Warren Buffett: I Haven't Seen As Much Economic Fear In My Adult Lifetime

[CNBC]

Warren Buffett: I Haven't Seen As Much Economic Fear In My Adult Lifetime - Charlie Rose Interview

Posted By:Alex Crippen

Here is a complete transcript of tonight's Warren Buffett interview with Charlie Rose, airing on PBS. It was provided to CNBC by the Charlie Rose program.
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Charlie Rose:
Let me talk of the news of today. You have announced an investment of $3 billion in General Electric, along the same terms as the the Goldman Sachs --

Warren Buffett:
Yeah, almost identical.

Charlie Rose:
Why GE?

Warren Buffett:
Well, I got a call this morning from a friend of mine at Goldman Sachs saying they might be interested in such an investment. I'm familiar with the company. I've known the management, the current management, Jack Welch before Jeff Immelt. I've known him for decades. And so I understand their businesses. We do lot of business with him, and GE has been -- I think it's the longest running stock in the Dow Jones industrial average. It will be 100 years now it will be around. I hope I'm around then, too. And it was an attractive investment. And we have had a lot of money around, over the last two years, and we're seeing things that are attractive now.

Charlie Rose:
Are you looking at other things?

Warren Buffett:
I look at everything, Charlie. That's my job. I really do. I mean every day, I think about everything, yeah.

Charlie Rose:
I know, but cash is said to be king now. Are you sitting on a lot of cash so that this is the time for Berkshire Hathaway and Warren Buffet to look carefully at a lot of opportunities.

Warren Buffett:
Yeah, we want to use cash. The reason we haven't used our cash two years ago, we just didn't find things that were that attractive. But when people talk about cash being king, it's not king if it just sits there and never does anything. There are times when cash buys more than other times, and this is one of the other times when it buys a fair amount more, so we use it.

Charlie Rose:
There is a time to accumulate and a time to spend.

Warren Buffett:
Absolutely. You want to be greedy when others are fearful. You want to be fearful when others are greedy. It's that simple.

Charlie Rose:
What are they now?

Warren Buffett:
They're pretty fearful. In fact, in my adult lifetime, I don't think I've ever seen people as fearful economically as they are right now.

Charlie Rose:
Why is that, do you think?

Warren Buffett:
Well, it's because they -- they have seen the credit market seize up. They're worried about money market funds, although the latest proposition from government should take care of that. They've seen eight percent of the bank deposits in the United States get moved very skillfully, I might say, within the last couple of weeks from institutions that they thought were fine a few months ago to other institutions. They are not wrong to be worried.

Charlie Rose:
Is it being felt as people often point out on Main Street?

Warren Buffett:
Well, I've read about all the sales today. If you're an auto dealer, you're feeling it. If you're a furniture retailer like we are, you're feeling it. If you're a jewelry retailer, you're feeling it. I know some of these businesses because we're in them. Yeah, it's being felt, but it will be felt big time more if we don't do something about it, what's going on.

Charlie Rose:
The Senate will vote sometime this evening.

Warren Buffett:
Right.

Charlie Rose:
Are you satisfied with that rescue plan?

Warren Buffett:
Well, I don't think it's perfect, but I don't know that I could draw one that's perfect. But I'd rather by approximately right than precisely wrong, and it would be precisely wrong to turn it down. We need -- we have a terrific economy -- it's like a great athlete that's had a cardiac arrest. It's flat on the floor, and the paramedics have arrived. And they shouldn't argue about whether they put the resuscitation equipment a quarter of an inch this way or a quarter of an inch this way, or they shouldn't start criticizing the patient, because he didn't have a blood pressure test or something like that. They should do what's needed right now. And I think they will. I think the Congress will do the right thing. I think that they've -- you know, they got into certain arguments and they start worrying about assessing blame, and there is a little demagoguery, but in the end, something this important, they'll do the right thing. So this really is an economic Pearl Harbor. That sounds melodramatic, but I've never used that phrase before. And this really is one.

Charlie Rose:
Go through why that is true beyond the fact that there is a freeze on credit, beyond the fact that nobody is making loans, beyond the fact that banks don't lend to backs beyond the fact that treasury bills are at a low.

Warren Buffett:
Yeah. When 40 billion of treasury bills are sold like they were last week, seven day treasury bills, at a yield of 1/20th of one percent, that means the whole country is basically at the point virtually, or a lot of the country is at the point of putting the money under the mattress. One twentieth of one percent away from where it's betting to put it under the mattress. You don't want 300 million Americans putting their money under the mattress. This economy doesn't work well without the lubrication of credit and trust. And that's been lost. It's a huge problem. What you have is you have the major institutions of the world all wanting to deleverage. They want to take down their assets and liabilities. What seemed so easy to borrow against a year ago now looks like rat poison to them. So they're trying to deleverage. There is only one institution in the world that can leverage up in a way that's all a countervailing force to that, and that's the United States Treasury.
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More:
http://www.cnbc.com/id/26982338/page/2/

Video:
http://www.charlierose.com/shows/2008/10/01/1/an-exclusive-conversation-with-warren-buffett