Warren Buffett's Complete CNBC Interview

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The latest info from Buffett about the current state of economy.

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Warren Buffett's Complete CNBC Interview: Video and Transcript (1 of 2)

Becky: I'm here with a very special guest today - Warren Buffett. Warren, we know it's hard to get you out of Omaha, but very once in a while he does leave Nebraska. Today's he's in San Francisco, and he's here for a very special cause, campaigning, or actually trying to raise money for Hillary Clinton who is running for president.

We're going to get to all of that in a moment, but, Warren, first off, I just want to start off talking about the Fed. We spoke last night, talked a little bit about what the Fed rate decision means. Tell us again what it means to you as an investor.

Buffett: As an investor, the Fed action today means nothing. We will buy a stock that we like today if the Fed raised rates or if they lowered them 50 basis points. We wouldn't sell anything based on it. It just isn't important to somebody that's going to own a business, or a part of a business through a stock, what the Fed does. If you were going to buy a farm today, if you were going to buy an apartment house today, and you looked at it as a good investment, you would not sit around, you know, on pins and needles, waiting to see what the Fed did.

We bought Washington Post stock in 1973 and it's worked out over one-hundred for one and I don't know what the Fed was doing then. So it's not a factor in our thinking on investment decisions.

Becky: Still, when you're looking at broader issues, something like a bet on the dollar or against the dollar, as you've done in the past, it is something you have to pay attention to, what the Fed is doing.

Buffett: Well, it's a big macro factor. The Fed is not the primary determiner of what happens to the dollar. Now it's true that when you have a weak dollar like we do now, if they take the rates way down, it will put more pressure on the dollar. But the real determinant is the current account balance, the trade balance. And over time, if you keep shipping two billion dollars a day out of the country, as we do of assets, you put pressure on the dollar and that's what's happened.

Becky: There are some people who, for the most part all of the economists we've spoken to say they expect a 25 basis point cut from the Fed today. There are some people, especially some market players, who are pushing for a 50 basis point cut. Is there any risk to cutting that, especially when you look at all the bad news that's out there today?

Buffett: Well, there's some .. it does have some effect on the foreign exchange market. But I really leave Fed policy to the Fed governors. Easier money obviously stimulates the economy and it depends how much they think it needs stimulation. But it will not make any difference. If you buy or sell a stock today and you look back five years from now, the important thing will not be what the Fed did today. The important thing will be what that company did.

Becky: Well, what about the economy from your perspective? How does it stand right now?

Buffett: It's sort of amazing. We have this enormous weakness in housing. That effects an awful lot of people. There's a wealth effect to it, everything. So far, it hasn't spilled over into employment. Now we have a set of dominoes in line that there could be some real effect from if unemployment rose. But so far, you know, it's been at 4.7, well, it won't make any difference if it goes to 4.8 or 4.9, but if unemployment really took off, there are a lot of dominoes in the economy that probably would get hit by that.

Becky: What did you think about the jobs number that we got on Friday? It was stronger than some economists had expected but not as strong as ADP had predicted.

Buffett: Well that's true, but it's still been amazingly strong when you think about what's going on in the housing-related industries. I mean, we're in the brick business, we're in the carpet business, we're in insulation, we're in paint. And those areas have really gotten hit. So, you've got a situation where tens of millions of Americans feel poorer because they thought that their house would automatically appreciate every year. And many of them have lived off re-fies. That's been taken out of the picture. So far it hasn't affected employment that much and if it doesn't I don't think we would have a recession, but if it does, I think there are some big dominoes out there.

Becky: Now you mention that a lot of your businesses are very directly involved in this. Everything from bricks to carpeting to insulation. I know you speak with the managers of the companies pretty frequently. What are they telling you? Are things better or worse than they were six months ago?

Buffett: Well, in the construction-related industries, I would say, if anything, they're worse. And they weren't so hot six months ago. I get daily figures around Christmas-time at all our retail operations, jewelry. And what's happened there is right after Thanksgiving, you know, supposed Black Friday and all that, sales were huge for a couple of days. They've tapered off a lot and I'm adjusting for the calendar and everything. But they've been pretty soft since those first couple of days. So, we'll see what happens in the Christmas season, but I would say so far it is not looking very buoyant to me.
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http://www.cnbc.com/id/22200828/site/14081545/