QuestionerWe are here at Smith and Walensky, and this is where the lunch for the annual Glide Foundation lunch, the charitable auction that Mr. Buffett does is taking place this year. And Mr. Buffett, thank you very much for being with us today. We do appreciate it.
WarrenI'm delighted to be here.
QuestionerThe winner for the Glide Foundation auction this year, paying $3.3 million to have lunch with you today, what are you going to say to them to make it worth their while?
WarrenWe'll talk about whatever they'd like to talk about and for as long as they want to talk. And so any subject they want to get into, except what I'm buying currently, I love to talk about what they want to talk about.
QuestionerIs it common to be asked for stop ticks, stock picks in these lunches?
WarrenNo, actually it isn't. In fact, I can't recall ever being asked. But we talk about family. Actually, the couple of the board this year are bringing along two small children. And we talk about the children, raising kids, a lot of things. It's not all stock or business or finance at all.
QuestionerWell, let me be the skunk at the garden party and start asking you about some of those things. You are joining us on a day when we have watched the stock market continue to set new highs, the S&P, the Russell, and the NASDAQ, the Dow's not far off. And the question we always ask you is, do stocks look expensive to you at these prices?
WarrenWell, they are definitely, if you had your choice between buying and holding a few, 30-year bond for 30 years are holding a basket of American stocks, there's just no question you're going to do better holding stocks. So it's more attractive than considerably more attractive than fixed income securities. That doesn't mean they're going to go up or down tomorrow or next week or next year. But over time, a bunch of businesses that are earning high returns on capital are going to beat a bond that's fixed at roughly 3% for 30 years. And it's not my field especially, but actually they look stocks generally, which are their businesses, they're American businesses, 30 trillion worth of them, and they look cheaper than generally real estate.
QuestionerIs that the only thing that makes stocks look attractive right now is the comparison with fixed income?
WarrenWell, that's what you have to do in investing. I mean, you're sitting with some cash and you're bogging. You've had savings, and the question is, what do you do with it? You can buy a duplex next door and run it out to people and do fine
[2:30]
Warrenovertime. You can buy a small piece of farmland or something of the sort, or you can put it into something fixed income, bonds or bank deposits or whatever it may be. And stocks, if you look at American equities, American businesses earning a lot of money relative to the capital put in. And the reason stocks are worth a whole lot more than they were 20 years ago or 50 years ago. or 100 years ago is companies have plowed back part of the earnings. With the bond, you get it all out in interest, you know, you get your 3% or whatever it is, and that's what you have. With stocks, you get maybe a 3% dividend, but they're plowing money back or they're repurchasing shares or doing something. And over time, that just makes a huge difference.
QuestionerThe reason I ask about stocks sitting at these new highs and whether you think the market's expensive is because there are retail investors who are sitting at home. And when nightly news starts talking about how the markets are at new highs, some of the those retail investors who have been sitting on the sidelines think, oh my gosh, I missed my opportunity again. The last time we talked to you, you said you were still buying stocks. Are you still right now?
WarrenWe're buying stocks this morning. And I'd rather buy them cheaper. But I've been buying stocks since March 11, 1942. And I really bought them under every president, seven Republicans, seven Democrats. I've bought them quarter after quarter. Some of the buys were terrific. Some of them were in such good times. And I don't know when to buy stocks. but I know whether to buy stocks. And assuming you're going to hold them, wouldn't you rather own an interest in a variety of great businesses than have a piece of paper that's going to pay you 3% in 30 years or a short-term deposit that pays you maybe 2% or something.
QuestionerYeah, no argument. Although your concentration in the stocks you own has gotten a little more concentrated recently. There was a filing that came out not too long ago that showed Berkshire Hathaway was continuing to buy shares of Apple. That stock is also at a new all-time high last night. It's now, you own 5% of the shares outstanding of Apple. It's the biggest holding for Berkshire Hathaway at $56 billion. Have you continued to buy even since that filing?
WarrenWe bought just a little. About 6 million of the shares are attributable to another fellow in the office that's owned it for a considerable
[4:50]
Warrenperiod of time. The rest are my portfolio. But I bought just a little bit. I like to buy them cheaper. I mean, it's very different. We started buying, or I started buying, when the stock was maybe 100. I was buying it kind of as fast as I could. And then I ended up buying some as high, you know, a whole lot higher. I don't want to name the exact price, but a whole lot higher. That's, I'd rather have it go down. For one thing, if it goes down, Apple's going to buy a lot of stock back. They're already buying stock back. And if it goes down 10%, it means they get to buy 10% more shares. And my interest will go up 10% more. for spending that money and buying care. So I am benefited by going down. If I were to talk my book, I would talk it down.
QuestionerI spoke with an analyst today, Gene Munster. And he pointed out that the interesting thing about Apple is that for a long time, it was a very volatile stock. It kind of traded in this boom and bust cycle. Every time they had a new phone that came out, it would push the stock higher. If they didn't have a new release, it would drop. He said that it's still 65% of the business, but a lot of people are maybe looking at it a little differently. He wonders how you look at it. Is this a boom and bus cycle or is there something different here?
WarrenNone of the least. I don't, you know, I like to see the new release do well or, you know, that, but I do not focus on the sales in the next quarter or the next year. I focus on the, they won't tell you exactly how many, but hundreds and hundreds and hundreds of millions of people who practically live their lives by it. And if you look at that little piece of whatever it is, you, that is some of the most valuable real estate. in the world. I mean, that is, Fifth Avenue will never come close to that. I mean, it is, you've got, you've got hundreds and hundreds of millions of people with loads of buying power and able to do business or learn information or whatever it may be. And they, and it's part of their habitable living. I mean, they spend hours a day and it does all kinds of things for them. So that real estate is worth of fortune. And it's nice to have it added to. as they sell new phones, and of course, a lot of them are replacement phones. But that they're adding to hundreds and hundreds of millions of consumers that are never going to get to Fifth Avenue or they're never, and you are an indispensable part of their lives.
[7:14]
QuestionerI mean, it's an extraordinary product. So you don't even look at it like a tech analyst would or like a tech company for that matter?
WarrenI look at iPad. Oh, you mean, just in terms of how you value this stuff.
QuestionerOh, in terms of how you value this stuff.
WarrenWell, well, they. They've got to keep having the product that this huge clientele regards as indispensable. So it's got to be the best thing that they can tell us to when airplanes will arrive or, you know, whatever it may be. What the weather will be, what stocks are doing, you know, a million play games, whatever it may be. And that's important that their replacement products are looked at as super desirable. But one of the things that I grew to understand was we have a very large retailing operation in Brasca Furniture Mart. And if people went in to buy the latest iPhone or whatever it might be, if for some reason we didn't have it, you couldn't sell them anything else. They either went next door, which we didn't want them to do or they came back. But, I mean, it was it wasn't an alternative. And when you have a product that is there, you know, they didn't. that personal, that valuable. And, you know, they talked about the iPhone 10 costing $1,000 in that lot of money. I have a plane that costs me a lot, maybe a million dollars a year or something of the sort. If I used the iPhone, I use an iPad a lot, if I use the iPhone, like all my friends do, I would rather give up the plane, which is a million or a million and a half a year for something cost a thousand bucks. I mean, the iPhone is enormously underpriced. Now it's got competition, so you can't push the price. But in terms of its utility to people, and what they get for $1,000 someplace else, you know, you're going to have a dinner party, a good cost that. And here this is and what it does for you, it's incredible.
QuestionerYou mentioned airplanes and airlines, and I just wonder, are the airline stocks that you also still find attractive? Have you been adding to your positions there?
WarrenWell, we can't add. I mean, technically we could, but I don't want to go above 10% except in rare circumstances of the security. So we own nine and a fraction percent of the four largest. And I actually have to trim them just a little if they're repurchasing shares to stay under 10%. If I could buy 20%, I would have been happy to buy 20%. But so we've got about what we can handle.
QuestionerWarren, let me ask you a little bit about the news of the day.
[9:58]
QuestionerCampbell's came out with its own business initiatives, a strategic initiative today. I saw that. You saw that they're selling off a couple of units, the fresh foods, and the international. Does that make it more attractive or less attractive as a buying opportunity for something that could get wrapped in potentially to Kraft-Hines?
WarrenWell, I don't know that it changes the picture a lot. I mean, presumably they're going to get fair value for that. So if they would be calculated and they'd buy any acquires being worth. Now, it may be, it may or may not be tax efficient. I don't know the tax basis on those assets. But if they have a low tax basis on those assets, then it actually decreases value a little bit for another buyer because you've given some of it to the government in the process. But I don't think, I don't think in terms of any other company looking at it for acquisition, they are probably selling the assets that those companies would have been particular. they're looking for but I don't I don't know Campbell that well
Questioneryou're saying you don't know it that well makes me think that you haven't been looking at over considering it as a purchase because they're Dan Loeb would like to see somebody buy it my question is would Berkshire be interested would Kraft Hines be interested
Warrenwell Berkshire certainly wouldn't be but but but that's partly because we own Kraft Hines too we wouldn't do any but I think it's very hard to offer a significant premium for a package goods company and have it make financial sense they package good business makes high returns on tangible assets that it has but it is a tougher business than it was 10 years ago and the stocks are higher than they were 10 years ago so they we back in the 80s we were the largest shareholder of General Foods I've always liked brands and they're very good brands but in terms of the battle of the retailers versus the brands and the and the willingness of people to change their habits We had a higher propensity for that than 20 or 30 years ago. So branded goods, branded packaged goods are a very, very, very good business in terms of return on tangible assets. But they're not a sensational business in terms of where you can be five or ten years from now.
QuestionerLet me ask you about some news that Berkshire made a little over a month ago. I'm not sure it received quite the attention that it should have. You said that you were changing your views on buying back Berkshire shares.
[12:25]
QuestionerRight. for a long time you've said that if it got above 120% of book value, you would buy it back. That created a floor for the stock. Now you say that you're throwing that out the window. If you and Charlie look at it and you and Charlie Munger and agree on it and think it's worth it, you'll buy back stock. Have you bought back any stocks since then?
WarrenWe bought back a little, yeah. And we tie it now to intrinsic business value, which we should have done all along, but for a while book value was a good proxy for, it didn't fully describe It didn't fully describe intrinsic value, but it tracked it. And it was a reasonable proxy. And it's gotten to have less and less importance as we moved to operating businesses from investments. So what really counts is what are the businesses worth, along with the securities we own. And if it's at a discount to that figure, Charlie and I will buy. And we bought some.
QuestionerHow often do Charlie talk about it?
WarrenWell, we don't have to talk very often because they, If it's so close we have to talk every time it moves 1%, it isn't worth buying. I mean, so there should be a margin of error in our calculation. So we never talk day to day or week to week on it. But I know that what's in his mind, I know what's in my way. We're totally in sync. And we need a big enough discount, so we're buying it. And what we know is a price where the continuing shareholders are going to be better off because we because we bought it. We're running business for the people who are going to stay, not the ones who are going to leave.
QuestionerAbout a week and a half ago, or just about a week ago, I spoke with Brian Cornell. He's the CEO at Target, and he said that in his career, he's never seen a better environment for the consumer. That things seem to be filing on all cylinders. I just wonder what you see when it comes to the economy, what you see when it comes to the consumer.
WarrenWell, the economy really since the fall of 2009, has progressively gotten more. progressively gotten better, but it started from very low base. It started from panic. And we've now had nine, well, very soon, we've had nine full years of improvement in business. I mean, quarter by quarter. Now sometimes it looks like one percent or one quarter percent, sometimes it's two and a half. Now it looks even better than that. But business is good. Across the more businesses. business is good. It was good two years ago.
[14:53]
QuestionerIt keeps getting better. But American public, American public household wealth is over $100 trillion. And 250 years ago, you know, this island where nothing was worth, there wasn't anything here. I mean, 24 bucks for Peter Minuet. But the economy is firing on all cylinders. One issue that people have worried about is what's happening with trade and tariffs. Have you seen any impact on Berkshire's businesses or higher costs? or higher costs associated with any tariffs that have gone into place?
Greg AbelYeah, there are a few. Definitely. And we buy steel, you know, for example. I mean, at my tech, or we've buy a lot of places. And we are seeing some effects from that. And we're seeing some effects from inflation. I'm sorry, from inflation. We've seen more in the way of cost increases in the last year, if you go across all of our businesses. But particularly, But particularly building materials or we saw paint. I mean, the can it comes in. That is a lot more expensive than it was a year ago.
QuestionerHow much of the inflation is directly tied to the tariffs and how much is just from an improved economy and inflation you would expect to creep them?
Greg AbelI can't tell you exactly yet. And some of them are kicking. Well, newsprint. It pops up in different places. I haven't really done that. But I was seeing it. it in raw materials well before the the terrorist situation came up. But the terrorist situation will aggravate it significantly.
QuestionerLet's just talk about that. If you are seeing price increases coming through, that may lead you to the conclusion that you think the Fed should raise rates or continue to raise rates as they've been doing. The President, Donald Trump, tweeted out and talked in an interview about how he doesn't like to see the Fed raising rates. What do you think about that? Just as somebody who watches that.
WarrenWell, I think Jay Powell is a terrific. terrific chairman of the Fed. I've known, not known him well, but I've known him. I know people he worked with, and I've listened to what he's had to say. So I love the fact Jay Powell is chairman of the Fed. And he will do the right thing as he gets a lot more figures in than I do. I may get him a little faster on some things than the Fed. They may work their way through. But he will see it and he'll do what in his judgment is best for the American economy over time. There isn't a question about that. And maybe you'll make mistakes.
[17:23]
QuestionerI know I'll make mistakes, but he knows what his job is, and he'll do it. The president also tweeted about another initiative, and I just wondered what you thought about it. He said that after speaking with Indra Newy, we later found out that she was the one who had talked to him, that he would like to do something that he thinks will help American business. That's to say, stop reporting every quarter, maybe do it on a six-month basis. What do you think of that idea? Because you have focused on long-termism.
WarrenYeah. Jamie Diamond and I came out a while back. But I've always focused on the idea that, A, I like to read quarterly report as an investor, and we've got a couple hundred billion dollars worth of common stock. So I like to get those quarterly reports. I do not like guidance. And I think the guidance leads to lots of bad things, and I've seen it lead to lots of bad things. I don't think quarterly reporting itself, It's when you get into promising people what you're going to do every quarter, because I can't promise it what's going to happen. You know, we're in the hurricane season now, and you can change our earnings dramatically with a storm or something of the sort. So I think it's a very bad practice to be in the game of earnings guidance, and it is a game. I mean, you know, people play it as a game and then people adjust to numbers and all that. But I like to get the figures quarterly, and I hope that stays. that stays. I don't know if you follow Twitter very closely. My expectation is that you don't. Right about that. But there was a fake Twitter account, a fake Warren Buffett Twitter account that went from 20,000 followers to 200,000 followers in 24 hours by tweeting out all kinds of pithy sort of sound advice, things that said, folksy sayings that sounded like they could have come from you. Why don't you tweet more often? Well, I just don't see any reason. I mean, I put on an annual report. an annual report and I do not have a daily view on him. All kinds of things. And maybe I've got a guy in this copycat or imitator. Maybe he's putting out better stuff than I would. If he puts out enough good advice, I'll take credit for it. We have seen some CEOs who like to tweet very frequently, including Elon Musk. Yeah. He's certainly somebody who's tweeted a lot. What do you think about people who do tweet a lot? I don't think it's helped them a lot. No, I think it's, well, it would be particularly dangerous to
[19:43]
Otherdangerous to start commenting on Berkshire daily, which I never would do. I won't do it with you. But, no, I just think there's other things in life I want to do than tweet. I mean, I'm not that desperate for somebody to hear my opinion on this.
QuestionerWarren, it's your birthday today, your 88th birthday, and we want to wish you a happy 80th birthday. In fact, we have something that we've ordered up. The chefs here at Smith and Lewinsky, just to celebrate your 8th birthday. This year, they went out of their way to focus on the Coke holdings. It's your fifth-largest holding, so there's your happy birthday cake.
WarrenWell, that is terrific. I just wanted to talk to you about, at 88, you know, there's probably not a lot of new tricks that you can get taught. But I know that even though you don't have a smartphone, you do have an iPad. I have an iPad. I use it a lot. What do you do with it?
QuestionerWhat do you do with it?
WarrenWell, I keep it around on my desk during the day, and if I want to check anything in the financial market. in the financial markets. You know, that's an easy, very easy way to do it. But I look up things. I mean, it's what I do with a computer at home. And a computer is enormously useful for me. And the iPad is, you know, this is the one I have in the office in effect.
QuestionerDo you ever listen to any podcasts? Do you ever follow anybody else? What other kinds of things do you do with this?
WarrenI listen to a podcast from my friend at Tom Murphy today. But podcasts are normally, you know, they take a while. I can read faster than I can listen to one. But, but. I recommend that. It was done with David Novak. It's a 28th minute podcast. Any time you get to listen to Tom Murphy, I think it's terrific. But generally I don't because of the time element.
QuestionerWhat did you learn from Tom and Murphy in that podcast?
WarrenWell, I've learned, I've been learning from here ever since I met him at 1968 or nine. I mean, the very first time I met him, I'd learned. Tom Murphy liked Charlie Munger. That may be a better person than I would otherwise be. be. I mean, that's the ultimate gift you can give to somebody, and Tom Murphy's given that to me, and Charlie Munger's given it to me, and my dad earlier in my lives and so on. But he's a human being that, if you study him, I'm just talking about business, but just as a human being. And you want to have the right heroes, and I've had the right heroes, and Tom Murphy's one of them.
QuestionerTom Murphy's from Cap Cities ABC. Warren, happy birthday. Thank you for spending time with us today, and good luck with the lunch.
WarrenAnd thank you, and I may need a second helping, actually. That's a little skimp. It's a little skimpy on the Coke there. But guys, we'll send it back to you in the studio, Carl.
OtherThank you.