good morning and welcome to "worldwide exchange" here in cnbc, live from the nasdaq market size in times square. i'm joe kernen becky quick is live in omaha asking your questions, our questions, everybody's questions to warren buffett. good morning, becky. i thought long and hard about, you know, i watched a little bit of the oscars last night i thought about a hostless "worldwide exchange. i wasn't going to show today does it matter they didn't need one last night. >> yes, we do need you there >> i thought about a hostless "worldwide exchange" this morning, right it worked pretty well last night. >> the a.i., the artificial intelligence anchors that they've been showing the updated version of max headroom it's a good thing. >> i'm here. >> we don't want to advocate for these things let's zip it. >> you'll do the heavy lifting today. although i did watch "60 minutes" last night about the electric cars in china and that will be something -- i want to talk to warren about that a

little bit he's smart. >> good, because i missed it i read the write-through >> i watched it for that reason. it wasn't on byd as much as it was on knee owe but they have a lot of startups over there but the government, we think we subsidize tesla, they really are behind these cars. scott pele seemed to think that's what we should do here. shocking "60 minutes" wants more government any way, we'll get to more warren buffett in a minute first a quick check on the markets. u. u.s. equity futures up on the markets. the president is going to delay the implementation of those new tariffs here our top story president trump in a tweet announcing yesterday he would delay that increase on chinese goods. he tweeted i'm pleased to report, might as well look at it exactly, i'm pleased to report that the u.s. made substantial progress in our trade talks with

china on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency and many other issues and as a result of these very productive talks, i will be delaying the u.s. increase in tariffs that was scheduled for march 1st. assuming both sides make additional progress, we will be planning a summit for president xi and myself at mar-a-lago to conclude an agreement, a very good weekend for the u.s. and china. tariffs on $200 billion in chinese goods had been set to increase from 10% to 25% on march 1st and china's shanghai composite surged 5.6% overnight, a big move think if we got 5.6% move. european equities also responding in kind, at least a little not to that extent, but green across the board and potential merger between two major gold industry players that

moved a step forward, talk about this last week barrett gold made an all stock merger proposal to rival new mont mining. barrick said friday it was considering the move ceo mark bristo said the combination would unlock 7 billion in synergies shareholders would get about 2.6 barrick shares newmont is in the process of buying smaller rival gold corp. for 10 billion but barrick says the deal offers a far superior opportunity for newmont. let's get to becky quick in omaha with warren buffett. i think "green book" was universal picture, which was controversial, everything is controversial now days ramimalek's fake teeth won best actor, i think, did they not

>> no, i think they did not. i didn't watch a minute of the oscars i didn't read any of the write-ups. i'm pretty sure that's not true. >> probably not. >> i'm telling you that did make it a pretty good -- to be able to about with -- i mean, they had to add teeth because freddy mercury had extra incisors did you see it in of the movies? i saw almost all of them believe it or not. >> i saw bohemian rhapsody i watched a bunch on flights we've been traveling a lot lately every time i'm on a flight i watch some of these things. >> i saw that. the favorite is very good. it's crazy whacky but it's -- >> i didn't see that. >> you did not see that. you didn't see green book? >> i did not. >> how about buffett, is he a movie buff >> warren, have you watched any of these movies? >> i saw the wife. >> i saw that, too. >> which was fabulous. >> i was hoping glenn close would win because she was so good and her daughter annie was actually in the movie as well, and she did a fantastic job.

>> who was she in the movie? the one who was leading him around >> yeah, she was the young. >> guide. >> yeah. she was the young person in the flashbacks but she's terrific and glenn was unbelievable. >> yeah, she was that was an excellent movie, i have to say. that was my favorite that gets my vote, too. >> she must have lost the rabbit vote >> yes >> going way back to the '80s, right? >> having seen fatal attraction. >> let's get to our special. go ahead, joe. >> i thought when you said the rabbit vote i thought you were eluding to the favorite because the olivia coleman won for playing queen ann and she had 17 rabbits as pets. oh, no, you're talking about that rabbit. [ laughter ]. >> becky, last night -- >> no a rabbit in a pot. >> mccarthy, the actress came out dressed in favorite-type costumes and she had a rabbit,

her right hand was in a puppet, a rabbit puppet while she was talking and the whole time she was getting the rabbit to look at her and it was like probably the best part. i didn't see that much i don't watch that much. my son was fixated. >> you lie sounds like you watched the whole thing. >> yes, he did he almost got them all right. >> glenn is a wonderful friend, i stay away from her easter. >> get to it you got 'em. let's go. >> let's bring in our special guest, warren buffett joining us just after writing his annual letter to shareholders warren, this is a big deal it's something that the investment community kind of waits on and sees as a must-read because you spend so much time actually writing this yourself. >> i do. too much. >> when do you start writing the letter >> well, this one i started very early because i had one section in mind, turned out to be the last section when i talk about

the american tail wind but i probably wrote that in late summer. and then i work around different sections but, it takes a long time. yeah i'm not a first draft writer >> well, for people who have been reading this for a long time, this letter was markedly different than what you've written the past few decades or so at the top the opening of letter in the past to this point has been berkshire's percentage change in book value as the measure that you thought was most important. >> right. >> this time you kind of stripped it out and said it's not the most important metric any way for a couple reasons one of which berkshire has change so markedly but also you think it's not the way you'll be measuring things in the future. >> no. it's not the more relevant figure, at least over time, not in my one-year period, but basically it's market value because we have become overwhelming an operating company and we hope to become

even more so than a company that really held a lot of stock and bonds. so, i've actually talked about that in previous reports i wouldn't have wanted to quit by the one i got clobbered by the one i was adopting the one that made me look good it was a good year to make the transition i included them both in. and you said it's different. i've always had the image that i am talking to my sisters i have two sisters they're both berkshire's pretty much their whole investment. they're smart. they're not active in business, so they're not reading about it everyday, but i pretend they've been away for a year and i'm reporting to them on their investment this year because we may be repurchasing shares, i tried to have the vision that they were talking to me about whether they should sell their shares

i was explaining to them exactly how i would look at it if i were in their shoes so it's dear doris and berty at the start and take that off at the end. but i'm talking to them. i'm trying to talk to them in a manner where if they're practically entirely in berkshire and thinking of selling some, here is what immaterial them to know before they made a decision. >> to do that you used a new description for coming up with it this time, which was the idea of having five grows, you being a timber company and having five groves that berkshire is invested in. you looked at each of them one being the non-insurance businesses that berkshire owns another being the equities bunch that you have. the final ones, the insurance companies, but you also have treasuries and cash that you're holding. and then businesses that you own part of, not all of would be the

five groves. that's pretty interesting. how did you come up with the groves somebody who is not so steeped in business can get their head around easily. >> berkshire, as dozens and dozens and dozens of company when analysts look at it, they want to go out and figure out how many boxes of valentine's we sold in our candy company. you can get totally lost in terms of looking at the forced buy trying to look at every tree because some of the trees are flourishing. some are decaying and some are huge and important and others are more or less twigs. so, i thought i would group the assets in a way that logical and where you could sort of figure out the valuation that you might attribute to that particular grove. i think it's a lot better than trying to describe 80 or 90 businesses with 390,000 employees. we're in one of the businesses

right now. and this is a very interesting business but we have jordans in boston, star in houston, we have rc willy. to go through every one and tell them about the store we opened, it's much better to look in groups because they make sensible groups. >> to that point, this is the ask warren show and we have gotten a lot of questions that have come from viewers, others from berkshire shareholders or long-time watchers i want to bring up a question that comes from marcelo p.-lima. he writes in and this comes from twitter, i think mr. buffett, you note that some of berkshire's trees are diseased and unlikely to be around in a decade how do we prevent healthy trees from joining them? and which ones do you have in mind >> well, i did say that, but i would not name the ones that have major problems from amore hall standpoint. we're going to keep running them but we have companies that are

on the down swing as well as on the upswing. it would be very tough the ones that are, as i call it, diseased, they're very, very, very small part of our earnings. you would gain nothing analytically and have 100 people go to work today feeling, well, we might as well give up or something of the sorts so i don't like to name them specifically, although you could probably figure some out by looking at our list of companies. some companies are just in the wrong industry, i mean if you made whatever it made, well, even making televisions in this country, that was the hot industry when i was young, and we don't do it anymore we sell a lot of them here at our store. so i would not like it if i were working at company x and my boss

had just got through saying, you know, you're in decay. >> you do name some of the big redwoods that you consider to be essential to the growth, though. i think you said that berkshire hathaway energy and the railroad, burlington northern santa fe. >> they're big both set records for after-tax earnings last year combined they earn right around $8 billion after tax and 8 billion is a lot of money to us. that's a third of our operating earnings we earn 24 large fraction of operating earnings last year, 24 billion. and those two companies alone earned 8 berkshire hathaway energy also has multiple companies the railroad is just one big railroad. >> let's talk about that operating profit number, $24.8 billion. a gap basis was $4 billion that

comes because of accounting change that came into play this time around, $20.6 billion paper lost on your investment holdings that you now count back in from the huge amount of securities you own and also the $3 billion write-down on kraft. you go out of your way to emphasize again you don't think people should be looking at these gap earnings even though you're reporting them this way. >> well, that's the final gap earnings 24.8 billion also are gap earnings but they're operating earnings and i think they were -- we had some outside tail wind on that, but they were 41% greater than any year we've ever had on operating earnings but beyond that, we have this large portfolio of stocks and also the write-down in kraft hines. but main thing was the portfolio stocks and we made a lot of money in stocks overtime, but there's been years when we've lost money, too and i tell the shareholders that

we expect to make money on stocks over time we haven't got the faintest ideas what years will be up or down and they changed the rule last year so that unrealized gains or losses are recognized through gap income that had not been true for dozens and dozens of years before so that changed our figures. but that's what i explained. that's what i tell doris and bertie what happened. >> this year it was a decline of more than 20 billion dollars you don't think people should pay attention to the upswing either, these are just fluctuating numbers. >> no. they should pay attention to how we do over ten years in the stocks we own, but actually the way the rule works now, every minute it's recorded earnings is market to market and we're buying stocks that in

some cases we'll hold 10, 20 maybe even longer years. and those companies are retaining earnings they're reducing the number of shares they have a lot of things going for them and i would, you know, i have bet a lot of money, 173 billion of equities at year end. and i love having those. and they will make is money over time but i have no idea what they'll do in the next year o two. >> let's talk through a few other questions that have come in from viewers just regarding berkshire while we're here eric le font wrote in and said, warren how have you structured greg and ajit's compensation now that they oversee dozens of different businesses >> our proxy will be out very soon shows what they received. i think unless there's some calendar quirk or something like

that they will each received $18 million last year. and the base salary is a high percentage of that and then bonuses is discretionary with me but they're doing a fabulous job. >> bonus is discretionary based on. >> it's how i wake up in the morning. >> on that same sort -- >> that may be the only one you'll read about like that in a proxy. >> there's another question that comes in regarding greg and ajit from the rational walk suggested question on monday given that abel and jain are not only responsible for running most businesses but also vice chairman shouldn't they be up on stage along with charlie at the annual meeting? >> you will hear more they will be up front with mie koe phones

ready to take on any questions that come. you know, it's not going to be that many years where the two of us are -- they will be up on the stage when we rearrange the format, rearranging the format, means rearranging me and charlie to some degree and it's lodgical for them i hope a lots of questions will get directed to them at the annual meeting i should mention one thing about their comp there's this rule -- and i may not be giving it to you exactly proper, but there's a rule for public companies that you get to deduct only a million dollars for compensation unless the excess is tied to some formula everybody pays running the super company of all time and attend to arrange the base valley so they're a million or 2 million or call the rest something that qualified under the irs where they get the deduction for it.

>> i didn't know. >> every company calls it and consultants know and everything so you have all these salaries and then they have something that makes it very easy for them to make a lot more money and that money is deductible where as i don't think what we pay in a way of excess, i think it's over a million is deductible but, i mean, it would be a joke. so we are paying them a fair amount of money, i believe, that's not deductible or almost any other company would see they're designing it so it is deductible. >> i always wondered why the base level -- >> it's ridiculous. >> it makes everybody feel good. they pass 10 or 20 years ago and immediately everybody, oh, we just had this revelation that now you really only worth a base salary of tiny amount. and they came to me about

designing something like this, you know it's just a joke we're not going to pay them a billion a year they have huge responsibilities. you'll see a different situation. i think the bonus i give them, i think it was 16 base and 2 bonus. i think the 2 is probably deductible >> so 6:19 on the east coast and you're already making friends. well done. let's get to another question from the audience this comes from brian chan he asks how are ted and todd's performance since they joined about eight years ago? the money managers who are there. have ted and todd performed better than index? charlie said recently that most money managers did not add any value compared to an index >> yeah. the first few years each of them came at a slightly different time as maybe a year to a year and a half or something different times.

and they got well ahead of the index and got paid compensation. now they got paid so it came in third so that it could be clawed back two thirds of it if they missed the second year and so on overall, they are a tiny bit behind the s&p each by just almost the same margin over the same time. >> over the entire period. >> over the entire period. they now manage 13 billion each. they've done better than i have. >> that's a good measuring stick. >> no, it isn't a measuring stick. i mentioned it because if i don't somebody else will so they also both of them have done an incredible amount of work in terms of acquisitions and todd in particular on our

medical venture, anything at berkshire -- we made an arrangement with lee enterprises in terms of managing our enterprises, ted handled all that got my approval on it, but a million details. and they're both contribute to all kinds of ways to berkshire but it has been a tough time to beat the s&p but that's the deal we've got with them. and they've got a small carry forward of deficiency to make up i mean, they had some clawed back earlier they made pretty good money. some clawed back because of the three-year lookback arrangement. and then now they've got small carry forward. >> okay. another question that came in --

>> but they've done better than i have, becky. >> tony dickinson writes in, what changes should we expect from geico with the transition from tony nicely to bill roberts? and how do they approach leadership differently >> they're two peas in a pod on that they've worked together so long. they're so compatible. they have the same feelings about geico. i mean, nobody can quite match geico's -- tony's feelings about geico. but there's just no change i was at a meeting of geico that they had maybe 40 of their top executives and everybody went around and introduced themselves and gave the length of time they've been with geico. the shortest time somebody said was 19 years geico grows its own. we're here at the nebraska furniture and will talk more about a story you have from the founder of nebraska furniture

mart coming up later right now we'll take a quick commercial break when we come back, we were also going to talk to warren buffett about the big drop in kraft hines shares on friday we'll talk about the markets we'll talk about the economy and much more. right now though as we head to the break, let's look at the biggest premarket winners and losers in the dow.

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get $250 back when you pre-order a new samsung galaxy. click, call, or visit a store today. welcome back to a special edition of "worldwide exchange." we're live in omaha, nebraska, with berkshire hathaway's chairman and ceo warren buffett. warren, we're just sitting down with you for the first time since the news last week that kraft hines put out. there was so much news it's hard to summarize it all. they came out with earnings that missed expectations. by the way, it's not going to get better in 2019 revealed there's an s.e.c. investigation taking place into accounting they wrote down the value of the brands by just over $15 billion. were you surprised by any of this news? what did you think of what happened because the street was surprised the stock was down over 30%. >> yeah. well, i may have learned a week or ten days before something

like the s.e.c. investigation. i'm not on the board but greg is on the board and i talked to greg and greg had been talking a lot to the head of the committee and he's a terrific guy, jack pope but the write-down, i do my own write-downs in my mind so i was not surprised by that although the accounting firms look at write-downs a little differently than i do. i would not argue with them on it i can give you some math that was substantiated. i've been watching -- i was wrong in a couple ways on kraft hines, but i think we talked lunchtime about the packaged goods brands losing some ground against the retailers. >> just over a year ago? >> six months ago. the glide, the packaged goods

companies are always in a struggle with retailers. our family had a grocery store for 100 years. we didn't have much bargaining power. but the really strong brands, they can go toe to toe with walmart or costco or whomever it might be but the weaker brands tend to lose out now the interesting thing about kraft heinz, this is still a wonderful business in that it uses about 7 billion of tangible assets and earns 6 billion tax on that. on the assets required to run the business, 7 billion, they earn 6 billion roughly after depreciation pretax, but we and certain predecessors but primarily we, we paid 100 billion more than the tangible assets so for us it has to earn around

107 billion, not just on the 7 billion that the business employs. and we don't have -- it would be wonderful if we could deploy another 7 billion and earn 6 billion, but it isn't there. so i think that when you're going toe to toe with a walmart or costco or maybe an amazon pretty soon, and you have a modestly good -- you got the weaker bargaining hand than you had ten years ago. the really classic situation is this if you think about it, becky, heinz started in 1869 all that time to develop various products particularly catsup and things like that the kraft part is a little more murky but goes to 1895 c.w. post those companies brought all kinds of brands out, all kinds of you know them, you had them

when you were a kid. they've been distributed worldwide through tens and hundreds of thousands of outlets. they had hundreds of millions, spent a fortune on advertising and their sales now are 26 billion. costco introduced the kirkland brand in 1992, 27 years ago. and that brand did 39 billion last year where as all the kraft heinz brands did 26 or 7 billion. so here they are 100 years plus, tons of advertising billed into people's habits and now kirkland, a private label rand comes along and with only 750 or so outlets does 50% more business than all the kraft heinz brands so house brands, private label, is getting stronger. it varies by country around the world, but it's bigger and it's going to keep getting bigger.

>> couple questions on that. first of all, does that mean you overpaid >> well, we did overpay. we didn't overpay for kraft. i mean, for heinz. we bought that originally. it was a 50/50 deal. >> with 3g we had two stockholders. then we overpaid for kraft and we wrote down 15 billion of that and that, you know, that's cba's way of looking at it actually the markets marked it down more than that. and probably quite properly. the thing to remember, you know how the stock doesn't know you own it you pay $10 for a stock, it goes to 8, it gets back to 10 i'll sell it. it goes up to 20 you say i can sell half and take all my money out. all those things are nuts. but in business, if we paid 7 billion for kraft which is all

it takes to run the business, it would still earn the same. the stock -- the business does not earn more just because you pay more for it. and we not only after buying kraft everybody started speculating things we buy so the prices of everything went up and on top of it we pay large premiums for it and we misjudged it. >> i hear what you're saying about the house brands and competitions from places like private label brand like costco puts out what about millennials changing habits how much is that younger consumers don't want the brands that their parents and grandparents wanted? >> there's some change in habits but if you think about it, people don't really change their habits that much try to think of the billion dollar brands that have been created in food and their private abeled there's very few billion dollar brands being created in food but you don't really see that

has not been a huge change the ability to price has been changed. and that's huge. >> we had an analyst on last week on friday talking about what she perceived as the problems with kraft heinz and she said she thinks they're underinvesting in the business that's 3g's way to cut to the bone and make this profitable. but she thinks the brands have been underinvested in. would you agree with that? >> i don't think so, but that's hard for me to tell. but i see -- i was on the board. i saw lots of innovation on different products and you saw them advertised to some extent i do not think, but i don't know this for sure, take food companies, i think innovation they've tried a lot of things, but how many things work if you look at kellogg and general mills and go up and down, coca-cola, i mean, how

many products really become big? you read about them. but take heinz catsup. it has 60% market, higher in other parts of the world it's a very, very, very strong brand. cream cheese is a strong brand for philadelphia in certain categories maybe in kool-aid or jello or something like that, they go back 75 years or something and there's some secular trend but that isn't the key. they cut costs not in innovation or product quality or anything like that they just took it out of sgna basically. they may have made a mistake in

terms of working -- i shouldn't say they we may have made a mistake in terms of trying to push hard against certain other retailers and finding out that we weren't as strong as we thought we were. >> let's go to one of the questions from viewers because we got a lot of questions related to kraft heinz. >> sure. >> is this the type of incident in time when you buy more heinz or do you pull the plug? >> we don't pull the plug on them we have never sold a share of kraft heinz. if we sold or bought, it has to be reported within two days. so, we wouldn't be able to do anything significant but it isn't our style we're partners with 3g on it so we have exactly the number of shares we had before i guess i should never say never at age 88 in terms of somebody else might do, but i can tell

you i have absolutely no intention of selling and have absolutely no intention of buying. >> if you're sticking with the business and it's 30% cheaper today, why wouldn't you buy more >> it isn't worth as much. >> so you think it was a fair write-down >> at 35, you have 1 billion, 200 million shares up. so that's 42 billion for the equity and we owe 30 or 31 billion. so whole company is selling for 71 or $2 billion as i mentioned it has about 6 billion of operating income. for 6 billion, would you pay a lot more than 72 or it doesn't look like it's going to be going up for a while, maybe -- they said it was going to go down in 2019 you know, there are other things i think where you get more for your money and better prospects.

i would buy the bet one way or other, part-time will eat more of our products this year than last year. >> if you see better places to deploy money, why don't you sell >> we can't as a practical matter move around 10s of billions of dollars that easily. but beyond that, well, if we were working with a million dollars or $10 million, would i have a position in it? no you move around with a million or 10 million and ted and todd can move around reasonably well with 13, but that's going to be difficult. you dance like an elephant not like some guy on "dancing with the stars." >> we have a lot more questions that have come in regarding the partnership with 3g and 3g's style of doing things, but we'll get to that in a little bit. in the meantime we have to take another break. when we come barks, we have much more from warren buffett,

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this is beyond wifi. this is xfi. [ joyful laughter ] simple. easy. awesome. xfinity the future of awesome. ♪ >> announcer: welcome back, you're watching "worldwide exchange." live from the nasdaq market site in times square. good morning, our top story, president trump announcing yesterday he would delay an increase in u.s. tariffs on chinese goods. he sited progress in the trade talks. said if it continues there would be a summit. they would plan a summit at mar-a-lago as a result, stocks in shanghai surging over night up 5.6% u.s. equity futures at this hour sharply higher this morning as well, up triple digits

as you can see up 140 on the dow jones, the s&p up about 11, nasdaq up 38 we're not that far from some new highs. pretty amazing right now let's get back to becky quick in omaha with warren buffett. you've got important things to talk about i don't know if you've talked about march madness yet, beck. >> nope, we have not do you want to jump in with that >> no. we can at some point, but he always offers up these things, they soundattractive he never pace off, ever, anything last year i think it was to get to -- >> it's because nobody wins. >> to get to the elite eight or something. let's think about a way where people -- >> no, no. we always have a sure winner, joe. last year it's true the favorites got knocked out early, but we did split -- there's $100,000 consolation prize for

whoever does the best. now, that got split eight ways last year, but the year before we had five people that came within one game and just the last games of winning the million dollar prize now, if they won the million, they would have have split it if all five won it, but there's a million dollar prize we're going to do it again this year and we limit it to employees of berkshire, but close personal friends of mine who have a brick may be entitled to enter. >> he invited you to enter last year and you didn't do it. >> no, no. we were doing other things let's do it again this year, warren w the creighton versus xavier thing they both have losing sort of records and they're not doing quite as well although creighton best georgetown and yesterday xavier beat villanova. i don't know if you saw it, it was pretty good. let's do something there and

let's see there's a net jet card i can think about. let's see who goes further. >> you can get another brick. >> i get 30 seconds on the program versus a net jet membership for you is added. >> got it. >> i'll tell you what i'll do, i'll let you name the bet, and i will let you name the stakes and we'll go from there. >> whoa. >> really? >> this is the honor system, joe. yeah. >> okay. let's do that. >> now you're talking his language. >> he's very crafty and very smart. he sent me a net jet card it had my name on it but it was absolutely useless i use it as a luggage tag. it wasn't worth anything >> you said net jet card you didn't say it had to work for any flights. >> that's a starter card that's a starter card, joe we have big things in plan for you. >> i think you think the market is expensive, warren i want to talk to you about that you don't like to say that and

say lrnl it will be fine, but you have a lot of metrics you're looking at like the market cat to gdp or gnp. that's -- that looks expensive there, right there are things that look expensive. and you're having trouble finding things so you need to be honest with us about that is it really expensive >> the market -- joe, it depends on interest rates. we've talked about that before if you tell me that 3% long bonds will prevail over the next 30 years, stocks are incredibly cheap. >> okay. >> because even i mention that kraft heinz earned 6 billion on 7 billion in tangible assets even if you pay 70 billion and you earn 6 billion on it, that's better than having 70 billion out. interest rates govern everything and if there were a way to short 30-year bonds and own the s&p for 30 years, i would give you

enormous odds the s&p is going to be 30-year bonds. now, we've had this period of extended long-term all rights not only here but around the world but now looks like we're not going to jack them up very fast so we may be in a new world the world that japan entered back in 1990 and if so, stocks will -- when we look back on it, will look very cheap but, you know, this has not been the history of the united states to have these continued low interest rates so, there's no -- if i had a choice today for a ten-year purchase of a ten-year bond whatever it is or ten years or buying the s&p 500 and holding it for ten years, i would buy the s&p in a second. >> that brings us to a question that a viewer wrote out in t 67, says from the annual report in the 13 f looks like berkshire was the least active in the public markets in the quarter when the stocks were the

cheapest you also did fewer buybacks in the fourth quarter when berkshire was cheaper. taking the foot off the gas in the fourth quarter conscious decision and based on what you just said, we got all these signs that look like the fed was not going to be raising rates in the fourth quarter, too. why wasn't that a buy signal for you? >> i well, i thought stocks were a buy in the fourth quarter just like i did in the third and second and first quarter but sometimes we have other things in mind, too, that may use a lot of money sometimes they work out. sometimes they don't but -- >> does that mean you were holding your cash in case a deal came through >> we had at least one deal possibly with a very large -- so i like stocks in the fourth quarter. but, i like -- i would like buying a business even better. >> is that deal -- >> incidentally i did say in the annual report we expect to be buyers of stocks this year we have not been net buyers, i should point out

the market has gone pretty much straight up. i still think stocks are more attractive, but i have trouble buying when everyday it's up. >> the deal you just mentioned, is that potentially still on the books. >> no. >> so it's not -- >> no, i don't think it is, no >> is it a deal here in the united states? >> is it bigger than a bread box? >> i'll give you a hint, it's on thisplanet >> so, you went out of your way in the letter to say that you do think buying businesses out right is more expensive even though you don't think stocks are too expensive. >> no question stocks now you have -- or businesses i should say, you have a huge, huge, huge buyer. and that's not only -- companies are eager to buy, too. but you also have private equity and i don't know whether private equity is flexible because they can call in their partners for

more money and all that. but let's just assume that they would have a trillion available. now, they use a lot of leverage. they call themselves private equity but they're really private debt to a great extent but that trillion might buy as much as, say, $3 trillion of assets if it was leveraged with $2 trillion of debt. well, the total stock market is something like $30 trillion and if you take the top five companies, you knock $4 trillion off that you're down to something where the buying power of private equity plus just the normal buying power from companies, it's just a huge amount of competition. >> when you start looking around, does that -- do you think the private equity companies are overpaying for this or can they make it work >> they obviously want to make the best deals they can. but they are in a game that is

so much more competitive than it was for them if you go back to the 1970s when leverage buyouts started which are the same thing they're doing now, but the name got -- lost its appeal there the deals you could make then were enormously more attractive than the deals you could make now. >> let me ask you one more question that came in from a viewer you've kind of answered this, but there may be a little bit more to the answer this is t-84 for the control room nick writes in why didn't a large acquisition happen for berkshire in the fourth quarter 2018 selloff maybe it was the timing of it, maybe it was so quick. >> well, in 2008, for example, we were going to buy constellation energy we ended up buying the stock and making some money on it. but that was part of a deal. when constellation fell apart, it was in the fall of 2008

well, i was watching the tape. dave was watching what was going on we called each other at the same time and he was on a plane with greg -- >> greg able >> yeah. >> that day. and we -- we contracted to buy it so we were ready to buy that and we tried other things. but we participated in marketable securities at that point, too, as you know. we spent -- i think we spent $16 billion in three weeks when nobody else was spending anything >> when was that >> between about september 15th and october 7th or 8th then we already had another $3 billion committed to dow which was not going to get taken down until later on we went through our cash pile pretty fast, too fast, actually. >> you have a huge cash pile right now. $112 billion

and that doesn't even count the other $20 billion in cash-like -- >> no, that does count but the 110 or something like that that counts 20 and, you know, i never get right down to 20 anyway, but we've got a lot of cash and we'd love to use it but we're -- private equity firm that's going to buy six to seven times what they call ebitda. which i don't use as a metric. they're going to pay more than we are if you pay too much for something, it doesn't accommodate you by earning more money to make you look good. and if we'd paid $10 billion less, they would have earned the same money >> this question that comes in, this is f-7 control room when you come across bad news on a holding for example kraft heinz, can you share the sequence of criteria you use to

determine if the stock is sale and buy and a bust and sell? what concerns you as to what is in back of a dip >> the stock market is there not to instruct me it's there to serve me so if there's bad news and the stock goes down, the question i have is is the long-term valuation changed? and, you know, there was -- well, there was certainly bad news with geico when we bought it, for example. but there was bad news in american express when i originally bought it back in the '60s it was the best investment the partnership ever made. so what you like, bad news about a fundamentally good business. then you got to make sure it's still a fundamentally good business bad news on a good business. we're better off because apple stock is down significantly. from where it was four or five

months ago apple will probably -- they may not, but they have said they're going to go down to cash neutral. they can do it either by acquisitions or dividends or repurchases. about $130 billion away from cash neutral now if the stock were at 200, it would buy 150 million shares we're way better off if it's at a lower price when we purchasing shares the worst thing that could happen from our standpoint with apple is it sells at $230 or something like that. they don't like buying as well at that price. >> we have a lot more to talk about with apple there are a lot of questions from viewers on that but we are coming up towards the top of the hour. to make sure we make this a good business, joe, i'm going to send this back to you right now >> okay.

thanks we have a lot more obviously coming up. two more hours with the oracle warren buffett we're going to talk a lot more about his biggest holdings and his view on the markets and the economy and much more. what the green new deal would do for berkshire hathaway we'll see. "squawk box" will be right back. what do advisors look for in an etf? don't just track an index, help me meet a client's need. is the fund built to sell or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully.

this is a special edition of "squawk box" live from omaha, nebraska we're speaking to warren buffett, the economy, markets, trade talks, and much more find out where the legendary investor is putting it to work plus all this morning's headlines and market moving news as the second hour of "squawk box" begins right now. live from the beating heart of business, new york, this is "squawk box. >> good morning and welcome back to "squawk box" here on cnbc i'm joe kernen becky's made her way to omaha

where she is speaking to warren buffett this morning fresh off this weekend's letter to shareholders equities responding to positive news, perhaps, on the trade skirmish, trade war, whatever you want to call it with china but other than that, here's what's making headlines at this hour barrick gold is proposing a merger with newmont mining the come by nation would result in at least a billion dollars in synergies. newmont has a plan in place to buy rival gold corp. and gas prices have risen 10 cents over the past two weeks. according to the latest lundberg survey, that puts the price at still a good price still 15 cents lower than it was a year ago and president trump, we alluded to this, has delayed an

increase on chinese goods that could have gone into effect this week on march 1st the president pointed to what he called productive trade talks between the u.s. and china all right. warren buffett's annual letter to shareholders released over the weekend. let's get to becky quick at some point you've got to find out if he has a favorite -- did he vote in the geico contest the cavemen are still my favorite politically incorrect. >> i'm glad they brought those back >> ask warren if he's noticed all these other insurance companies that used to be so serious, they're all trying to do comedy now. there's one where a guy has these stupid, he's riding a back with these disgusting calves they're all doing comedy because it worked so well for geico. >> the camel i think is winning the contest. >> i like him too. mike, mike, mike, mike, mike >> well, i was back at geico ten

days ago and the camel was running well ahead >> you should win some type of mad men or advertising -- you single handedly turned that into, you know, people need to do that. geico -- what the heck is a guy c -- geico? you ramped up all that ad spending and look at it now. they owe you the, the whole advertising industry >> joe, i am so glad that you remembered that i was the one that came up with the idea of geico gecko. people at geico misremember that entirely they think it was their idea i remember when sketched that little guy out i thought it was crazy >> neither one of us get credit where we -- you know, people forget what we do. >> i know that yeah our day will come.

>> let's talk about what joe was talking about. joe, stay there. the trade talks with china >> yeah. >> how big of a deal is that what have you seen on your companies, on your investments >> well, i see the monthly reports from the companies coming through and a fair number -- the tariffs have had some impact on 10% tariffs and they -- a number of them say if it were 25%, there'd be some big adjustments. some of the suppliers have swallowed over in china and some we split with them but it pushes prices up. i mean, there's no question about that but it hasn't had a big effect at 10% a number told me at 25%, the world changes. you either get a lot more money

for your product or your source it differently or you do something. >> so are you relieved to hear of the deadline being extended, being pushed off that march 2nd it's not all going to 25% >> i'm relieved there's still a chance some sense will prevail it is bad for china, it's bad for us if we get into some kind of a trade war. a and, you know, negotiations are tough. this is a big deal to both countries. and to some extent you're playing a game of chicken because it hurts both countries. and i generally think when two very smart countries have something very important at stake, they'll make rational decisions. we've been thinking that way with the russians since the

nuclear bomb that even though you got all kinds of tensions and people generally figure out what's best for themselves and the best thing for both china and the united states is to work out something. >> did you think there was valid reason for amping up these negotiations for saying, hang on a second, we're not getting a fair shake >> well, i think we haven't been getting a fair shake to some degree but i think we can sustain -- i mean, to some extent the united states can do things that no other country can do so as i think smaller countries want to run trade surpluses with us it strengthens their economy i think we've got a role to play in the world that way. but i don't think we can be uncle sam either. >> joe, you have some breaking news >> yeah. out of general electric. breaking to a lot of us.

didn't realize ge had this much money tied up in biopharma the company general electric is selling its biopharma business to danaher for $21.4 billion $21 billion of that will be in cash ge says it's going to use proceeds to reduce leverage, strengthing its balance sheet. there's a lot of comments about how from culp about how this is in keeping with their plan to reduce leverage, strengthen the balance sheet, and all the other things danaher, meanwhile, sees the deal to adjust the earnings per share the first full year. instead of us talking about this, me or you, i guess we should get warren's comments on this move. >> let's do just that.

i do want to bring up this is something, warren, that we got viewer questions about randomly. ge control room, t-102. brian wrote in the, given the recent turmoil with ge, do you believe larry culp is right for the job? and what would you inform him to do why haven't you invested in a company like ge? >> i think he should sell the division for $21.4 billion to danaher. ge should be leveraged they just -- they owe more money than they should at present. and they should sell assets to some degree. not in a fire sale at all. this is not a fire sale price. so i applaud what was just announced.

and i met larry. had a terrific record at danaher. and we are a big customer of ge. we are a big supplier of ge. you know, i've had some connection with the company for decades. they did call us in 2008 when they needed money and so i think all america's cheering for ge. i'm certainly one of those that is cheering. >> have they called you more recently >> well, i've talked to them off and on over the last year or two. but, you know -- but i've said the same thing pretty much is what i'm saying right here >> joe, you have other questions on this front? >> not so much on that i got a lot of things, obviously, that we want to talk

about. i guess warren probably does know ge pretty well. does he have -- i'd like a little more color to his comments on ge he probably doesn't want to do that what's your expression you criticize by just generally but you praise by -- >> criticize by category, praise by name. >> i guess i can't get you to do that on ge or immelt or anything -- >> you'll never get me to do that >> what a mess, right? >> i haven't seen their 10k yet. i want to get their 10k as soon as i can it may be -- it's probably out just about now and that's the document you have to read. >> well, it's up about 50% from the lows, i guess. >> yeah. but it's -- you know, it's

selling -- the equity is selling for about $100 billion and then they have a preferred issue that's $5 billion or $6 billion that most people don't know about that. and then they had, you know, something over a hundred billion of debt. on consolidating ge capital. that's the way to look at it and they've got a couple of very good businesses. but they were over-leveraged they've got to reduce the leverage clearly they're doing it >> warren, there's a question that comes in -- >> you could write a check for that, warren, if you really liked it >> that's true >> it's true that you could but you won't be okay i'm just paraphrasing. all right. >> there's a question that came in from a viewer they asked this because we're talking about ge and it's one of many companies looking at

unfunded pension liabilities this is t-24 how do you see the unfunded pension liabilities affecting our economy over the next ten years? >> if you're talking about the corporate sector, the unfunded liabilities have been working their way down so they don't have defined benefit plans. we have bought a number of older companies. so we have a fair number of companies with defined benefit plans. it's not a huge problem in corporate america. i mean, you have a pension benefit. there'll be others it's way less of a problem than it was 20 years ago.

the public sector, it's a disaster some of the -- it's interesting to me when you talk about those location problems. and all that sort of thing if i were relocated into some state with a huge unfunded menti pension plan, i'm walking into liabilities. but that liability isn't going to -- you can't ship it off shore. and those are big numbers. really big numbers is they may come -- you can delay a long time. i mean, getting pushed maybe somewhat but the politicians are the ones that have attacked in a good many states. when you see what they would have to do, i say to myself why do i want to build a plan that has to sit there for 30 or 40

years? i'll be here for the life of the pension plan and they will come after corporations and individuals they're going to have to raise a lot of money >> when you say that, the states coming to mind not looking at the statistics for awhile would be illinois and new jersey top of the list. >> as i said, i praise by name and criticize by category. >> let's talk about the decision of amazon to say forget it to a second headquarters in new york city we were with charlie munger on that day this was february 14th, just a week and a half ago. we were with charlie munger the day that announcement came out charlie had pretty firm comments on it. he said it's crazy states like california and others are basically driving the rich people out what do you think about that >> i heard charlie on that they don't have kids they don't -- and a good many of them are charitable. they tend to give things that are around them. and they don't use the services

nearly as much as the taxes they pay the average person so they use the hospitals. obviously -- well, a state like florida with no income tax attracts a will the -- a lot of rich people. when people relocate there, there's the fact there's no income tax is a real factor. and i don't know about those two specifically, but i have a feeling their retirement plans are in pretty good shape nebraska is in very good shape far long time. we've really been against the state having any debt.

>> what we're talking about is state versus state you're now talking about some new taxation plans that are being recommended in congress or by specific senators or congressmen that are similar to some of those policies we've seen many the state. elizabeth warren with her wealth tax on anybody over $50 million. aoc with her plan to tax anything above $10 million at 70% rate bernie sanders with his estate tax going up to 77%. if those policies are enacted on a national basis, do you see that same sort of trading off where people would potentially leave the united states? what do you think about these plans? >> it's an interesting question. i would say this if tomorrow everybody in the world had a chance to make a one-time change in where they lived, 2 billion families all

over the world, any time they're only going to get to make the change but they would get transported free to any country they want to g, their family, and have citizenship. what do you think is going to happen tomorrow? >> a lot of people coming to the united states. >> very few people are going to leave. north korea might have a small decrease in population the point is, i mean, this is an incredible country and it's true that right now we're raising $3.3 trillion and spending probably $4.3 trillion. we have a deficit of about a trillion in a very good year in the cycle. you can probably take it to 2%, 3% deficit and not have the ratio of debt. we're out of whack on it

you can cut spending and raise taxes. but i would say that the wealthy are definitely undertaxed relative to the general population. >> but your answer -- that was almost a dodge of the question if these policies drive out the wealthy people, sure if you've got your choice of where to go, everybody would want to come to the wealthy state. >> i think most the people that -- the rich people -- mark rich being one of them -- they leave because they -- in his case, you know, he's leavings before the feds pick him up. and i don't think -- if you offered most of the rich people if they were sane, anyway, and you said if you stay we're going to take half your net worth and if you leave, you can take it all with you and you're 88 years old like me. am i going to leave the united states i could move -- south dakota has no state income tax.

wyoming has no state income tax. we've got two states that borde nebraska if iowa which is right across the river had no income tax, i wouldn't move. now, i think people want to come here i think if you made that offer i made, the united states, there'd be more people coming to the united states than any place else they would come if the deficit was $1 trillion or $1.2 trillion this is the land of opportunity. >> do you think they're good tax policies >> warren, you're making a decision to leave all your money to the private sector in terms of charities i assume you think maybe it'd be better spent there than by the government isn't it policy that it's just not the right idea to just -- what's already a bloated, what

some people would think, a bloated enemy and address the spending side. otherwise you ought to reconsider if you think the government is so good at spending money, why leave it in the private sector give it to the government and let them do it you seem to understand that it's better treated if you do it philanthropically. >> i've got about four choices, joe. i mean, let's say i have $80 billion. ai could spend it all. but even to spend it all, i would have to sell berkshire sto stock, so the government would then get 20 if they wanted to spend it all i can give it all to your wife then there's no tax. i could give 4 million people $20,000 each and there'd be

no -- well, there'd be no tax on it as long as i make gifts to separate people up to $20,000, i could do that and there's no tax. one thing you could do, the estate tax now, you're allowed to give to charity. 50% cash, 30% appreciated stocks and have it deductible from your income they let you essentially deduct all at depth you could have a limitation that you only get 50% to philanthropy and treated same way actually as if you're giving away income there's a lot of things you can do with tax law. the tax and i think that one way or another when the forms for a

hundred have gone from $93 billion to $2.7 trillion since 1982, the market system as it gets more specialized will give more and more to the top people. if we were back in 1800 and all works on farms, you'd be more than i am. but the top person to one and a half to maybe two times. buzz he we get more and more specialized, worth $30 million to fight now, he's worth $30 million to -- as we get more specialized, the rich will get even richer. and the question is how do you take care of the guy who's a wonderful citizen and father and it just doesn't have market

skills i think the earned income ax is the best way to address that question however you come at it, i'm fine with it. >> okay. we'll continue this conversation, obviously. inequality is a big issue and it's already royaling politics at this points we can talk about that in a minute, but we'll go to joe now because we need to take a break. >> thanks, becky coming up, a recap of this morning's headlines. including the deal with danaher. plus more from warren buffett. ayun u're watching "squawk box" on cnbc people know aflac... aflac! ...but not what they do. so we're answering their questions. aflac is auto insurance, right? no. uh uh. is it homeowner's insurance? no... uhuhuhuh! is it duck insurance?

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welcome back to "squawk box. we're going to have much more with warren buffett in just a couple of minutes. let's check on the market. this morning we're up triple digits on the dow. those aren't the best levels at this point the s&p 500 indicated up another 11 points this morning pretty amazing that puts the -- that would put the s&p over 2,800 which, you know, classic anyway, with everyone -- all e

the -- pulling in their horns, their bullish horns. again, that's a lot of people's year-end target or well boabove. asian markets doing well check out shanghai 5.6% on the news from president trump vis-a-vis the trade skirmish war with china. let's take a look at oil prices which were strong earlier. the dollar has been kind of flattish for awhile now as interest rates aren't going up for a time and there's gold which is unchanged on the

session. all right. becky, they're making a lot of -- i like those hand movements. i can see you on a monitor i'm watching you oh, don't do that. is that your age or your iq? >> i just lost him i lost you >> when we return, we'll head to omaha to hear from becky quick and warren buffett looking forward to talking electric cars and tesla and dyd after that "60 minutes" porert which was before the oscars. "squawk box" will be right back.

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breaking news out of ge which we told you about earlier. the company selling its biopharma business to danaher for $21.4 billion. $21 billion of that in cash. they're going to use the proceeds to strengthen the balance sheet. they expect to close during the fourth quarter of this year. danaher is sharply higher on the news as well on adjusted earnings it will add to danaher's

results. although on a reported basis, it will cut eps by $1.15 to $1.20 ge will still have a go-forward health care business of $17 billion because some of the health care portfolio of ge isn't going. pharmaceutical diagnostics will remain with ge danaher is going to borrow some, issue some debt, use cash on hand to make the acquisition which is part of culp's strategy to reduce debt, strengthen the balance sheet, reduce the leverage of general electric which is now up almost 12% on the news and remember it was down -- i think it broke under seven breerly in it's most recent sledding we saw at the end of last year. so if you base seven as the low, you're down back to 12 big move if you were able to buy

ge at the lows and a major deal in the drug sector spark buying roche that was 122% premium. spark working on treatments for hemophilia and huntingtons disease. when we return, much more from warren buffett and becky quick in omaha we will be right back after a quick break. this is loma linda, a place with one of the highest life expectancies in the country. you see so many people walking around here in their hundreds. so how do you stay financially well for all those extra years? well, you have to start planning as early as possible. we all need to plan, for 18 years or more, of retirement. i don't have a whole lot saved up, but i'm working on it now. i will do whatever i need to do. plan your financial life with prudential.

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oh it's him. good call. get the data options you need and still save hundreds of dollars. do you guys sell, other dogs? now that's simple, easy, awesome. customize each line by paying for data by the gig or get unlimited. get $250 back when you pre-order a new samsung galaxy. click, call, or visit a store today. welcome back to a special edition of "squawk box." we are live with warren buffett in omaha, nebraska warren, thanks again for your time this morning. we've talked about a lot of things so far, but we have not gotten your take on the economy to this point. there was just a federal reserve report out on friday that suggested that gdp for 2018 is probably going to come in slightly below 3%. what do you think the economy is doing right now just based on your businesses, based on the receipts you see, the companies you track that you have major shares in? >> right now just based on the

monthly statements i get and some cases i get other data in between. overall things are a little better the rate of improvement has tapered, but it certainly hasn't flattened. now, that could change next month. home construction has been disappointing. but most of our businesses -- i've seen other figures on retail that has been strong. i would say our retail figures in january were not strong but january is a peculiar month. that can be affected a lot by weather. any retailer will always look at the weather. right now things look fine >> when you say it's a little better, that's relative to when? what's your comparison period?

>> i'm saying it if developed as i see in january and february for the whole year, i think we would probably beat our 24.8 billion, but that would depend on insurance -- >> on the operating profit >> yeah. but business looks decent. it's not galloping ahead and the tariffs having a little effect at 10%. they went to 25%, that would change things quite a bit. and i do see some inflationary things i don't see anything to be alarmed about at present but incidentally, if you told me gdp would be down this year, we'd still be doing the same things pretty much >> what inflationary signs do you see at this point? >> as i get the reports from the

companies, they say these were all material costs going up. and now oil being down helps us. that's the basis for a lot of material cost. >> you mentioned that housing has been weaker. home building. why do you think that is >> it's puzzling because, you know, before 2008, you know, we were running higher i mean, the one obvious answer -- you expect household formations to go way down and the recession. but you had this big trend from home ownership to renting. so that's probably changed by five percentage points well, five percentage points when you're talking about 125 million households, there are people living in rental units rather than housing. that configuration has really changed.

and i would have thought it would have turned back as people got jobs back and all of that. single family construction is really -- i think it's been quite weak compared to what you expect after ten years of recovery and with a stock market quadrupling from the lows. people are just making different choices. >> jay powell, the chairman of the federal reserve is set to testify before -- some of the downturn you saw, do you think he made the right move by signaling is much more dovish take last quarter? >> i don't -- i don't second guess him at all i think he's a terrific choice for federal chair reserve.

i saw him make a lot of good decisions for the united states government he's a smart man he's very level headed he understands both business and economics. i don't think you're going to have a better chairman than him. i will never second guess him. >> i know you don't make a lot of investing decisions based on what the federal reserve chief or anybody else is saying, but what would you be interested in hering from him. >> i read what he does but it doesn't nest it in it. you know, the amount of money we're going to spend on the railroad this year, energy we're plowing aed head we know the company is going to make a lot of progress over time >> couple of question that came in from viewers when it comes to the economy.

t-19, control room rashad asking do you think he 10-year yields are likely to rise from current levels in the long run i don't know what the long run is is -- >> i'm amazed that ten years into the recovery this is not classical economics to have trillions and trillions of dollars still at negative interest rates with the world doing really very, very well you know, i don't understand -- they've got to explain it somehow. but that's the real question for stock investors are are these rates more or less a new normal? people who taught the japanese race in 1990 couldn't possibly stay where they were, you know,

that turned out to be suicide for the people that shorted the japanese bonds and so on we live in a world that wasn't described in -- >> i think central banks did what the had tootsds -- we'll do whatever it takes. the only one that can say that is central banks i think central banks behaved very well postthe recession. >> you mentioned twice where the interest rates stay at low levels will it work out better for us than it has for japan? >> the answer is i just don't know but japan also has a declining population and no energy of resources. we're a different case than

japan. >> we're here at nebraska furniture mart here today. you were talking about rose blumkin. she came here in 1917. >> yeah. she came over here on a boat from yokohama and she landed in seattle. i've got the manifest of the boat here and i've got her entry papers and she couldn't speak a word of english. red cross got her to ft. dodge, ohio where her husband u hunt spent two years ago. to say decided to come to omaha. and she sold used clothing and did various things had four children. and 15 or so years later she'd saved $2500. and you're in what was -- became

the larnlest foam turn i-- largt furnishing store the punchline is she couldn't read or write. and i've got a contract here that we signed this is what i came out with me. i typed this up 1983 it's really just one page. this is the signature page here. and that's her signature at the top. as you can see, it's just a scrawl and we did not get an audit. we did not look at the profit. i just asked, do you owe any money. she said no. thavs it >> how much did you pay? >> well, at that time we

bought -- we rearranged things within the family some so we, in effect, bought 80% and the value of $60 million on 100% basis. but we had -- we just -- we shook hands. and then she went onto work until she was 103. if of my mores are out there, that's the how we check. when the family sat down for dinner, they sang "god bless america" before eating you know, it's an incredible story. >> warren, in the annual letter this year you write about the american tail wind >> yeah. well, as i point out in there, on this march 11th in a couple

weeks it'll will -- i paid $114.75 for three shares of citi service preferred. but you've had been a pension fund and you put a million dollars into the s&p 500 and reinvested it during my investing lifetime, that million would have turned into $5.3 billion. you would have gotten for every dollar you put in, you would have gotten over $5,000 without ever reading the headline, -- o just picked america. and if that isn't the tail wind, it's more like a hurricane american business has done incredibly well. and america's done incred bbly

well and there wasn't anything here then and now you have $108 trillion of household wealth in the united states. you know, we've got something that works and that famewowe had a frame wt unleeched human potential. just think of those periods one of which i experienced and you couldn't help but you had to blame america nothing. you didn't have to pick a stock. >> is that worked the last 77 years. but there's a question that came in, t-29, this is from koth bak baker. is it still market neutral and the best investment? >> yeah. because most people don't know how to pick stocks and most of the time i don't know how to pick stocks. it's not an easy game.

and by definition, people are going to do the average. take everybody in ak regat half of them are b-- as i've told, i've instructed the trustee to put 90% in an s&p 500 index fund and 10% in governments. just for feeling of security but there's been no better bet than america there's managanother question h. would a strong sustained shift to the left on fiscal and economic policy rip away at american business tail winds moving forward >> all my life i've been hearing half the country say that the

other -- the person favored by the other half wins, things are going to go to hell. so i pointed out in my decision i've lived under 15 presidents 14 of them i've ninvested under i didn't invest under hoover in this last election in 2016, most of my friends were for hillary. they thought, you know, sell stocks you know, dig a cave do whatever it might be. i told them they're crazy. you do not want to have a political view in investing. and most people put it through a political prism. they just can't keep kaep. the gla if you'd been a staunch democrat through the last 77 years, you'd have missed out on a lot of the party

>> what about now when the parties are kind of in flux? donald trump was not a true republican bernie sanders wasn't even a in democrat until recently. he was just a socialist who caucused with the democrats. >> heefs -- he was an interesting candidate. i would say that 90% of the people who voted for him hadn't heard of him two years earlier that's really unusual. it's given hope to a lot of people entering this time. when you look at what trump did, people look now and say that could be me. so sanders, the big appeal i think he had was he came -- he had unusual authenticity they do move around as the polls come in and their advisers come

in you had the feeling when you listened to bernie that he was saying exactly what he believed. you can agree with it or not, but that's a very appealing characteristic in a candidate. may not be enough to carry anybody to victory, but it is -- it makes people notice you they really do notice to some extent that you believe what you're saying out there are. he was talking authentically i absolutely give him that. >> do you agree with his policies >> i agree with certain things that make him mad. i don't like the campaign. and i think the inequality gap has widened and will continue to widen. unless something is done about it but i also believe the most

important single thing, to have more eggs to distribute around i don't want to do anything to the goose that lays the golden eggs we've the goose that pllays mor and more we hope to have something that works in terms of turning down goods and services people want the question is what happens to the people who's a decent citizen and doesn't have market skills and we can solve that. a rich family can handle that. they've got six children one is just another in the market, that's six times what it was when i was born in real terms. so we can take care of people and we should. but we shouldn't screw up the market system. >> well, bernie looks mild compared to some of the candidates running to the left of him

>> that's because people saw how it worked for them >> this is another one written in this is based off a play we've had conversations with jamie dimon. i've given republicans money he said the question -- first question, warren, are you a card carrying democrat? i said no, i'm not i don't think eat edge in tho virtual. by the time they get in politics, they sort of stake out their positions. although they move them in a period like this when they move further left you see people that sort of had a new vision all of a sudden because they saw bernie.

but no i will vote for more democrats in i wish president at the university pennsylvania. i ran for delegate through that. >> when we were just out with charlie munger, he said he didn't think much of too many politicians but he did like what mike bloomberg did in the scity of new york. what do you think about bloomberg as a candidate and howard schultz running as a third party candidate? >> i will answer you on non-political. i'm for him. i think he would be a very good president. i mean, he and i disagree on some things, but i think that he knows how to run things.

i think he's got the right goals for america. he understands people. he understands the market system and the problems of people that don don't fall into the market i would have no trouble being for him. howard schultz, if he -- well, he says he's going to run as an independent. if he ran as an independent, i think he would take votes away from any democrat. i think it would be a mistake for him to run i think generally third party candidates, they're going to hurt one side or the other they're more likely to hurt the side because they're closer to that view. they pull more people away that

this -- wouldn't otherwise i hope no third party candidate runs, pulls any significant amount of those. there'll always be a couple of people that file but i think third t -- we're up against the top of the hour when we come back, we'll have warren buffett answering more of your questions a lot of changes that were just announced. meantime, look at the futures this hour. dow futures up by about 137 points after it looks like the tariff deadline is put off s&p futures up by about 12, the nasdaq up by 41. we will be right back thhi special edition of "squawk box." sfx: [phone ringing] you still have service? call the insurance company it's them, calling us. it's going to be a week before they can get through on these roads

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welcome back to a special edition of "squawk box." today we're bringing you a live interview with warren buffett, the oracle of omaha. we've already heard from buffett on kraft heinz >> a wonderful business. >> on apple. >> the worst thing that can happen is it sells at $230 or

something like that. >> on markets. >> i still think stocks are more attractive but i have trouble buying one every day. >> and there's still one more hour of warrenbuffett answerin your questions on the biggest issues in business the final hour of "squawk box" starts right now ♪ live from the most powerful city in the world, new york, this is "squawk box. good morning welcome back to "squawk box" here on cnbc i'm joe kernen becky quick is live in omaha she is posing our questions and posing for some interesting screen shots that have made its way to twitter but the questions are going to warren buffett >> oh, no. >> you haven't seen them yet >> no, i haven't had time to look at twitter. >> i didn't know that went out >> i didn't know i was either. i thought it was just on the side

>> that's what i thought but there's a good one with you sticking your tongue out at me. >> yea >> i'm going to send it to you if you haven't seen it you got your phone, right? you can see it on twitter? >> i do. >> all right check it out >> i haven't had time to look. >> okay. i'm trying to conjure up some followers for you and for me anyway, here's a check on the markets this morning the futures indicated up 138 nasdaq indicated up 41 s&p indicated up 12. here are the stories investors are going to be talking about today. president trump announcing he's going to delay that increase in tariffs on chinese goods he cited progress in the trade talks and if it continues, they would plan a summit at mar-a-la mar-a-lago. stocks in shanghai surging overnight. and news breaking in the last hour, ge selling its biopharma

business to danaher for $21.4 billion. ge is going to use the proceeds to strengthen its balance sheets and expects the deal to close during the fourth quarter of the year i don't know why we would mention that without showing you the stock? because the stock is sharply higher for general electric. all the way up at $11.90 there it is. thank you. up almost 17%. danaher also trading sharply higher as well and a potential merger between two index players. barrick proposes to buy newmont mining right now let's get back to becky quick in omaha it's bad enough we never know if the mikes are hot. >> how bad was the shot? holy cow what was i doing >> it's a good one

i'll send it to you. it's cute. >> show me your face do it for me no, do it for me now >> no, no, no. >> show me come on. >> i may have been born at night. it wasn't just last night. >> just between you and i. >> nobody needs to see my moldy looking tongue i'll tell you that much. >> come on make me feel better. stick your tongue out. >> misery loves company. >> it does that's why i'm begging you. >> i did it really fast. >> thank you >> it had to be quick. >> there is tivo joe, thank you for jumping in with me. i appreciate it. let's get back to our special guest warren buffett who is sitting down with us after just coming out with his annual letter to shareholders and just last week filing the 13-f that showed what positions you've been moving around as of december 31st. and there were a lot of questions that were raised by that i want to run through some of

the holdest, some of the changes that were registered and your take on why. first up, apple. you trimmed to 31.5 million shares that caught a lot of people by surprise they were wondering if you were selling in selling. >> no. one other fellow in the office had about 6 million or 7 million shares he had it before i did and he works with a limited amount of money. $13 billion roughly. if i want to buy something i've got cash around to do it so he sold about 3 million shares, i believe. cut it in half roughly >> so this was not even a conversation you had with him? >> it's his business they do not check with me.

i sometimes learn at the end -- well, i do at the end of the month. i see how their portfolio compares to the month before and see what they've done. >> this generated a lot of questions from viewers let's go to one t-14 if you loved it, meaning apple, undervalued at 200-plus and a trillion-dollar valuation why would you sell any in this past quarter? you answered it already. you didn't sell it >> i never paid $200 for any stock in apple >> what'd you start buying at? $160 >> average cost is about $141 or something like that. >> there's a question that also came in from rick. this is t-90 he said do you plan on adding to your apple position throughout 2019 and i want to bring up a tweet from jim cramer. he tweeted on february 5th, doesn't apple trade like berkshire is back buying i spoke with cramer about it and he said i don't know anything.

it's almost as if. are you interested at lower levels >> i'm always interested at lower lels in a number of stock we own there's some where we really can't go over 10 pl% and genera i don't like to go over 10%. it complicates life quite a bit. with banks it actually throws us into the bank holding company. there are stocks that i would buy that we own nine and a fraction percent and i don't want to drift over 10%. but apple -- i don't see myself selling. the lower it goes, the better i like it, obviously >> i mean, apple is not one of those 10% stocks don't you own about 5% >> about 5%. >> it's really not back to where -- it may have briefly,

very briefly got there but if it were cheaper, we'd be buying it. we aren't buying it. >> there's another question that came in. this is t-91 apple decelerated share repurchases to around $8 billion in the fourth quarter just when the stock price went down. apple repurchased zero shares when the stock hit a 52-week low. what are your thoughts on apple's repurchase deceleration? >> their debt is roughly equal to the cash. i think that would take $130 billion or so to get there but of course they could make some acquisitions on the other hand they're learning more than their dividend mentally i say to myself, we're

very likely -- a lot of things could change this with them. and the lower the price, the better it gets they should be at 4 billion shares, probably, in maybe three years so oit should be over 6% a that point i like that prospect then we might buy some ourselves. it depends on the price. but they will sell a lot more stock if it's cheaper than if it's higher. it's simple math we're better off if in the next three years apple is cheaper >> you loaded up on financials in the fourlt quart th quarter and six of your top ten holdings, i believe, are banks at this point. why so much emphasis on the financials >> they're very good at sensible prices

a couple of those we own a fraction of the next quarter maybe we have so sell something. i try to leave myself two years of repurchases but bank of america's been particularly aggressive on buying brian moynihan has done such a good job since taking that company over he was the most underrated bank executive in the country everything he said he'd do, he's done he sets tougher targets all the time for himself and he's been smart about repurchasing shares. >> jpmorgan is a new stake you had $35 million in the new stake. you raise it to 50.1 million shares in the fourth quarter is that your purchase? >> yeah. >> for a long time you held it

in your own portfolio. >> i've still got a little bit but that goes back years and years and years. >> so why jpmorgan now >> better question is why were we so dumb about not buying it earlier? and the answer was i was dumb not buying it earlier. but it's a very well-managed bank and banks are -- you can find a bank like jpmorgan earns 17% on net tangible equity. a business that earns 15% or 17% on net tangible equity, that's incredible in a world of 3% bonds. i mean, just imagine that you had a deposit account with jpmorgan that they made a mistake and they gave you 15% on it and they couldn't redeem it. what would you sell that account for? you wouldn't sell it for 200 cents on the dollar.

you wouldn't even sell it for 300 cent os think dollar you have an instrument that would be on the dollar which is way better than treasuries now, if on top of that, your deposit allows you to let your interest compound to some extent, now that instrument becomes worth even way more. because if you have an instrument that could compound at 15% for ten years and use the added capital, that's worth way more than three times tangible equity at current interest rates. way more a lot of things could happen to change that equation around, and the banks like all other -- almost all other -- including berkshire, including the banks that can be taken away

on the other hand, the fdic, they ended here recently because the fdic has $100 billion in it now. that money has all come from the banks. the u.s. government has not put any money in the fdic. people think that somehow the fdic is financed by the government it's guaranteed by the government but the fdic was started in january 1st, 1994. one time borrowed temporarily. but it doesn't have a dime of government money and that money -- now they got 100 billion in there and the banks are much better off because that fund takes care of the bank here and there that goes broke last year was no bank in the united states, no fdic bank went broke. >> let me slip in one more question before we take a break. oracle that was a stake that you suddenly popped up in the third quarter that berkshire had $2.1

billion. to see it flushed out quickly. was that you >> larry ellison has done a fantastic job with oracle. i've followed from the standpoint of reading about it, felt i didn't understand the business then after i started buying it, i felt i still didn't understand the business i changed my mind in terms of understanding, not in terms of evaluating it. oracle is a great business but i don't think i understand exactly where the cloud is going. i just don't know where that game is going. >> that leads us to f-4.

ibm bouncing back, how do you feel about getting out >> we got out at a lot higher prices than this but i'm not knocking -- the whole market's come back i don't mean it's at a high and then it's going down ten years ago, the s&p was at 666 and within a day or two of when we got together they were afraid of america and what happened. quadruple in ten ears. how many quadruples do you get in your life okay we're going to take a quick break right now. joe, back over to you. >> all right coming up, much more from the oracle warren buffett and this big-ass warren buffett show we have

before we break, president trump tweeting this morning oil prices getting too high opec, please relax take it easy the world cannot take a price hike fragile. he also tweeted about spike lee, believe it or not, and some of spike's comments yesterday checking crude prices, we're going to see a 2.5% drop this morning. that's pretty funny. it's pretty interesting after trump after the president tweeted. anyw, wnaydo 2.5%. "squawk box" will be right back. (vo) we're carvana,

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do you guys sell, other dogs? now that's simple, easy, awesome. customize each line by paying for data by the gig or get unlimited. get $250 back when you pre-order a new samsung galaxy. click, call, or visit a store today. welcome back to "squawk box. futures continue to trade up triple digits 140 now on the dow jones. the s&p will be back above 2800 if it were to close where it is right now. indicated premarket up 12. nasdaq indicated up 41 coming up, we have much more from our special guest warren buffett. we'll talk about some of berkshire's biggest holdings right after the break. so don't go anywhere we'll be right back.

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welcome back to a special edition of "squawk box." here's becky quick live in omaha where warren buffett is answering your questions >> welcome back, everybody we have a special guest today. berkshire hathaway chairman and ceo warren buffett we spent a lot of time talking this morning about the annual report, the economy, the markets, some of the individual stocks you've been buying and selling. but, warren, what we haven't spent much time talking about was this idea of what happened with amazon.

and looking for a second headquarters choosing new york initially and then saying forget about it once they saw the backlash that came up you're a company that has never really shopped around for deals like that. what do you think of companies that do get special deals from states >> well, i've actually helped nebraska a few times when the governor or somebody's asked me to call a company. and everybody does it. it is a competitive game on occasions. but it can be a little irritating in a sense when you're here and employing thousands of people and you want to give special incentives to somebody who -- which they haven't given you. and in some cases to be your competitor amazon is going to complete plenty in new york regardless. but, i mean, amazon is going to affect negatively the business

of many, many, many companies. in every state including new york as jeff bezos says, your gross margin is my opportunity >> does that mean you think new york was right to turn down the deal or to kind of second guess the deal that they had originally proposed? >> that's what happened. they both got to the alter, you know, then the dowry was changed in a sense i don't know all the details but you're in a tough position if you're a company and negotiating with public officials. because the public officials really can't necessarily be the last say whereas the company if the ceo says you got a deal, you got a deal and on the public side, you know, there's a city council that has to ratify something of the sort now, our experience in new york and buffalo has been fantastic geico went there and we got 3,000 people and the community's helped and

governor cuomo's helped. just generally it's been very, very, very good for us but i think if you're going to have a bad marriage, it's better to find out before they pronounce you man and wife you still -- they're both hurt a little bit the fact it went there. and it makes people think twice about doing a deal where the community may get upset about you one way or the other that the pligss can't deliver on it from amazon's standpoint, it hurts some of them not in a great big way for either one but it's no plus to have things fall apart so you really want to have sha sort of thing sealed before. but you need political figures a lot of things can tank it on the public side. >> you know jeff bezos very well in fact, you're working with him

and jamie dimon on this health care initiative between the three companies. can you give us an update on where things stand right now >> we've got a terrific fellow running it it is a long-term process. and when we get through, we have to not only have a better -- and i think we've got a lot of great things about our medical system. but it is costing up from 5% and if any other cost in america had gone from 5% to 18%, federal taxes have stayed constant around 18% for 40 or 50 years. same time, medical's gone from 5% to 18%. little double counting because medicaid is in there but -- so, we've got to stop the cost situation but what we're hoping to find is something that will not only do

a better job for our employees, but have them feel better about it and stop the ascending rate. every point you chew up of gdp com comes from somebody else there are only 100 cents in the dollar but it's very long-term. i mean, it's -- and we'll get something done the probability -- i mean, we're trying to change a $3.3 trillion industry that really for the people participating in it, they feel pretty good about it. the people getting the $3.4 trillion the hospitals aren't unhappy the drug manufacturers aren't unhappy. they may complain a little bit the people are not screaming change, change, change >> we will have more of our conversation with warren buffett. still have a half hour to go in this show. when we come back, we're going to talk a little bit more about

his thoughts on kraft heinz and his partnership with 3g. as we head to break, take a look at u.s. equity futures right now looks like the dow futures are indicated up 142 points the nasdaq up by 41. special edition of "squawk box" back after a quick break see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade they seem to be the very foundation of your typical bank. capital one is anything but typical.

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get $250 back when you pre-order a new samsung galaxy. click, call, or visit a store today. welcome back to "squawk box" on cnbc live from the nasdaq market site in times square. in case you missed it earlier, ge is selling its biopharma business to danaher for $21.4 billion. the majority of that, in fact, $21 billion in cash. ge says it will use the proceeds to strengthen its balance sheet. expect the deal to close during the fourth quarter of this year. both companies -- the shares in both benefitting nicely from the announcement with ge up 15%.

been a long time since the 12. danaher up almost 16%. let's get back to becky quick in omaha with warren buffett. the big ask warren show doesn't get nearly as much play and accolades as the big-ass warren show really it just doesn't. this is a big deal >> i explained that to warren in this past break. >> it happened again >> i'm trademarking the show, joe. you're infringing on my trademark. >> you know what i wouldn't be surprised. he did that on break he trademarked that on break >> he did. he also said it's better than being called the dumb ask warren show. >> or the jack ask warren show. >> maybe we'll get into why that name is appropriate. >> oh, speaking of, you know

what i'm coming to next. all right. let's get back into the serious business with warren buffett warren, mentioned before the break, we'd be talking about kraft heinz again. you own 26.7% of kraft heinz it came out with a lot of bad news on thursday with its earnings missing with an s.e.c. investigation being unveiled with a writedown of the brands and by the way, management saying on the call that they didn't anticipate things would necessarily get better in 2019 >> you forgot to mention we cut the dividend >> forgot to mention that. let's get to a viewer. what are your thoughts on kraft heinz following all the current news and what is your biggest concern regarding their future >> well, we have some very, very strong brands at kraft heinz and the company earns about $6

billion pretax but after depreciation earned $6 billion on $7 billion. it's a fabulous business it's -- in terms of return on tangible assets, return is much higher you go up and down the list, there are very few that are 7 billion. but we paid $100 billion more in assets and we overpaid in kraft i don't think we overpaid in heinz. and we borrowed money that related to projections that have not been met we were paying out a lot of money so we had very little in way of retained earnings our debt of $31 billion is higher than we projected originally to rating agencies

and so on. we need to bring it down and it comes down very slowly unless you sell properties i mean, even to cut the dividend from 250 to 160, that's $1.1 billion a year but there's a lot of -- there's real debt to be reduced. >> then with the addition of kraft as well. this is from james shanahan. mr. buffett, how would you characterize the relationship with 3g today? would you still consider additional deals >> yeah. i consider gyorgy and my associates over the years first meeting them on the board. i think he's an absolutelily outstanding human being. but a year ago, he pointed out

that the game had changed in terms of brands. brands that -- it's not as -- packaged goods are not as good as they were we learned that over the last few years. walmart's going to private label. some big portions on the other side if you got a good enough brand, you can also call -- costco dropped coca-cola some years ago and brought them back. >> do you see that ever shifting or do you think the game is

going to be this way weighted towards the retailers? >> well, it certain ly looks lik the picture. when you have amazon and walmart fighting, it's like the elephants fighting the mice get trampled. and i don't see the retailer's position getting weaker. i mean, you have -- it just -- you got -- walmart's done a very, very, very good job. you had doug mcmillon on but he carries around that list of the top ten retailers from the past. >> from every decade. >> to remind him, you know, it's hard to stay on top. and -- but now you've got a lot of over players too. two strong players that have got their foot to the floor.

and to some extent will be pushing their own brands >> in erm it is -- terms of the partnership with 3g, if brands are not as strong as they used to be, and as you said in the past it's gotten much more extensive to try to look at other consumer packaged goods companies and potentially buy them does that mean the whole 3g formula has been upended is it difficult to make it work if you can't go out and buy another company and cut costs? >> well, the acquisition, they just don't work as well. for one, anything -- almost anything at a price can be good. anything at a certain price can be bad that doesn't change in that you borrowed a fair amount in conjunction with it, it takes

awhile i do not see -- well, we're not in a position to buy additional brands and i have not thought it made sense as we've seen both prices change and the competitive position change somewhat i still like the businesses we have very much i'll be happy to be in kraft heinz five years from now or ten years from now. certainly happy to be be apollo's partner he's a terrific human being and very smart on business but you can say that we both misjudged the retail versus brand fight as to who would be gaining ground on the other. >> watching what happened to kraft heinz on friday after that news came out thursday, stock was down 30% for berkshire that was a loss of 3 billion dhrs on top of your share of the $13

billion writedown. i know you wrote the annual letter about how there are days because you have such a big portfolio, there are days with market volatility being back that you see a swing of plus or minus $4 billion i know you're like dr. spock, but is there any part of you that gets a little queasy when you see you've lost $4 billion in a day >> not in the least. assuming i like the business, depends which ones they are. but overwhelmingly during the fourth quarter, the things are going down "a," they were buying out their own stock. so i'm actually making money that day. there are stocks i would have kept buying though i was bumping up against the 10%

if you paid "x" dollars a pound for hamburger yesterday. and now it's at 80% of "x," maybe you have a little hamburger left in your refrigerator or something. do you tear your hair out over that or say this is terrific the price is cheaper what else in the world don't you like then you're paying the day before if you're going to keep buying it >> that's a very logical way of looking at it. joe has a question. >> mr. spock dr. spock is that whacky guy that wouldn't console -- >> he's the baby guy i finally said something that got your attention >> no, i actually wanted to ask about -- i wanted to ask -- i was just talking about dr. spock with my son. he was -- i don't know he was -- i don't know if you just let kids cry forever. i think you need to -- anyway. >> no.

no way. >> you can't you can't. that guy was wacko >> no. >> trying to explain freud too. >> good luck with that >> can i ask quickly about the "60 minutes" >> yeah. >> the basic thrust of this piece yesterday on electric cars was at least the way i read it was in this country i think we're starting to feel like maybe the subsidies that tesla gets aren't really a good way to do things necessarily. and over in china, they seem to be going -- how much they're subsidizing electric vehicles. as a result the thrust of the piece was by 2025, they're going to be doing a couple million vehicles we're going to be stuck down under a half million is that what we should be doing here in your view? or is there a reason you're invested over there in electric

vehicles rather than here? is that the way to do it should we be subsidizing it completely here in the u.s. or do market forces allocate capital better >> markets are better generally, joe. i mean, you know me. but that doesn't mean all the time but markets are better i actually think you're going have a lot of people pushing electric cars in the united states even though the subsidy is going away i think it goes away at 200,000 units or something like that and tesla is hitting it and so on i think electric cars are very much in america's future and i think much sooner than autonomous driving but listen, i'm all for the chinese doing what they're doing in terms of the planet you know, it's a good thing.

>> but you're invested over there. you're not invested here, right? >> oh, we bought the byd ten years ago. charlie called me up and said buy this that is totally charlie's position and it's done fine he keeps in touch with the management and all that. that is not something -- i could not tell you within 20% what the price would be i don't look at it. >> so that's not your thing. okay but just watching it, you know, the spin i was getting from "60 minutes" was that, you know, we don't understand certain industries you need full-on government assistance or almost subsidies, you know, ten time what is they are right now to try and win at something which is not surprising for "60 minutes. but i wonder whether you thought we're going to fall behind if we don't have a concerted

government effort for the industry >> there's a concerted industry effort from what i hear. we have an interest in pilot flying j so we have certain businesses that would be adversely affected i think we're going in that direction. and i think you'll see the american companies quite aggressive in that >> i was listening the whole time, becky. what do you mean that's the only time i got nothing else to do here but listen i was listening. i just liked that. you know how much i love mixed metaphors. my favorite is, like, it's a walk in the cake you know or there's just so many good ones if you can mix them up >> start working on your march madness ballot >> i know how you operate, buffett.

yeah why don't you just offer -- offer a hundred billion to someone who gets a perfect bracket? it's never going happen. it's never going to happen ever >> it has happened once, didn't it didn't a kid win a few years ago with a perfect bracket >> all you have to do is get through the first bracket and you get a million dollars. assuming nobody else wins. but we had five of them two years ago we had five of them that got to the last four games. perfect. >> that's amazing. >> four of them went out on one game the other went out on the other. >> last year you were going to let me take over your twitter account if -- >> no. >> why i want to do that again. >> whoa, whoa. whoa look out. >> if i get all eight. if i pick all eight, can i -- >> if he gets all -- >> the lead eight. >> you got a deal. >> wait. you better set some parameters on that.

how long does he get to keep your twitter account for >> listen, i have other people pretending to be me on twitter it's very cheap. >> all right thanks we're going to take a break. >> joe, take us away >> i will. coming up, your last chance to commit your questions for warren buffett with #askwarren. more of his answers after the break. u.s. equity futures at this hour, 146 on the dow we'll be back.

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welcome back to this special edition of "squawk box." we are live in omaha, nebraska, at the nebraska furniture mart with warren buffett. we've talked a lot about a lot of things this morning, but i'd like to go back to your thoughts on the overall market. we just had a conversation with charlie munger about a week and a half ago i asked him if he thought the golden era of value investing was over he said no, not for forever. but he thinks the game is a lot harder than it used to be. what are your thoughts in terms of looking around, trying to find businesses, trying to find pieces of business versus when you started? >> well, it's harder for two reasons. one of which is peculiar to us we've got a lot more money so the universe of possible things to do has shrunk from thousands and thousands of things that i used to look at when i had small amounts of money to a relatively few things

now. >> see, that seems to defy logic. i have more money so i have fewer things i can do. but it's got to be much bigger >> yeah. so no, there's probably a 100 stocks, you know, if we put $5 billion in something, and it is 10% of the market cap, which would be as much as it would be, you're talking $50 billion in market caps and $5 billion is 1% of berkshire's value if it goes up 50%, we make half a percent basically on value before tax 35, 40 basis points afterwards so and then the second thing is, i mean, obviously way more competition than when we start ed in 19 -- really 1951. the whole world was my oyster because people were not going through the manuals and you had to -- it is easier to get the data now for one thing, just

with the internet, far easier. i used to mail away for reports and go to the interstate commerce commission, the public utility commission, the insurance commission, i went to all those offices and dug through papers and now it is -- it takes five seconds for somebody to get the information. >> i'll ask this very fleetingly, has your position changed on bitcoin >> no. it is too bad, but bitcoin, it is ingenious, and bot chain is important, but it has no unique value at all you can stare at it all day and no bitcoins come out or anything like that. it is a delusion, basically. >> so we have gone from rat poison square to a delusion, kind of an upgrade. >> i don't know -- who knows where we'll be next year sorry it happens because people get their hopes up that something like that is going to change their lives and it is a very ingenious thing to figure out how to have a limited supply

and make it harder to -- more expensive to create, all that sort of thing, but it doesn't -- the function and this is explained to me by people smarter than i am, but block chain does not depend -- jpmorgan talks about creating their own, and it will be worth a dollar, it is matched to the dollar to dollar and it's -- i'm sympathetic to people who own it. >> there are a lot of questions that are kind of like the new bitcoin questions, we have several questions that came in to ask you about i'll go to t-46. this is forka design llc do you think the hemp and marijuana industry is a viable industry to invest in, even though there are still restraints on how capital can be moved and used we got lots of variations on this question. >> it is an industry that i don't really know anything about usage or otherwise >> never >> no, never no, i couldn't figure out -- i

couldn't even smoke a cigarette. you're talking to a guy that doesn't pick up things very fast >> what do you think about college athletes and whether they should be paid? i ask you this, having watched what happened with zion williamson, the duke player whose nike shoe blew up on his last week, it reignited the whole debate you're a long time watcher of college athletics. >> if i was an athlete, i think i probably have a view on i should be. you are -- if you're really good, you're an enormous commercial value and the rules of design -- are designed to prevent you from cashing in on commercial value, you know, for some period. the rich schools are going to win though harvard may have a resurgence in football >> this one came in, t-28.

do you see any irrational human behavior by investors or corporate americans right now? you're kind of -- you and charlie are like the police of corporate america. what do you see that you don't like right now >> well, there is always a certain number of people doing things that are designed to take advantage of other people. the market is so big and so there is always people that, you know, maybe it is bitcoin, maybe it is new issues. look at all of the things created around bitcoin there has been a lot of fraud and disappearance and all these kind of things it attracts sh s charlatains a lot of people get -- that's

going to happen and that's why we got an s.e.c. and why we got courts and but it will always continue it will always need policing >> there are a bunch of new technology ipos that are slated to come to market this year. i think back to what you thought about the tech ipos in 1999 and not wanting to be near them. these are different. a lot of these have earnings you think of airbnb, pinterest, is this different? how do you value this stuff? >> the big ones have losses and some of them report earnings differently than i would report earnings you think about it, you got a whole bunch of people on the other side who have an interest in marking up each stage of it, even if it is phony, sometimes they offer one price for the employees that already have the shares and then but then they have an artificial price so they

can say this round went at a higher price they're picking the time to sell to you i don't like -- i like it when i'm picking the time to buy in 2008 rather than having them pick the time when they decide this is the time we can cash in by selling to you. we're going to do you a big favor and let you buy in i have never been a big fan of ipos and i'm -- the valuations are kind of staggering now >> any in particular >> no, not that i -- by category. >> let's -- the category of those that you think the valuation is staggering is based on what, just earnings per the market percentage? >> if the company -- $50 billion, what should you expect it to earn in five years is it -- you should certainly expect it to earn $5 billion pretax, if you wait five years to get 10% on your money and people, they don't sell them

that way there aren't that many companies that earn $5 billion or more pretax fair number, but it is not that easy and it is particularly not that easy if you count what you're paying the employees in stock options and all that sort of thing. >> question came in, this is t-112 from todd marshall he says who wins more at the card -- the card game bridge, buffett or gates >> i probably play 100 times as often as bill, so that probably is the only game in the world where i would have a slight edge with him, very slight edge probably spent two solid days working on -- while you bring up bill gates, melinda gates has a book coming out on april 23rd, one of the best books i think i've ever read. >> what is it about? >> about women, and women around the world, about herself and very candidly told and the stories are terrific and i read it the other day in one sitting. only 220 or 230 pages, coming

out april 23rd it will be a huge seller. >> that's great. we'll look forward to seeing it. another question that came in, t-55, steve pilgrim asks, for those that lived our lives and careers reading and listening to warren buffett and charlie munger, to whom do they recommend our grandchildren listen >> i hope it is us but sort of actuarial freak. there is probably interesting writers that -- but i will tell you this the fundamentals won't change you're not going to discover anything new about investments in the next 50 or 100 years. it is buying a business. you have to know how to value the business, and you have to know something about how markets operate. but you don't buy a business unless you can value it. you have to learn how to value a business and know the ones within your circle of competence and the ones that are outside. that won't change. it really gets back to investing is laying out a dollar an hour,

and getting more back in the future and you try and figure out, you know, how much you're willing to pay for that bird in the bush compared to bird in the hand. >> we want to thank you for the three hours that you spent with us today we truly appreciate your time. >> thank you >> warren buffett, the chairman and ceo of berkshire hathaway. do you have that bracket ready >> i have been -- i'm getting into it now. i watched a lot yesterday. i watched michigan, michigan state, i watched cincinnati, connecticut. i watched xavier, villanova, and i like -- into the big east again, warren, just, you know, our friend bill murray, becky, you believe that, his son no longer coaches at xavier, he'll send me all of his crap from xavier he becomes a louisville fan. >> just so you know, bill is watch, he's been watching since 5:45 he's over in europe somewhere. >> i don't want his used xavier stuff. i can't believe he can just switch like that we would never do that, would we, warren >> he's a fan of his son, who

was coaching at xavier and now is at louisville you do the same. >> it is very disappointing. >> that was good golf temps for you. >> good wardrobes, yeah, exactly. thank you. warren, becky, thank you did you see your picture yours is much better than mine i look horrible -- >> i haven't had time to look. >> we got to go. thank you, warren. see you tomorrow make sure you join us tomorrow "squawk on the street" is next ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer who is back, david faber at post nine at the new york stock exchange futures up about 160 or so as the president delays tariffs on chee chinese goods. barrick gold in a big week with powell, the drug ceos, lighthizer, michael cohen on capitol hill europe is ho