though, are taking bets over a long period of time. does it change that inherently? >> that business stands on its own. any time we can do something we

think is mathematically intelligent, we have the resources to do most anything. so we can take on anything. then the question is does the math make sense? and we'll always -- that's the way we'll evaluate things forever. but we won't always have one to think it through as well as he can. >> you say when you look out 10 to 20 years, you can see in your mind how much money berkshire will have coming in. what's the ballpark figure? >> vague. but i've always -- i've always had numbers in my mind. when i was in grade school before i learned those things i would do compound tables of my own. >> all right. we're going to continue this conversation in just a moment. we have a lot more to get to. back to you in the studio right now. >> thank you. coming up warren buffett once told lebron james if he got

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welcome back everybody. we've had a lot of questions for warren buffett. here's one from a cleveland cavalier, lebron james. >> actually i have two questions i would like to ask warren buffett. my first question would be yeah, what should i invest in next? can i have some tips? and my second question would be i'm not doing too well with the profession i'm in right now. can you teach me how to play a little basketball please? those would be my two questions to warren buffett. >> warren? >> first one was what should he

invest in now. >> right. >> i think somebody like lebron and we've talked about it but i think -- >> you and lebron have talked about it? >> occasionally. i think actually through the rest of his career and beyond in terms of earning power, just making monthly investments in the low cost index fund makes a lot of sense. i think somebody's position ought to have a significant cash reserve. whatever makes him comfortable. and then beyond that owning a piece of america, a diversified piece bought over time held for 30 or 40 years, it's bound to do well. and the income will go up over the years. and there's really nothing to worry about. >> you think he's listened to you on that? >> you'd have to ask him. >> his second question? >> people toend get proend to get promoted.

usually the simpest is the best. >> what does that mean? >> something like owning the united states at a decent average price over time. you really can't go wrong with that. now, somebody else will end up doing better with this or that but somebody will do a lot worse with this or that too. and their expertise is making a lot of money doing something they do extremely well. but they aren't going to be generally able to take the time to become a professional investor too. it's the same advice i give 99% of the people. >> buying an index fund. >> and doing it over time and starting early, starting young in life. and nobody's ever followed that and gotten other than a decent result. nobody. >> all right. warren, we'll continue this conversation. joe, back to you right now. >> i missed the second question. >> i'm sorry, the second question -- wait wait. time-out. let me take it out. second question was if he's not doing well in his own current career, what would you tell him

to do? help me out here. >> he's doing fine in his present career. >> he wants what? oh. he wants advice on how to play basketball. >> well, we went one-on-one for a considerable period and his game went up after that. i'm kidding. we went up for a jump ball one time and he got it went the length of the court, dunked it just as i was starting to jump. he does not have much to learn from me. >> all right. joe, back over to you. >> thanks. coming up we're going to talk politics with warren buffett. find out what he thinks about the race for the next american president.

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welcome back to "squawk box," everyone. we have warren buffett live in omaha, nebraska. it's time to start talking politics this morning, warren. there was a story this morning saying hillary clinton could announce her run for presidency as early as next month. we had -- sorry. wrong page. this one from the panic. would you still bet money hillary clinton will run and win in 2016? that's referencing something you said at fortune's most powerful women's conference. >> yeah. i'd bet money on both of those. i don't know whether intrade started their calculations yet. the odds may be up on that. but i'm sure she's a -- things

could always happen in politics. but she's extremely likely to be the democratic nominee. and i think she's very likely to be the president of the united states. >> guys? back in the studio i'm not sure if you wanted to play in on this one. >> i've heard before -- >> hot potato. >> no no. i thought of a couple ways of approaching it i guess. i know how warren feels about this. we've had him on i think eight years ago you were saying the same thing that you -- it wasn't eight now. i'm jumping the gun at 2016. but it was six and you didn't care -- you thought either president obama or hillary clinton would be great nominees for the democratic party. and, you know you were positive on the prospects for both as president. if you had to pick let's just say that you know that i can promise you ibm would be at 1,000 by the end of next year

if you were to pick a republican to run, are there any of them that are less distasteful to you than others? who do you think they should run? >> oh i think well of a number of republicans. i vote for republicans. i contributed to republicans in the last few years. yeah, i can think of certain republican candidates i would vote for in preference to certain democratic candidates. but i'm not going to give you names. but that is the case. i mean if you -- there's a couple of democrats that if they were the nominees i would end up voting for the republican probably. >> would you vote -- if elizabeth warren were the nominee, would you vote for ted cruz? >> i'm not giving specifics, joe. we're not going to get -- don't get out the phone book.

but i'm just telling you, i am not a card carrying democrat. i vote democrat most of the time and i agree with their position on social matters to a significant degree. but i'm not a straight down the road democrat. >> warren what do you make of elizabeth warren and especially her views of wall street? >> well i think that she would do better if she was less angry and demonize less. i believe in hate the sin, love the sinner. and i also believe in praising by name and criticizing by category. >> have you tried to convince her? >> oh, go ahead. >> no. listen, don't pick her out of -- there's plenty of other

candidates that their styles are not 100% my style. but i do think it's -- i think it's a mistake to get angry with your -- with people that disagree with you. i mean in the end we do have to work together. i think the whole nature of governing particularly when you have divided government is you'll end up with bills that each side doesn't like but they like it better than doing nothing. i mean that's -- that's the way government has to function. and it does not help when you demonize or get too violent with the people you're talking to. warren hatch talks about how he had this great relationship with ted kennedy. they certainly didn't agree on many things but they got some things done. i tip my hat to both of them. incidentally, i think there's a reasonable chance of a corporate tax change because i think orrin

hatch and ron, they are two people that if they do it in private can forge something that again neither one of them likes but they like it better than the present system. that's what's going to have to happen in government. >> warren you say you like to criticize by category, not by name. >> right. >> you certainly did a lot of that in the annual shareholder letter this year. you took on investment banker conglomerates, private equity and a lot more. we're going to talk about more of those names in a moment when we come back. because you were not shy on a lot of these categories. >> i'm not shy about my views. there's plenty to criticize. but i don't name names. >> okay. andrew, we'll send it back to you with more on this in a moment. >> just before he goes about having fun. we're getting a lot of comments on that at 84. can you give us an idea of that too? are you talking about playing bridge or other things?

what -- can you -- golf? what is it? >> i probably play bridge ten hours a week. but that just depends what games you like. >> across the board? i mean you're doing everything you were doing at 24? i mean -- >> well i'm doing all my daytime activities are similar. i would say -- i was having a lot of fun at 24 or 44. but at 84 i will tell you. if you're working with people you love at a job you love it doesn't get any better than that. >> okay. warren buffett, don't let him take you there. you know where he's trying to go. >> no. get your mind out of the gutter. >> when we come back a lot more of warren buffett in the next hour. we'll look at the 50th annual letter. we'll get warren's take on walmart wage hikes. also another celebrity video question. we're coming back in a moment.

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slower rate than i anticipated. autos faster than i anticipated. >> from berkshire hathaway to his biggest oldings, plus your investment questions answered. >> you try to evaluate it and where it will be in five or ten years. if you think it's cheap, you buy it. and everybody should do that. >> one of the richest investors in america right here on the biggest name in business news. >> i'll run an ad on cnbc when we sell. >> as the final hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with andrew ross sorkin. we're in a our midtown manhattan studios. becky is in omaha this morning

with berkshire hathaway chairman and ceo warren buffett. we're going to hear one of them. i was thinking about becky trying to get out there. did she go out yesterday? >> i don't know. we can ask. >> more snow again yesterday. here are the futures so far. i think they've turned around or at least they're -- okay. they're not up as much as they were. up about 8 points at this point on the dow. it's jobs week again. we're going to get the number on friday for the january employment. we've got as i said up 8 on the dow. the nasdaq up about 7.5. we'll see whether we need to have that big party of the new high on the nasdaq any time soon. greece down again. i think thursday and friday of last week when we were watching as well. 861.49. let's keep that in our mind that that's where it is. and there are some headlines. >> let's get you through some of those headlines right now. nxp is buying semiconductor

freescale. $12 billion that tieup. and shares of lumber liquidators are getting slammed this morning. a report on "60 minutes" last night suggested they sold floors with higher levels of formaldehyde than was allowed. and they argue the attacks were driven by a group of short sellers. the stock is now down more than 40% than last week when the ceo said "60 minutes" was planning that story. we're also watching shares of oil prices. because they're dropping again. >> okay. let's get back to omaha. becky's there with warren buffett. >> thanks again, guys. we are spending the morning with warren guf fete. we've been talking about his letter to shareholders which was released this weekend. it was a lot of reading. a lot of people going through with all this. one of the things that jumped

out at us is you really didn't hold back. this was no holds barred in terms of your opinions and everybody on wall street got scathed in one way or another. let's talk about a couple things you said. you said conglomerates it should be acknowledged have a terrible relationship with investors and they deserve pipt. >> absolutely. >> why? >> there's nothing wrong with the structure, it's just they were -- they have been the source of enormous abuse including accounting manipulations over the years. and they led themselves to that. and actually the worst period was in the late 60s. it contributed to me winding up my partnership. because there were -- it was just a feast of accounting manipulation and promotion. and i didn't want to engage in it, but i also didn't like

having lousy figures against people that were just basically playing games with the numbers. but the conglomerate form for us is perfect. i mean we can move capital which capitalism is all about intelligently withdrawing capital from place where is theit is not good and moving it where it is better. and we can do that without taxes seamlessly and in a way that doesn't upset people. so we have a good form but that form has been abused in the past. >> that form's been abused in the past. do you see excesses like that taking place the the marketplace right now? accounting fraud, i should say. accounting games. there almost always are accounting games going on. there's huge peaks and valleys of that. that's a big generalization.

but that hadn't been true all year. and in the past, too often their auditors helped them. i have sat in more meetings when a company has been acquired and heard the auditors -- outside auditors explain ways that purchase price accounting can be used to goose the earnings in subsequent years. that was regarded as -- they thought that was their job. a lot of that has been improved. in fact, i've been on a lot of committees where i tried to improve it. but accounting, it's just very tempting. i mean you're putting out little numbers that people capitalize and create billions and billions of dollars.

>> andrew i believe you have some breaking news right now. >> yes, becky. relates to warren buffett to some degree. costco which as you know last week or two weeks ago announced it was going to be ending its relationship with american express has just announced it has now signed a deal with citigroup and visa. that's what will replace the american express card. of course american express a company warren buffett owns a stake in. but that is the news. this deal goes into effect april 1, 2016. is i would toss it back to both of you but also ask warren if you have views about this deal. i imagine you knew some deal like this would be coming. >> yeah. somebody was going to get the bid. and american express learned a week or two ago that they were not the one that was going to get it.

i don't know the terms of the new deal but i don't think citi will get rich off it. >> you don't think there was much margin to begin with? >> that would be my guess. >> i thought it wasn't the margin helping as much as the business. >> i'm counting all of that. the business should get outside of costco and everything. i mean the cobranded cards -- and this isn't just through costco. the airlines and such. the cobranded cards have become quite a competitive business. it's better to have your own proprietary card is worth more than a cobranded card. >> okay. let's get back to some of the insults that you handed out in the annual letter. >> i don't know. commentary. >> commentary that i know you look at as teaching people. let's talk about some of these

things. >> sure. >> you say when it comes to prieft private equity it's a dirty word for many private-equity buyers. debt is piled on in virtually all private equity purchases. >> right. and as a matter of fact private equity is grumbling to some extent about the fact the fed sort of said six times is what the banks, it's okay to lend. >> six times leverage. >> six times leverage. and private equity would like to see it higher. they want to borrow every time they can. in most cases. there's some exceptions to that. and that's why they call themselves leverage buyout operations originally. that's what they do. they do lenchverage buyouts. that got a dirty name. and so they changed the name. but they didn't change the activity. and i don't blame them. i mean if you can get all the money from somebody else and you get the upside and if they get

the downside to a great degree there's nothing un-american about that. but it -- that is what it is. and if you're selling your firm to a private equity firm you can expect it to be loaded with debt. the equity will -- it will become less of an equity-rich company after the deal. and like i said there's nothing un-american about that it's just not the way we operate and not the way some sellers want their companies to operate after they sell. and when they don't, then we're the logical guys. >> however, you've done deals with 3g. >> right. and they like to leverage up. and they're very good at running businesses and we're delighted to be their partners. it's not what we would do in buying businesses. but we are partnered with them. and they are exceptionally good operators. i feel fine about the debt. actually bought a little debt personally of some of the ones they've done. but they like leverage. and they can pay more because

they like leverage than we could pay on an all-equity basis. >> what's your point in the letter? it's a bad practice unless you're really good at it? >> i'm saying it's a different practice than some companies want to have for their businesses. and so we get the people who do not want their companies loaded up with debt. but there's nothing improper about loading something up with debt. it's just one of several forms of selling out and to anybody that doesn't want their company hocked to the gills, it's for us. >> so it's a big ad why to sell to berkshire. >> it's an ad why people who don't like a lot of debt should sell to berkshire. if you want the best price, you probably get it by auctioning it off to somebody who's going to borrow as much as they can. there's nothing wrong with that. but if they don't want that we're a good place to call. >> all right. let's talk about what you had to say about investment bankers. one of the comments you made is

that investment bankers being paid as they are for action constantly urge acquirers to pay 20% to 50% premiums over market price for publicly held businesses. you've had thoughts on investment bankers in the past. you don't necessarily always listen to their opinions. in fact you rarely listen to their opinions. >> they are in the business of selling companies. and therefore they see the virtues of people buying and selling them. they're very smart people. sometimes they can contribute in a helpful way. but they like having transactions. you know, again, there's nothing evil about it. just better be aware of it. i mean if you're -- if you go to a dentist and he only gets paid by the number of teeth that he removes, then you better start taking a little bit and making judgment about which teeth you want to keep. >> okay. we'll continue this conversation in just a moment.

andrew, joe, we'll send it back to you guys in the studio right now. >> thank you, becky. we're going to talk to warren about walmart with over 60 million shares about 2% of the company his stake. worth more than $4 billion. warren buffett on walmart and retail coming up after the break. being a keen observer of the world has gotten you far but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform,

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welcome back, everybody. we are live in warren buffett this morning. we've been talking about a lot of things but also talking about major investments for berkshire hathaway. one of those stocks warren that you do own a big chunk in. i think $5 billion we were just talking about this is walmart. >> uh-huh. yes. we and the walton family control the company. i'm not sure they see it that way. >> almost all huge errors of berkshire hathaway were in not

making a purchase including not purchasing walmart stock that was sure to work out well. berkshire's net worth would now be at least $50 billion higher if it had seized several opportunity it was not smart enough to recognize at sure things. >> our biggest errors have been errors of omission no comission. now, to some extent that's because we're basically so conservative. we have never wanted to push. so there have been times even in the 2008 panic we bought $15 billion worth of things in three weeks. but we kept a lot because we always believed in the company. so we could have played that harder, but we just never wanted to get close to the edge. >> what do you think about some of the recent moves? we talked very beliefly about

walmart raises its own minimum wage internally. do you think that was the right move? >> well i think the management is very good there. i think doug is doing a great job. i'll see him again in a month. but i think he really has a feel for the business. but i think e-commerce has been to be enormously important to them. i think they're in 12 billion now or something like that. but, you know that's a game they've got to become very very competitive in. >> i know another ceo who you've met with in omaha is mary barra. that you bought a new cadillac. she was instrumental, i think, in convincing you to buy that cadillac. we have questions from kyle bass. kyle bass is an investor in general motors. he's been pushing for the company to buy back more shares and increase the dividend. >> put a fellow on the board.

>> that is harry wilson. who he's been pushing for that. harry wilson was involved with resetting gm. but he points out that he thinks it's trading at a significant discount to intrinsic value. >> mary's only been in there a short period. there's a lot of things to do. having had to go to the government a few years ago to stay alive, you can go through cash very fast. i don't -- if i were running it would i be buying the stock? i don't know if i would or not. but it doesn't bother me at all when she's not doing it. i think she's exactly the right person for the job. i've met her a couple times and she is very very good. and i think it -- i just think the idea of trying to do something now to get a pop in the stock should not be on her agenda or the shareholders' agenda. i think the main thing to do is

build the strengths of general motors which they had in the past. and i think mary's the right one to do it. and i totally disagree with the idea of putting somebody on the board who has an option on some other people's stock which is only good for two years. to have somebody sitting there in the bedroom who has a two-year rise when they make money that goes to zero after that. it's just not the way to run a business. berkshire would not be where it is today if we'd had a bunch of directors over the years that had horizons on when to make money off of the stock. >> what do you think about corporate activism in general? >> sometimes i think it's justified. and sometimes it's just way, way off the mark. i mean i think of coca-cola when david winters who runs the fund is underperformed through every inception. and who draws a 150 basis point fee when you can go to vanguard

and do it for less points. he complains about it not being commensurate with coke. i think he's a fellow living in an all-glass house. >> you agreed with some of his points when he first came out against coca-cola though. >> i thought last year was excessive in terms of stock. and the coca-cola comp committee has done a sensational job of reengineering that plan. i've seen the model of proxy should be written and in terms of what they've been doing. but they went from the top quartile to the bottom in terms of cash issueants. i give great credit to mel.

she has really worked at devising and explaining. >> you've been in close contact about that? >> i saw her last week yeah. >> and what did they lay out? >> they just showed me the proxy material that's going out and how the plan is put together. they already described this a few months ago. these are the specifics. they thought it through like an owner. that's all you can ask. and they've spent lot of time doing pipt i noticed the-- but it's a really -- they went at it just like an owner should go at it. i think it's crazy of winters who's getting incredible fees for negative production to complain about coca-cola.

>> but again you agreed with his points when he first came out. when did he start saying things you didn't agree with? >> i agreed total will i with the fact that the plan that was put out last year was way too big on stock issuing. i felt it had flaws in it. and so did the coca-cola compensation committee when they looked at it again and looked at it hard. there was -- to say there was a service performed by david when he pointed out the fact that there was too much stock involved in it. but then unfortunately that when the facts changed, he didn't. >> but he was the one who first brought it to your attention. >> no he didn't bring it to my attention. but he brought it to the public's attention. but i read it. >> all right. warren, thank you. and joe? >> yeah. i love coke. i mean i love -- >> i do too.

five a day. >> i know. and not diet coke right? i like -- i drink a six pack of coke classic every day if i could. but i need to do those calories elsewhere. but i love it. but i'm sworn off it. you know what i mean? >> yeah. that's why i only have five a day. but i agree with you on that. i like the real thing. i'm not a big diet goo i. >> i do too. even coke zero. and i like cherry. i like all of those. but i don't know. i need -- i'd rather have a clark bar or something. i don't know. thank you. >> i hear a lot of people complimenting you on your physique and just general appearance. now i know why. >> you're right. yeah. so you're hearing that too, huh? >> it's all over omaha. all over omaha. i can't go down the street without -- >> i have a trainer.

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welcome back to "squawk." forbes out with the rampging of the world's billionaires. bill gates beat out carlos slim for the second straight years. he's at the top of the list. warren buffett our big guest all day today here on the program climbing one spot coming in at the world's third richest person. he was the biggest gainer of the year growing his fortune by $14.5 billion to a total now of $72.7 billion. when we return we have more from warren guf fetebuffett. we'll talk to him about a lot more when we return.

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welcome back everybody. we are live in warren buffett this morning. warren i can't believe that it's already two and a half hours into the show and we haven't even gotten a chance to talk to you about some of the headlines coming out from greece and the eurozone. we heard the headlines at the top of the show. you said you had comments on it. i'd like to run another question for you that was sent in by charlie munger. he had some questions for you as well on that. listen in to this. >> we think the new guidelines are all fizz. and it really doesn't address the fundamental problem that was raised that it was excessive and we believe it is now --

>> all right. sorry, live tv does this sometimes nap is not the question we were waiting for. there was a question that charlie munger had on the eurozone and on greece. he had some very specific thoughts on this. and let's run that one. >> in the eurozone should the rich nations simply give the poor nations all they want in order to avoid an unusual share of economic decline? >> that was his question. should the rich nations just give into the poor nations to make sure there's not an undue amount of economic decline? >> becky, if you have behavior you want to get rid of it's probably not the smartest idea to reward it. if you have a dog that's peeing on your carpet you do not want to give it a bunch of dog biscuits. or you're going to have some -- your carpet after awhile i'll sell you a new carpet.

and essentially if people find they can break the rules and you kind of threaten the rest of them by the fact they'll cause you more trouble. and you're going to have a more stains carpet if you essentially give into them. just keep modifying the rules as you go along. >> okay. i would in general agree with that comment, but the situation in greece i think is more complicated. first of all the eurozone stepped in in the beginning and bought a bunch of bonds that they were kind of trying to -- that is a lot of the debt loaded up on them. and quite frankly germany and some of the other rich nations have benefitted greatly from being linked to weaker economies and having their currency devalued. germany has been a huge

beneficiary of this. is there anything that says they should be sharing the wealth with some of the poorer nations? >> well if they want to engage in foreign aid and just say that these people can play the game any way you want. i suppose that's up to them. but the -- what greece has done is exposed the weakness of the original concept. and the idea that you're going to link currency in lock step among a large group of countries that have different fiscal policies, different cultures different labor laws and everything. it has a structural weakness to it. just imagine we had a western hemisphere zone that we linked ourselves to. and, you know you name it. it wouldn't work. and you have to -- you have to either get further in or recognize the fact that the

structure will not work over time. and it may -- but it may work in some modified form. >> you would tell greece to take a walk. >> yeah. i would tell them you know here's what you can do. and if you want to do it, fine. but it isn't going to work if you're going to go in a different direction in terms of fiscal policies and all of that. and if you decide then you'd like to give foreign aid to them, that's fine. we've done it with countries. but you shouldn't -- i mean just imagine if we tried to link our currency to 18 or so other countries in the western hemisphere and we pick some that had way different fiscal policies and a whole different approach to government. it wouldn't work over time. i mean you either have to have a greater conformity. lincoln talked about the nation not being able to exist half slave and half free. and essentially you're taking

things that are really desperate types of economies and saying you can operate in all these way different ways but we're going to keep our currencies in line. currencies don't work that way. >> it sounds like a really dumb idea when you put it that way. do you think the eu exists in 10 years, 20 years, 50 years? >> i think they will but it will be modified. we've had amendments to our constitution, right? we thought we wrote a pretty good document. and we did. but we still have to amend it occasionally. and there was probably a boost to enthusiasm that they have to do the other half of the job. >> the biggest security investment is in wells fargo, there have been a lot of questions about the big banks and whether the big banks need to be broken up. there's also a huge question with the change in the regulatory structure if it is going to make as much sense to

be an investor in big banks down the road. what do you think? >> well you can make -- if you have different capital requirements based on size which you do to some degree now, and based on other things. but you can make banking unprofitable. you make a decent return on equity equity. and you earn on -- you earn on your liabilities plus your capital. and if you have to have more and more capital relative to other liabilities, you bring it down to where it's attractive. i think our banking system is doing a terrific job. and it is not -- our banks are not as large relative to the economy remotely as in many other countries and our banks are in better shape than much of the rest of the world's. but big banks are now being -- jpmorgan number one, i believe,

but penalized on capital. and you can make it an unattractive business. and i suppose if you push that hard enough people will say, well, they don't like big banks. they didn't like big oil back when the trust existed. they broke it into pieces. all the pieces have done pretty well. i think the present banking system is -- it's a pretty damn good system for the united states. >> let me ask you also you're not only in the business of banking through your investments, but now with the purchase of van tile you're a car salesman too. >> yeah a good one. >> which leads to a conversation on a story that's out from dealbook. they talked about how wells fargo is putting a ceiling on the subprime autoloans. in terms of how frequently and how easily you can get these things. wells fargo's not participating anymore and that's putting a freeze on the rest of the industry and raising concerns. what do you think? >> i think they put a lid on the percentage they want to have.

i just saw the figures on a sub-prime lender the other day where 50% of the loans they made defaulted in the first year. there's something wrong with an operation like that. you don't need the degree of misery that occurs with hundreds of thousands of borrowers if 50% of them default within a year. your lending standards are wrong in that respect. i don't say anybody that's kind of marginal doesn't have a right to get a shot at owning a home maybe with a low down payment or a car. but have it become the norm bigtime. i think it's a mistake. >> you said earlier though that car sales have rebounded more quickly than you expected. do you think it's in part of these loans being handed out? and do you think the auto sales will be hampered by this? >> i think that just from what i've seen on one or two operations, i think that there's been a weakening of credit

standards that is probably unwise. >> okay. andrew, joe? >> thank you. we also have breaking news to give you. just happened the past couple minutes. hewlett-packard announced it is buying aruba networks for $2.7 billion. hewlett sees the deal adding to earnings in the first full year. following the close of that deal. of course they make wireless equipment for businesses. that stock up just in the past week because people thought this deal was coming. there were rumors and speculation about it. that stock had traded sliegts slightly higher on friday. also, when we come back warren has been answering your questions all morning long here on "squawk box." up next a question from former california governor and celebrity arnold schwarzenegger. he once tapped warren as his economic adviser. we'll talk california's debt and the nation's economy with mr. buffett after the break.

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welcome back, everybody. this is our annual ask warren show. the questions have been pouring in for the berkshire boss. warren, we've got another question that came into you on video. take a listen and see what you think. >> warren you've been very outspoken about the unfunded liabilities, the pensions that you talk about here. and in california we have a huge

problem. we have over $500 billion in unfunded liabilities when it comes to pensions and health benefits for the retirees. but in the book we only show maybe $90 billion or $100 billion of debt. really pulling wool over people's eyes not telling them the truth. is your solution to this big problem we have not only in california but all over the united states? >> arnold schwarzenegger asking about the pension liabilities that could be a lot bigger than we even admit in terms of what we tell the public. what do you think? >> well they can be. there's such as investments. it doesn't change how long the pensioner lives or the pension. so it's been particularly easy for politicians to make promises on pensions because they're not around to pay them and it makes the union you're negotiating with the state or local union,

very happy to get a pension increase. they vote for it at the next election. by the time the bill comes due, you're long gone. it is true that many illinois is in terrible shape. new jersey is in bad shape. talked about curing it but they didn't. california's in bad shape. those pension obligations can be met, but they can't be met if you pretend they don't exist. and you never start making large payments into trust funds essentially to deal with them as they come due. you know you promise somebody that you're going to pay them for 30 years after they quick working, you better start accumulating something now to make those payments. and state and local governments have been particularly remiss in that compared to corporations although there have been plenty of corporations coming up short as well. >> okay. we'll continue this conversation with warren in just a minute. joe? >> becky, hey, warren.

what's your favorite ice cream flavor? >> well this morning i had a little strawberry haagen-dazs before i came down. that was at about 4:00 this morning. >> you've had greater, i know. did you ever look at greaters and think about buying it? i know you probably know that old cincinnati company, right? >> i don't know that one. but if you're telling me it's good, i'll believe you. >> going to send you some. so you like strawberry right? >> i like strawberry. i like chocolate chip. i like of -- hard to find an ice cream i don't like. >> you finish off the montgomery, you finish off with greaters. >> i eat it right out of the carton. >> i do too. for some reason then i feel like if i don't leave a dish in the sink, no one knows, you know what i mean? and i don't go down very far. i kind of make it flat. you know you can't really tell the way i do it.

anyway when we return we're going to go downtown. jim cramer is going to get into the mix. we'll talk monday markets plus what warren sees in ibm that others might be missing. the stock down. is this a buying opportunity? we'll revisit that. we'll find out more from the world's greatest investor. ♪ at mfs, we believe in the power of active management. every day, our teams collaborate around the world to actively uncover, discuss and debate investment opportunities. which leads to better decisions for our clients. it's a uniquely collaborative approach you won't find anywhere else. put our global active management expertise to work for you. mfs. there is no expertise without collaboration.

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welcome back, everybody. let's get down to the new york stock exchange. jim cramer joins us right now. you had sent in a question. i wanted you to get the chance to ask the question yourself. >> thank you so much, becky. the energy business that you have, warren, is just phenomenal. tremendous pipeline business phenomenal, but also great railroad business. i was wondering whether keystone shelving that isn't a terrific opportunity for burlington northern which you were somewhat critical of in the report. and i kind of felt bad for those guys because that is one of the best railroads in the world. i think they could be a winner from the president blocking the pipeline. >> well, i agree with you about

burlington being a great railroad. i don't know how keystone -- you know, there's pluses and minuses in terms of how it cuts for our particular railroad. but i think -- i would have passed keystone. i think that we have an enormous interest in working with canada as they have and working with us. that oil is going to get sold. if we make it more difficult for them who knows they'll feel about making things more difficult for us someday. that is a valuable resource of north america, and canada has been a terrific partner over the decades. and for us to kind of thumb our nose at them you know, not what i would do. >> wow. look, i think that's great. i wanted to also ask you, if you're managing burlington northern, you read the letter obviously you say that union pacific did a better job. you put more money in it. is this the type of thing when you're the managing in a very decentralized business that you

have, you wake up and you say oh, my i'm the guy that didn't do as well as i should have for mr. buffett? >> matt rose has done a terrific job for us. and the u.p. if you remember i know you do jim, about a dozen years ago, u.p. had some major service problems. and we gained a lot of share against them. and they're a terrific competitor. but we are spending a lot more money than they are now to improve service. and my guess is that over the next 20 or 30 or 50 years, a few years when we surge in a few years, when they surge and that we both come out a whole lot better off than we are now. >> all right. look i wanted to congratulate you. i thought the letter was just unbelievable. i read it twice. everyone has to read it. they should be in an index fund i agree with you, but it was brilliant. i learned so much. i just wanted to thank you. thank you for what you've done for investing and for making it so that it's accessible but also for recognizing people's own

lilt axs s limitations and being in index funds if they can't spend the time like you do. >> thanks jim. appreciate it. >> jim, thank you. and we will see you in just a few minutes coming up at the top of the hour. when we come back we're going to wrap up loose ends with warren buffett. join us tomorrow. another great lineup including guest host david rubenstein the ceo of the carlyle group. stick around. much more with warren buffett on "squawk box" right after this break. can it make a dentist appointment

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welcome back everybody. we are coming to the end of three hours live with warren buffett. time seems to fly when you've got a lot to talk about, and we have had a lot to talk about today. there are still some questions that are coming in warren. in fact, david tepper wrote in a little bit. ago. obviously, the hedge fund manager. he says first of all, what does buffett think about transparency of compensation plans, particularly in regard to have companies make capital allocation decisions? and enthis he wrote me another e-mail and says and how does capitalal indication relate to how much cash is on the balance sheet? >> well it's a pretty broad question. transparency of compensation relative to capital allocation. >> yeah.

>> the compensation figures that we publish are the ones that are required by the s.e.c. i think a terrible mistake, just like in your business i mean if everybody knew how much each anchor got paid it would tend to escalate payments. i mean and is that good for the shareholders or not? so i think publishing everybody's earnings would be -- it would be anti-shareholder in the end. it would satisfy a lot of curiosity, and a lot of people would get very envious of those around him. i saw at salomon how envyious people could get about others' compensation. i don't see how it relates to capital allocation exactly. i don't get that part of the question. >> maybe david will write in if he's got additional thoughts on that. meantime harry wilson wrote in. we were talking about gm earlier. wilson has been proposed by a group of activist investors as a

potential addition to the board of general motors. we had comments. he wrote in to clarify. i want to give him a say. i won't read it all but he does say that the underlying rationale of his candidacy is to do exactly what you said to help general motors build for the long-term strength it needs to become a world-class company and thrive for many years to come. he points out he's been a shareholder since 2011. and as he said he expects to be a shareholder for many years to come. as he said to the company, he's perfectly willing to take all of my compensation in stock and have it locked up for an extended period of time. this is not by any means a two-year deal. >> yeah. well, maybe i'm wrong, but my understanding was that he was getting the profit on 4% of roughly 30 million shares owned by three huj funds. so that's a 1.2 million share position. where the money that was made in the next two years counted and nothing afterwards. so i don't know the size of these other positions compared to the 1.2 million or whatever it may be that he has an option

on. i don't think it's wise to -- i don't think it's wise to compensate any director based on what happens in the next two years and have them overwhelming overwhelmingly focused on that which may or may not be the case. if mareharry has a ton of stock he's going to put away. >> i don't know the answer to that. he does write in and say that he does away with you on mary barra, that he's a big supporter of her and thinks she's doing a good job. >> i think he's dead right. i think he's dead right. it's not easy running general motors. and walking in now in the last year, a whole lot of things on her plate. it's a worldwide organization. and i believe in giving somebody like that a lot of slack. we do it with our own managers. >> i'll also point out, e-mails are coming in fast and furious. david faber just writing in saying you are exactly right. 4% of 31 million shares at two and three years is what he's talking about with that. warren, if you had one message that you wanted to get out to

people, obviously this is 50 years for berkshire hathaway. looking back reflecting, you had a very long letter anybody who hasn't read it yet, i would suggest they do that. there's a lot of good information in it. one quick message? >> if you're a 20 or 30-year-old and you can invest for your next 50 years and you consistently buy american business, american businesses are going to do wonderful over that time but you have to do it consistently and you shouldn't try and dance in and out or pick this stock or that stock. just own the country. the best days of america lie ahead, and the best day of american investors lie ahead as long as they don't beat themselves. >> warren, thank you so much for joining us today. we really appreciate your time. joe and andrew we will all be back in new york city tomorrow, and the three of us will join us. we've got great guest hosts coming up including david rubenstein. that does it for us today. right now it's time for "squawk on the street." ♪ everybody dance now ♪

what a show. congratulations to becky and "squawk." good monday morning. welcome. i'm carl quintanilla with jim cramer and david faber. nxp buying freescale. we're going to talk to their ceo about his company's $12 billion deal in just a moment. meantime we begin the month of march with the premarket relatively steady. oil is slightly in the red and