Will be joining us. But first the top stories. Its nice to see you again. Well do these stories in a second. Well take a look at comcast. It looks like they are beating it looks like they are beating on both the top and the bottom lines there. 79 cents, x items, and then 17. 83 17. 83 billion in revenue. Okay. In the year ago quarter, you had sochi, this quarter, you have the super bowl. So to compare apples to apples, theres a lot of excluding of different revenue metrics. Comcast is excluding olympics and super bowl but Thompson Reuters is not. Most of these numbers look like they are above analysts expectations. We should point out just right off the bat here i think the company is going to there it is Share Repurchases. People were talking about that. Once the deal brian alluded to it when he was on the show. Also combined with the Dividend Increase youd like to send your application to an additional lpder in the future. In some cases the story looked at four or five individual cases, maybe even more than that and in some of these specific instances the allegations are that the Clayton Homes offered one family a 7 loan, turned around it was a 12 loan. Theyre painting it as a bait and switch essentially, and obviously there are a lot of cases but in some specific cases it sounded like there was pressure put on some of these individuals. All i can say is that 300,000 loans were made. In the last three years, people frequently write me and complain about an insurance settlement someplace or they bought a tv set someplace, of one of our stores. All the letters get to know. Ive not received one letter from Clayton Homes and we sold in that period maybe 75,000 homes. We have 300,000 mortgages. And we have been examined in the last three years by 98 different state, well weve been involved 98 times by state regulateorregulators were listened in just about every state, and in 98 cases we were fined, once we were fined 5,500, got the fines right here, once we were fined 1,400 by tennessee in 2012. We were fined 3,000 by michigan in 2013 and i think we were fined 5,500 by one other year, and thats from 98 state examinations so 98 times the state regulators have come in and checked you theous and thats what they have found examining our loan files. You make the point there were over 300,000 home loans, this focuses on a small number of them. What about that these particular instances. Do you know if the authors of the article were correct in the situations of a few heartbreaking stories where again if the article is to be believed it sounds like a clayton home representative put undue pressure on these people baited and switched did a bait and switch when it came to some of the prices that came through. Thats what i think shareholders had trouble with. Lot read is this really what our business is . They get the form they can send their application in any group, and any bank thats on that list including their local bank and the local bank makes more loans than anybody else. Youre speaking broadly. Im speaking specifically about the individual cases. Do you know the individual cases . I dont know the individual cases but weve got 300,000 loans and i dont doubt that some people didnt wouldnt understand making a loan. Im sure that 300,000 people buy stocks, some dont understand what theyre doing but i dont see how you could have anything more clearly than the loan application or the lender board that describes the terms from every lender that wants to be out there for our loans, and there are many cases where if they get in trouble on their loan we give them modifications or something of the sort. We cannot for privacy reasons name loan by loan what we have done with anybody. Were prohibited by doing that so i remember that one time there was a nationally Televised Program not about manufacturered home loans but other loans and they had a woman there unhappy about losing her home and all. It turned out when they examined her she refid it four times more than what she paid. The privacy rules keep you from responding to that. Okay. You mentioned that of these loops you put out, again these are loans that are made to individuals who probably dont have great fico scores. Right. They are individuals who maybe have a little more tenuous income. Theyre a greater risk theyre a greater risk. You said about 3 of the loans go bad. Yesterday the Seattle Times took that number you used it at the Shareholders Meeting saturday said 3 annually go bad but if you look at pool of mortgages over a period of time that number would be much higher. They took an example from one of your competitors where they said their loans annually went bad at a rate of 4 but over eight years it was closer to 20 . The implication was the numbers would be similar at clayton. Are they correct in that assumption . Correct in any case car loans, talking about freddie and fannie loans, they give you the foreclosure rate by year and its true if somebody is in the fifth year that would be added but thats true of all, every foreclosure rate that you read and our foreclosure rates for these people generally have poor fico scores have jobs that are less secure our foreclosure rates are considerably lower than a great many of the mortgages that people borrowed in 20072006, from all kinds of other organizations, but everybody has foreclosures. If you just help the people that absolutely are stoern pay like me, a lot of people wouldnt be denied the chance to get homes. Some people take some risk in putting down a 5 downpayment. The average payment on our loan is under 600 per month for principle and interest. You saw the house we had there for 69,500. Its 1200 square feet a couple of bedrooms includes the appliance and air conditioning, you have to supply the land. Its bargain living but its being offered, youre not buying one and im not buying one and people that are buying them are people who if they lose their jobs are probably going to lose their home but if they lose their home and we have the mortgage, we lose money, too. We have no interest in putting anybody in a house that theyre not going to be able to pay for because well lose money. You definitely lose money in every case because one of the things the article pointed out these homes unlike other homes get repo cessed by cars. Youre definitely losing money every time a loan goes bad in this situation. We lose money, we lose significant money. I can tell you what we lose because the average loan when we take it is only 40,000, another reason Interest Rates have to be higher. These are much smaller loans that youre servicing and our loss runs about 40 of the mortgage balance, so if we possess a loan of 40,000 we probably lose maybe 16,000. Lot of times when people leave there is a divorce, or they lose their job, they dont leave the house in the best of condition. We find the rugs torn up and not everybody does that obviously. If they have no equity in the home and theyre mad, for one thing they stay in it for a while and dont pay us anything they got a rent free house for a while and some behave kind of badly when they leave but i can understand that. Warren, thank you very much. We have a lot more to talk about this morning. When we come back berkshires foreign investments, the ceos of ibm, cocacola, wells far dpoe and American Express. What they have to say about business the economy and having Warren Buffett as their largest shareholder. Take a deeeeep breath in. And. Exhale. Aflac and a gentle wavelike motion. Ahhh ahhhhhh. Liberate your spine. Ahhhahhhhhh. Aflac and reach, toes blossoming. Not that great at yoga. Yeah, but when i slipped a disk he paid my claim in just one day. Ahh so he had your back . Yep. In just one day, we approve and pay. One day pay, only from aflac. [duck snoring] test test test. Test test test. Test test test. We have some sad news to report this weekend. Survey monkey ceo dave goalberg died at 47. He was the husband of facebook coo sheryl sandberg. Facebook Ceo Mark Zuckerberg posted Dave Goldberg was an amazing person and im glad i got to know. He is survived by his wife and two children and its a terrible terrible story. He was a remarkably genuinely decent person. Literally two weeks ago. He was here on a friday. Two weeks as of friday or not even two weeks. Not even two weeks. We just emailed last week. He thank me for coming on and we had talked about Something Else and great guy. Prince. Its times like that where you realize 47 years old. You think about the family and the kids and sheryl and young kids. Yeah. Ten and seven. Horrible. All right. We will well be back and well go to becky. Talk about some other things. Talk about a huge weekend in sports. But lets go to break and well come back. Theres some facts about seaworld wed like you to know. We dont collect killer whales from the wild. And havent for 35 years. With the hightest standard of animal care in the world, our whales are healthy. Theyre thriving. I wouldnt work here if they werent. And Government Research shows they live just as long as whales in the wild. Caring for these whales, we have a great responsibility to get that right. And we take it very seriously. Because we love them. And we know you love them too. The network that monitors her health. The secure Cloud Services that store her genetic data. The servers and software on a mission to find the perfect match. And the mom who gets to hear her daughters heart beat once again. Were helping organizations transform the way they work so they can transform the lives of the people they serve. [ male announcer ] your love for trading never stops. So if you get a trade idea about, say organic food stocks schwab can help. With a trading specialist just a tap away. Whats on your mind lisa . Id like to talk about a trade idea. Lets hear it. [ male announcer ] see how schwab can help light a way forward. So you can make your move wherever you are. And start working on your next big idea. Welcome back to squawk box, everybody. We are live from omaha, nebraska. The chief executive of Berkshire Hathaway were here over the weekend. Ibms jenny rometti, wells fargo john stump and together they represent over 60 of berkshire berkshires portfolio. I asked what it was like to have Warren Buffett as their big he have shareholder. Hes been with us the longest and he owned 14. 88 . But who is counting and its really fantastic. One of the thing i always talk about is that great leaders are people who capture the hearts and minds, and warren captures your heart and mind because hes so passionate so engaged, so authentic and he wants to win, and so this disarming manner masks this fierce competitor, but hes a real gentleman. Anybody have things to add to that. Weve been very fortunate to have warren not only as our largest share owner since the 80s but also on our board for 17 years. Its been a wonderful journey and it continues unabated and he was at our annual meeting this week on wednesday. Everyone loves him and everyone hes able to simplify complex matters in just a few words and i think thats an incredible asset all the time. You even got him to play the ukele. Well, hes a great ukele player. Were the newest in his portfolio and almost 8 and i have to say, you know having warren, its a wonderful thing to have someone who has got such appreciation for setting a Gold Standard for that style of investing. All of us are brands that are endured decades and decades and decades, and it is great to have an owner who has that view about investing, that you make the right decisions to create value for the long term and you keep moving your own company to higher value and balance that with shareholder return. I would add just what ginni said. I talk to him not often but maybe once a month or so and its generally about very longterm things. I said warren you are 84 years old and hes talking about things ten and 20 years out. He really has longterm views and he understands the core elements of what builds shareholder value over a long term. Its so refreshing because we all have analysts we meet with every quarter, which we also love but equally. Equally. But we really like our long term investors. You know whats really interesting, i think, is warrens long term commitment but the fact that all of our companies have really strong brands, and yet were working with someone who probably has one of the strongest personal brands in the world, and so i think the congruence of having someone who really believes in a very strong reputation and sustainable longterm performance is absolutely critical. Ken, lets touch on this point. You said he has a very strong world brand himself. Is he different from other shareholders . Is it different dealing with him than it is with other people or is it just a perception because we know who he is . I think for me warren has a very unique style. We have a number of different shareholders. I get along with them very well but theres something that is incredibly engaging from the first time i met him. I agree with ken. I find him both inspiring. We learn. And i bet i dont share a sort of unique experience that he asks more questions and it is questions great questions, and whether they are about the long term about competitiveness, and its just you know he listens more than he actually talks, but when he does, you always take away. There is not a meeting i have i dont walk away with a great learning. I agree with ginni and ken. I think there is no one else that i know of that is as keen an observer of trends of people, of countries, of whats going on in the world. Not just in business. But just general trends. And being able to just bring those out in the most simplistic way and articulate those in the most simplistic way and the second piece is the fusion of humor and humility i dont know that of anyone else that is of any stature. Those things when you come here for him to drive you in his own car to a place to eat, and but those are really important things, so you know say, becky, what advice its not just something that comes out of his mouth. Its about his whole attitude about the way he lives and the way he adds value to everybody that hes in touch with. Being picked up by him in his car is a real thrill. He come to the airport. He pick you up and he drives down and you go to the, you know either pickolo petes and he will say what do you Warren Warren will have a usual. Ill have the usual also. I never realized the usual was a tbone steak with a side of fried chicken, mashed potatoes. It is a big plate of food. He loves it. Dont forget the cherry cobbler. He also might take dairy queen. One of things that personifies, you call warren how are you doing . Never been better. That tells you that hes always looking to the future and its informed optimism because this is not someone who is afraid to face reality and to tell you what the deal is because he has a mind like a steel trap but that phrase i think personi fies what warren bawf fet is all about. The thing that struck me the most from hearing from them is that every one of them said it was your long term vision that they appreciated the most. Now, obviously, you are looking at things for the long term. One of the companies that you told me youve been buying more stock in is ibm. You told me that on saturday that in the First Quarter you bought more shares. We will see that coming out in sec filings soon and i just wonder what you see in the long haul for ibm. Because there have been a bunch of people who questioned why you got into that stock right now. What do you see happening over the long haul . I think ten years from now they will be earning a fair amount more money than they are now and i think they will have a fair amount fewer shares and our percentage ownership will be up and i think well make considerable money. I can always be wrong on any stock but thats my best estimate. I felt that way when we started buying it a few years ago. They get a boil shares out then. Our interest has gone up by 15 or so without us laying out a dime in that respect. Its true that they are going through a transition in terms of the products many of the products their customers like but if you looked at those people on that program, wells fargo, American Express is a Huge Customer and my guess is ten years ago from now, that they will be Huge Customers of ibm. They will be selling them Different Things than they are selling them now but they will be solving the problems those companies have at that time and thats my best estimate. I could be wrong. Theres a story from reuters, i think it was last week, just before the meeting came out, questioning the idea of the competitive notes that you look for in companies, questioning whether if they can continue this article pointed out ibm and cocacola in particular. What do you say in response to that snngts. I would say 1. 9 billion eightounce products of your product in the world by 200 countries by people consuming it today and tomorrow i would say thats a pretty strong Competitive Position to be in. If people like something today, they usually like it tomorrow. And usually as their kids come along and more people inhabit the world, they like it. Here we have a product that started in 1886 cocacola and during the war, when they had trouble getting sugar or something of the sort maybe there were declines in consumption. Per cap ita consumption has gone up almost every year. You have to be doing something right. Ketchup, heinz, started up in the 1870s people are still putting it on hot dogs. I dont think something is going to change dramatically tomorrow on that. You have a question too. One of the things you said this goes back to ibm, one of the things you said on saturday was theres been more stupid stuff and stupid stuff written and stupid stuff done when it comes to buying back stock and one of the Big Questions about ibm, of course is how much stock they bought back over the past decade. I know you supported their efforts to continue buying back stock. Do you wish that they had bought back all that stock when the stock was higher . Well i mean obviously, you like to buy every stock at the low tick but that doesnt happen for me. Overall their stock purchase program, it goes back more than a daek its been dramatic and its been enormously beneficial to the shareholders. While they reduced their shares they also had Something Like 250 million shares of options outstanding ten years ago. The options are now down to a few million. They not only reduced the number of shares dramatically, they practically eliminated this fantastic overhang. We look at buying in stock can be extremely dumb it can be extremely smart. It was extremely smart for Henry Singleton and i wont give you the name of people who are extremely dumb. It all depends if you are buying or selling for less than its worth and we think did you see larry fink a couple of weeks ago put out this letter saying that he thought that companies these days were buying back too much stock and trying to actually put too much money back into the pockets of shareholders rather than investing in their own businesses . And i wanted to get your thought on whether he was right or wrong about that. Well yeah andrew its all case specific. We say at berkshire well buy our stock and well buy it aggressively at 120 of book value. I know at that price, the shareholders who stay are gaining on a per share basis because were doing that. If we were to buy it at 200 of book value, our shareholders that were staying would be penalized by that action. Its solely a function of what you are paying compared to the price. If you and i had if we owned a mcdonalds stand together and i bought you out at 80 cents on the dollar you know i bought in your stock, i would be ahead of the game for doing so. If i paid you 120 of what it was working, i would be behind the game and that its that simple an equation for maths, but many mths managements were going to buy this stock, thats no way to buy things. The way to buy things is when you buy them when they are selling for less than they are worth, when you are doing that you are favoring the continuing shareholder. In doing that you have a moral obligation to make sure that the exiting shareholder has received all the facts and, you know just like you would if you were buying a person out of a mcdonalds stand. But its not a complicated equation at all to figure out whether its beneficial or not beneficial to repurchase shares. We know how do it at berkshire and well be doing it this way ten or 20 years from now. Joe. Hey, warren. Good to see you. You must have been talking a lot again. Once you get started, its hard to get you to you sound a little bit hoarse and you got two and a half hours to go. I get paid by the word. We kind of do. So does joe. We kind of do. I tell you what i was saying i dont know how to ask it actually. This morning, i listened on the way in now. I got head phones and i got my iphone and everything. I downloaded something the from the cloud. Thats about as much as i know about the cloud and im wondering about your technological expertise. As i recall i dont think you bought microsoft or apple. I dont know if you ever bought intel or sisco. I mean you have sort of an aversion not an averg but maybe you dont feel like you have the expertise and yet that changed somehow with ibm. I never really understood that. Maybe its because there is such a Services Company now and they have got so many established relationships that its almost an annuity or do you actually understand what type of Cloud Strategy that a company like ibm should have right now . Because i remember carl icahn buying motorola he has no idea what kind of phones are out there or biogen. Is it the same with you or how did it change with ibm . I got great news for you, joe. You are only the second dumbest guy in the country about the cloud. I got you beat out in that respect. What we do and theres no question that i i have far less Technical Knowledge about how ibm works than i do how wells fargo or coke cold la works, we do have 70plus companies, when we talk to them we learn something of their plans and we learn about competitive products and we make some estimate. Well take wells fargo. My guess is that wells fargo, ibm is their biggest supplier now. My guess is ibm will be their big he have supplier five or ten years from now. I think theres a significant difference sometimes the location of the information actually has to be geographically specific but theres certainly differences in the degree of security that people feel they need in terms of storing information on the cloud and as i talk to ceos and i talk to our own managers i feel pretty good about ibms future probably more so in what they call the hybrid cloud than the cloud that you generally read about. Ibm is a very its a trusted organization. Its an Innovative Organization and they are competing against a lot of other people that are innovative too. Its not a winner take all game. I mean search you might say comes very close to a winner take all game. Cloud computing is not a winner take all game. I understand. Theres a hybrid cloud. Right there, you are not the second he just oneupped you. You oneupped me on that one. You tried not to but you are crazy i bet you know a lot more about ibms strategy for the future. Know a bit too much. Yeah i know. When you put it that way, with wells fargo, knowing, they probably have relationships like that, i dont know with how many of the s p 500 and you are probably right, you are not looking at it like an apple or some type of disruptive Innovative Technology now. You are looking at an established brand new thats not as dependent on innovation as some of the newer tech players. Amazon for example, they just gave their figures out on Cloud Computing a few weeks ago, and, you know they have i would guess they have far more customers by number perhaps than an ibm because they made themselves open to all kinds of developers and thats probably a very Good Business model. Jeff is a very very smart guy and he got in early, but what hes doing does not it is not a winner take all game and different kinds of organizations have different needs. American express is a Huge Customer of ibm. Our Burlington Northern santa fe railroad. We pay a lot of money to ibm every year and were very likely to continue paying a lot of money and they will they will modify their offerings to things that are more useful to us as we go along. But i microsoft is going to prosper, amazon is going to prosper. Oracle is going to prosper, but i think ibm is going to prosper too and i think what they have done from a capital structure standpoint on top of that i like very much. This is a company they had 250 million of options when they had a billion six or seven shares outstanding and now they are doing to 985 million with virtually no options. One of interesting things about an ibm and its true of other tech companies, ibm earns infinite returns on tangible common equity. Those are very Good Businesses. We have a huge tangible investment. Theres no net tangible investment. They are earning infinite returns on net tangible equity at ibm. All right. Gentlemen, were going to slip in a break very quickly. Still ahead, were not finished with this conversation. What ibm ceoginni rommetty had to say about watson. Stick around. Well be right back. Coming up watson makes a cameo at this week ends big berkshire meeting. Find out what the machine made famous by jeopardy did at the woodstock for capitalists. Sidewalk squawk box returns in just a moment. Can it make a dentist appointment when my teeth are ready . Can it track my crews performance, and protect their heads . Can it tell the Flight Attendant to please not wake me this time . At cognizant, we see opportunities for every company. To meet the new digital demands of their customers. Can it process my Insurance Claim . Like, right now . Can it download a track while im sampling it . Can my keys find me . With the power of digital, analytics and automation now every little thing can provide even greater value. Ok, so can it tell the doctor how long you have to wear this thing . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . Welcome back to squawk box, everyone. Berkshire hathaway saw a new name on the exhibit floor this year. Ibm. The Company Brought watson to the annual meeting allow the shareholders to play jeopardy against it. Ceo jenny rehmedi says it is more than an expert. Sometimes people think watson is just a Search Engine or Artificial Intelligence no. What it is take natural language and learns any industry and then combines it with a system that constantly learns and never forgets. One more thing as you and i were talking about. When you saw the demo on cancer it deals with the gray zone and how we make decisions. What does that mean . You and i do this naturally. Everybody does it naturally. When you go to make a decision on something. You formhypothesis and you come up with an answer and youre confident or not. Watson forms millions of hypotheses and test it everything it knows and forms a percentage of confidence. The difference is it can tell you how confident or the evidence for an answer. Is it already profitable or something that you ramp it up and it becomes profitable quickly . Its a service, it ramps up over time. By its nature it is a Cloud Service and a really important part of as you know one of our big strategic imperatives. Data and analytics. For us a 17 billion business last year. In fact grew 7 First Quarter grew 12 . So its an important part of that and this will be a play for the long run. So, warren question for you. Did you get a chance to play watson in jeopardy . I didnt get a chance to play watson in jeopardy but i can offer a couple interesting comments. At geico we are spending millions and millions of dollars with watson and weve been working with it for probably a year or so. And there are a lot of possibilities with it. And were learning a lot as we go along. I mean were not to the finish point by a long shot. But we do consider it something of potentially great value in terms of our Insurance Business. The one thing i was thinking of doing this year was to work into the my report the fact that there would be a third party at sitting up there with charlie and myself at the meeting and have people speculating about this being my successor and maybe having some having it hidden in some way and then unveiling it and waiting for the first question which you could have asked and you could have said, well lets get right to the meat of it. Who is going to be warrens successor . And then have watson rumable a little bit and finally say, i am. Sort of going back to terms of 2001. With geek yico, what are you training them to do . Its not going to know anything that we havent havent taught it in terms of putting in the information. But it works and would be enormously valuable for example, just in terms of training thousands of new people who act as agents for us on the phone. I mean that to be licensed and that sort of thing. And it can be it may and this is the long way off, but it possibly could be responding to tens of thousands of phone calls that we get every day. And it could be helpful in terms of claims and, you know it could hurt a lot. And it can, it has to learn what humans mean when they talk to it. But, i think the most exciting thing right now, of course is you have millions of dollars around the world look who cant keep up with the special scientific information coming along. If i had Prostate Cancer and treated them and he draws certain deductions from what this test meant and that test meant, but imagine getting that in the millions and having it all processed. I think a lot of things will happen in medicine. Joe has a question, too. Question about the geico head band on freddie i saw that. Did you know that . Well no i didnt know about that specifically but at our annual meeting, actually there was a movie where i challenged Floyd Mayweather here a few months ago and we we got in the ring together. I was the berkshire bomber. So, he didnt have that second in there with freddy at that time. He was drinking water, i was drinking cocacola. We had a lot of fun together actually. I bet you did. I was amazed. Just amazing that geico, you know what advertisinging youve talked about it before what advertising has done for geico. And there it was. There it was. I was just like what . What is that and i saw geico and shook my head and said buffett. Buffett. We spend, we spend about i think were in the fifth largest advertiser in the United States. We spent 20 million or so when we took control in 1995 and well spend 1. 3 billion now. But, advertising doesnt do you any good unless your product delivers what you promise. And, obviously, geicos product does. So heres one more ad. 15 minutes could save you 15 . We have much more coming up with Warren Buffett. Stick around. More squawk box right after this. And when you bundle your home and Auto Insurance through progressive, youll save a bundle [ laughs ] jamie. Right. Make a bad bundle joke a buck goes in the jar. I guess thats just how the cookie bundles. Now, youre gonna have two bundles of joy im not pregnant. Im gonna go. [ tapping, Cash Register dings ] there you go. [ buzzing ] bundle bee coming it was worth it saving you a bundle when you bundle now, thats progressive. [male announcer] if youve served in the military, certain habits may be hard to shake. For reintegration and adjustment issues big, small and everything in between, visit easter seals dixon center. Org. Jo nes. Zero, three, two, six. Here to make a deposit. [bell chime] ting its known as the woodstock for capitalests. Im live in omaha. Warren buffett is here to talk about the markets, the feds Interest Rate timing and the strong dollar. More of beckys interview. American express, cocacola, wells fargo and ibm. And his new contract with the Miami Dolphins made him nfls highest paid defensive player. The wall street journal called him a secret finance nerd. Hell join becky and Warren Buffett in omaha as the second hour of squawk box begins right now. Live from the beating heart of business, new york city. This is squawk box. Welcome back to squawk box, first in business worldwide. Im joe kernen along with Andrew Ross Sorkin and becky quick joins us. Well get back out to becky and warren in a minute. It is jobs week in america. The private payroll report coming out on monday and the governments pay roll data due. Mcdonalds expected to outline its latest turn around plan under its new ceo. Its u. S. Menu got too complicated and hurt operations. Samestore sales have fallen for two straight years and comcast out with Quarterly Results this morning. Earnings of 79 Cents Per Share and Beat Estimates at 74 cents and revenues also beat expectations and 2. 5 billion increase in its Share Buy Back program. Look at u. S. Equities program this hour. Dow looking higher about 46 points higher and nasdaq up 2. 5 points and the s p 500 close to about five points up right about now. Lets get back out to becky in omaha. Becky, good morning, again. Joe, thank you. You know, again, im in omaha with Warren Buffett who is the chairman of Berkshire Hathaway. Warren, a lot of the questions that i heard that were asked by other media, that were asked by other shareholders that tried to approach you. The one thing people want to know most what you think about the market right now. Obviously, not something you look at on a daybyday basis but you have from time to time made calls that the market is overvalued or undervalued. Where do we stand right now based on what youve looked at historically . Very occasionally over maybe a 60year period its been very clear that the market really is overvalued or dramatically undervalued. Most of the time i dont have the faintest idea of whether its on the high side or low side. When you get the extremes. 1973 and 74 were the cheapest markets ive ever seen. Our recent panic was such that you could clearly say stocks were undervalued. Back around 1999 2000 i said they really were overvalued. What you can say now is that not very helpful, but the market against normal Interest Rates is on the high side of valuation. Not dangerously high but on the high side of valuation. On the other hand if these Interest Rates were to continue for ten years, stocks would be extremely cheap now. And the one thing you can say is that stocks are cheaper than bonds. Very definitely. And what weesk seen low Interest Rates for six years ss or so. Rates we wouldnt have thought possible particularly in europe where theyve gone negative. That continued for a long time. Of course, we saw them continue for decades in japan. So, we own stocks and were happy owning stocks and we look at stocks as parts of businesses and we dont try to guess, we have no idea what the market is going to do next year. Charlie and i never talk about it. These low Interest Rates prevail for five or ten years and youll look back and say stocks are very cheap. If Interest Rates normalize, youll look back and say they werent so cheap. If youre a betting man, not that you are. If youre a betting man, would you assume that Interest Rates remain low in the next five to ten years . They fooled me so far. I would have been wrong and i would have thought by now you would have seen much more much higher rates than we have now which are essentially nothing. It looks to me like theyll stay theyre certainly going to stay low as long as europe keeps falling with present policies and europe will keep following those policies until they see the european economy come back fairly strong. I dont know the answer to that. I dont bet on it. If i had an easy way and a non nonrisk way of shorting a lot of o20 or 30year bonds, i would do it. Thats not my game and cant be done in the kind of quantity that makes sense for us. But i think that i think bonds are very overvalued. Ill put it that way. Whether the federal bank has the capacity to keep them in that situation, almost indefinitely. Well see what happens on that. Although every expectation is that the fed will start raising Interest Rates probably this year. Maybe december september. I think youre right the expectation is that. But i think its difficult. And not impossible. The fed can do what the fed wants to do. I think if you have negative rates in europe i think it i think there are a lot of consequences to raising rates significantly here. The important thing to remember in economics is people forget it. You can never just do one thing. I mean, its like physics. You cannot just change one variable and not have anything else change in the world. And when poland borrows a negative Interest Rates, it has an effect on what we can do without changing export prices. All kinds of things. Meaning that our rates look so much more attractive. People come flooding into our oissues and the dollar gets stronger and you dont even want to continue that curve. Becky, im sitting with a lot of money in euros that has to be in euros in our Insurance Company in germany. Im getting a minus rate on that. That gets your attention. And if you were sitting with some money, you know, in your bill billfold and every day a little bit of it got clipped away why is this in my bill fold . So, it pushes behavior. Interest rates push behavior incredibly and we are not immune from what goes on in a market as big as the euro market. And i think its difficult for us to raise rates significantly, certainly. I mean, i cannot envision us for example, having a 4 or something rate here with negative rates in europe. Now, the gradations you can argue as to how much effect they might have. But this is a very unusual situation and i dont know how it plays out. Is that a box potentially that the fed has put itself into . We saw what happened with qe. A huge supporter of what bernanke and company were doing at that point. I know you said you would probably do a lot of the same things they have done but we havent seen all the consequences play out. What possibilities i mean every action in economics creates some other fallout from it. But i think the fed has done the right thing, 100 the right thing. And i think probably the easy is doing the right thing in terms of their situation. But they still have consequences and its hard to envision all the consequences. We have not seen this movie before. We havent seen this movie before. But youve got an active imagination. What are some of the play lines that you thought through and worsecase scenarios . 3 billion worth of euros the other day and our average Interest Rate probably was around 1 and theyre probably doing on an average over three different issues 12 years or Something Like that. Youre happy getting 1 on your money over 12 years for the im happy today. And incidentally if rates go back what seemed like normal not so long ago, you know we might buy those bonds back at 60 cents on the dollar. Right. Well see what happens. But i dont think anything terrible is going to happen to me because im paying 1 . Maybe not to you. But what are the unintended consequences to the rest of the system . Historically i would have thought the consequences were significant inflation and that has not happened. I mean we kept rates lower enough for six years and now youre seeing something even more extreme and you even have central bank saying we want 2 inflation. And, so its its very interesting. And undoubtedly look back five to ten years from now and something will have happened and say that is the obvious consequence and i cant tell you. What about deflation and the japanese situation. You pointed to that earlier. 20 years. A long time. Well thats in theory you have to have deflation to make negative rates and make any sense. Its a strange itchsituation. When someone owes us money at our Insurance Company in europe. Normally you want to collect your receivables as fast as you can. If we collect it were going to actually have that money depreciate right away and whereas if we have the receivable 100 cents on the dollar. Right. We have much more coming up from Warren Buffett. A lot more this morning and also be joined a little later by Charlie Munger and bill gates. Andrew, ill send it right back to you. Coming up well hear more from the ceo warrens big four investments and later warren and becky will be joined by the nfl top paid defensive player. A new miami dolphin, i believe. Berkshire hathaway top chairman charlie mugnger and bill gates will join becky. music boys . Stop less. Go more. The passat tdi clean diesel with up to 814 hwy miles per tank. Just one reason volkswagen is the 1 selling diesel car brand in america. Welcome back this morning to squawk box. The futures right now, some green arrows i believe. Dow looked like it could open up higher. 55 points higher. And the s p 500 up close to six points. Right now, lets go get back to becky in omaha with our special guest all morning. Becky . Andrew thank you. Warren buffett owns shares of all of berkshires big four investments before the current ceos took office. These are the four big ceos of four big Chip Companies that Berkshire Hathaway is the primary investor. The leading intresvestor in. Of these four only one was not here before before buffett started buying. Ceo who was ceo elect when it was first announced that buffett accumulated a significant stake. I asked jenny what she thought when she heard that buffett was buying into the company. I had just been named. It maybe had been only two weeks or something at the time. And when we had found out and, obviously, i called him that minute to talk to him. And couldnt have been smiled a little bit. I smiled im still smiling. So i remember i immediately called because obviously, i had just been named and actually had not been effective yet. But i would be the one who would have a longterm relationship with. And he couldnt have been more complimentary and, of course its all about a Business Model and the things that are important and to steward the company for the long term. You know hes true to that. To this day. Hell talk to me about, as you know many divestitures ands our model moving to higher value and he would certainly agree that you dont want to bring revenue to a company. When we divest 7 billion thats a good thing to do as you continue to move forward. Hes very true to those principles about value that is sustainable for the long term. Ill always remember that first phone call and couldnt have been more pleasant and more reinforce oing about the Business Model and the quality of the company. The feedback that he gives you. You know Warren Buffett has a very unique style of investing. He will never do a hostile takeover. Hes not interested in battling management and i wonder if you all think that hes the best possible poison pill out there having Warren Buffett as an owner almost seems like it is unassailable to anybody else that will come in. I dont think of him as a poison pill. I think of him as a tremendous asset and a tremendous advantageous and a privilege. So those are, thats the thought that i have and i was, i joined the Cocacola Company in 1985 and he became a shareholder a few years after that. So almost all my life working for the company has been a shareholder and the company has benefitted in so many different ways of having him as a shareholder and as a director. But i do always recall the story when that was recited by the late don who one day, you know the price of the stock started going up a little bit. And he picked up the phone and he always said call warren. You wouldnt be buying a few of our stock . He said yes. Thats how he started. I think i feel the same way. I mean this is not from a defensive poison pill but from a, its such a privilege to have him be our largest owner at wells fargo. It is i mean who wouldnt want the best investor the worlds ever known, and maybe the finest human being. And we all talked about that to be a major investor. Not that we dont care about our other investor. We care about all of them. But its a privilege. And we want to earn that respect and make him proud of his investment. We want to make all of our shareholders proud of our investment. Thats how we think about it. The key thing you know with warren is hes not patronizing. He tells you exactly as it is. And thats fantastic. But the other thing to think about, because none of us are saying this lightly. It really is a privilege and honor. Because think of how many people warren is saying no to. Right . For the very reason that they would love to have that association for a variety of reasons. Whats most important is you have to earn it and warren has to believe in your Business Model and he has to believe in you as a leader. And unless those two connect, he doesnt go. And thats a good point because other companies hes associated with sometimes has taken a preferred shares offer to get him in the door. You guys out in the open market. Right. Again, Warren Buffett is here and listening to all of this. Warren, one of the things. I look at these companies and think theyre probably, it would be very difficult for an invester to come into any of these four with you as the major shareholder. Is that a fair way of looking at things . I think it probably is. I think that when we have close to 15 of American Express or when we have 9 of coke or almost 10 at wells fargo, i think it would be very silly for an activist to come in and say, you know, double your dividend today or buy more stock or whatever it might be that theyre proposing. Because i think the companies are well run and i think their financial policies are sound. If you have sound financial policies and a wellrun company, the best thing to do is just sit back and enjoy it. The one company that has been approached very recently was cocacola. With David Winters and the efforts that hes undertaken. Originally when David Winters came in you said that you had given it some thought. You hadnt thought about it before, but you were looking at what he was proposing. He had a good point. His math was way off. But he had a good point about the level of the number of shares involved in the option program or restricted stock progra and the period over which it would be issued. So like i said his map was way off. But i agreed with him that that policy should be modified in some way. And i commend the Cocacola Company terrifically. The woman that headed the committee yeah, the committee, she worked very very hard. She contacted other companies. She contacted investors and she thought it through and they designed a program that made terrific sense for the shareholders and the management and directors embraced it. Why do you take this different approach to investment . The idea that you would never do a hostile offer and the idea that you would never really publicly get into things like this. How did you get to that point of view and why do you do it . I did some semi hostile things very early on and it wasnt much fun. It just isnt the way to go through life. Why not find a waterfall company and join them rather than join a social company. So that was 50 years ago or more and berkshire itself was semi hostile, although the chairman of the board and the brother of the president both were on my side. But they the president himself wasnt. And it just doesnt make much sense when you can find very Good Companies that will welcome you, assuming you arent going to try to take them over. So thats been my game now for 50 years. But i must admit, there were a couple instances in my youth where i took on owhat i thought were bad managements and they deserve to be taken on. But it was not a life i wanted to live. Great. Again, we have much more to come from Warren Buffett when we return. Joe, ill send it back to you in the studio and were going to open this up for a lot more when we come back too. What about that house across the street from warren. Did you guys see that . The persons house, the person wants ten shares of berkshire. That doesnt seem like a lot. King lived in that house 55 years ago. That is the exact house in which don and mickey king and where i got to be friends with them long before cocacola. Ten shares of berkshire is what . Over 2 million. If they sell their house for ten shares of berkshire, i think i may be inclined to sell my house. Okay. All right. Well get back to that. Maybe coming up the latest installment in the avengers series falling short of a Box Office Record o, but still posting dominant numbers. More on that after a quick break. You, my friend recognize when a trend has reached critical mass. Thats what a type e does. With e trades investing insights center, you can spot trends before they become trendy. 40 of the streetlights in detroit, at one point, did not work. You had some blocks and you had major thoroughfares and corridors that were just totally pitch black. Those things had to change. We wanted to restore our lighting system in the city. You can have the greatest dreams in the world, but unless you can finance those dreams, it doesnt happen. At the time that the bankruptcy filing was done, the Public Lighting Authority had a hard time of finding a bank. Citi did not run away from the table like some other bankers did. Citi had the strength to help us go to the credit markets and raise the money. Its a brighter day in detroit. People can see better when theyre out doing their tasks, young people are moving back in town the kids are feeling safer while they walk to school. And folks are making investments and the community is moving forward. 40 of the lights were out, but theyre not out for long. Theyre coming back. When you go through times square, you almost feel like you could start having a seizure. So much sensory stuff. Have you been hanging out in times square . No. But when i drive on the way home its big. The things are huge and in h highdef. I misthe old signage, though. Its all now all lcds. All moving. A mammoth debut for avengers. The Disney Marvel blockbuster brought in 187 million in north american ticket sales and that brings its global total to 627 million. Its the second biggest Domestic Opening in history falling short of the 207 million debut for the first avengers film back in 2012. Once you get a franchise if youre a couple million shy, but still do 187 million, it was pretty brilliant to buy marvel and to start another, you can do sequels where you know the sequels. If its 12 million less than 210 million does it matter . Not only that. This was a weekend where there was a lot of other stuff going on too. And people are going to the fight. The kentucky derby. Yankees, mets nfl draft. Nba finals. So much going on. Anyway coming up much more from Warren Buffett still to come. And as we head to break, take a look at u. S. Equity futures which are looking pretty good so far. Hello. I am here to offer sophisticated investing strategies. My technology can help you choose the right portfolio. Monitor it. And automatically rebalance it. All without charging advisory fees, account service fees or commissions. That may be hard to compute. But im a computer. So trust me. It computes. Say hello at intelligent. Schwab. Com welcome back to squawk box. Tell you what is front and center this morning. Diamond offshore. Scrapping three rigs due to a drop in crude prices. The Justice Department will start revealing more about the governments use of secret cell phone tracking devices. Wall street journal said the government launched a review into how Law Enforcement agencies use that technology. Also a new survey by true carteling you that small suvs and compact crosovers are the most popular in the country. 16 of vehicles sold in the first three months of the year. In the meantime back to omaha and becky quick and the one and only Warren Buffett. Becky . Andrew thank you. Again, we have Warren Buffett here and hes just come off of the 50th anniversary of his antualnual Shareholders Meeting. Right here at this hotel, across the street in the Convention Center and a lot of people who came to pay homage but always tough questions that come up warren. This time was no different. You and charlie sat down for six and a half, seven hours. Questions that came directly from the floor from shareholders. Three on stage pose oing business questions and three journalists fielding additional questions from shareholders, a lot that couldnt make it to the meeting. In going through all the questions, again. Andrew and i were both here and saw thousands of questions that came in. We talked about Clayton Homes earlier this morning and some of the criticism that came up on that front. I want to bring up another three issues that we saw questions on as well. 3g is the company, the private Equity Company essentially, that you have done several deals with. First, with heinz and now with kraft. And we had several questions that came up from shareholders who were concerned that 3gs way of business is not necessarily the berkshire way of doing business. 3g go os in and tends to lay off lots of people when they go into a company. But it seems like it is tougher management than berkshire generally does. Would you agree with that . They go into companies where they feel that theyre inefficient in one way or another. And they receiveproceed very quickly whether its losing plants. In heinz they found, but im on the board so im aware of it. But they found that there were certain plants that were losing money and losing money for years. Frequently when you have a Profitable Company they just holler at things and 3g does not. They make very good money, but you have plants that are losing money or products that are losing money or the opportunity to bring on new products that will make money. They believe in taking the actions they would take whether the company is profitable or not. They believe in doing it promptly and from everything ive seen they do it not only sensibly they do it humanely. Berkshire, when we buy a company, the people that were managing it before key managing it. Usually they manage quite efficient operations. And we like to buy Companies Like that. 3g is perfectly willing to take on something where a lot of improvement could be made and then they do it. Is it fair to say you would have never bought shares in heinz or kraft recently. You used to own kraft. Would you have not gotten involved with those company if it was not for 3g management coming in . Those companies needed management that would make changes and they were spending money they didnt need to spend. Quite a bit of money they didnt need to spend. 3g would do quite about about it. I would have left the old management in place. Andrew was here this weekend and he has a question. Andrew . Warren on 3g and their approach. One of the questions is youre a longterm shareholder and they position them selves to be a longterm shareholder, more like a private equity investor. Do you have any concern or worry that when they cut, they dont just cut, you know the fat, but they end up cutting the muscle and maybe get down to the bone. What that means from a longterm perspective meaning they can maybe eke out some great profits in the next couple of years ahead, but what that does to the business 10, 20 years down the road. I think theyll be in the business 10, 20 years down the road. They when they went in the brewing business they start would a little brewery in brazil and now anheuserbusch and theyre not going to sell anheuserbusch and they start would burger king and making a lot of oprogress at burger king and theyre not going to sell burger king. Theyre going to make it larger. Same way with heinz. We bought into heinz to grow heinz, as did they. So it is true that the private equity firms generally have some timetable. When they want to get out of an investment. Its all right if they get out in just a couple of years. 3g our partners. 3g has no plans to do anything but build the businesses that weve joined them with and theyve shown no indication to do anything else throughout their history. They are in theyre in a retailing operation in brazil that they went into 20 years ago. They are builders. They are builders of efficiency as well as product. At heinz we have new products coming out very soon. Be sure to try our new heinz mustard. These fellows, every conversation i have with them they want to figure out how to make the companies bigger and more efficient over time. And ive watched them do it. So they are not, they are no way private equity operators that are buying a business getting an override for owning it for a while and then selling it. Another one of the big issues here this weekend, again, this was not on the floor of the Convention Center where things were takeing place, but concern that came from the pilots who have been negotiating a contract and who had issues with the contract that they have been negotiating. I think theyre concerned about Health Care Costs and being asked to pick up a larger portion of. But the net jet pilots have been very persuasive but in evidence youre looking at photos right now, outside picketing, standing outside and i noticed this morning net jet pilots standing behind us from time to time trying to get behind the shot and bring this back to your attention. What dayou say about the situation at net jets . I would say on average the pilots are making 145,000 a year. They are making as much or quite a bit more than they make with our competitors. They make far more than they make with flight option competitor. They have they have arrangements for seven days on seven days off. Being able to enter the system at many places that are the envy of pilots else where and we do not see pilots leaving net jets leave to work for competitors and we see people from competitors lining up to be at net jets. From time to time in labor negotiations that people have difference of opinion about what kind of contract that you would want to get or be offered and were in the midst of that now. We have no antiunion type philosophy at berkshire. Over 50 years weve had hundreds and hundreds of unions and to my memory we had three strikes. Two of which lasted less than a week. So its we would like to change the Health Provision so they participated in some of the cost but we are willing to pay a large lump sum to pay that and there will be negotiations and a settlement because the pilots like to fly net jets. They lineup to get the jobs and we like to have them and they are terrific pilots. Ive flown net jets for my family for 20 years and i never met a pilot that wasnt professional and i feel very good about the pilots we have. And i think they feel good about the jobs they have and now we have to come to a theres no hurry on it but we have to come to an agreement that both sides are happy with. And, finally, the other issue that seemed to come up a lot was concerns about changing taste, consumer tastes in the Food Industries that berkshire owns major stakes in. Companies like kraft, Companies Like cocacola. Whether this food is good for them. Thats something that millennials, in particular, have been thinking about. People have been drinking cocacola since 1986. I imagine that there is some, i dont know any study on the longterm study of people who drink cocacola versus only drinking water. Im 84 literally one quarter of the calories i consumed have been cocacola and i dont know if anybody can feel better than i feel. I missed a day of work you know rbs since i had the Prostate Cancer radiation three years ago. And i dont think the Prostate Cancer was caused by cocacola. And all my friends drink it like crazy. 1. 89 billion servings of ococacola served around the world today and more than that one year from now and more than that five years from now and more than that ten years from now. That is true and some people will like other things. If they like broccoli and brusal sprouts. I received a number of emails after you gave a similar answer at the meeting and some people say i think the question became not what your preferences are, but whether you recognize and think that Companies Like cocacola or whether its heinz or kraft will have to transform themselves over the next ten years. Will people be drinking cocacola or maybe a cocacola product but a different type of product and whether your taste, by the way, are in line or out of line with the sort of transformation in tastes at least in this country and abroad. Well theres no question that additional tastes evolve. That doesnt mean that peoples enthusiasm for their old taste disappear. But the diet product came about in the 1960s. In fact i think it was rc cola that came up with diet ritt first. Coke and pepsi follow would a diet product and coke zero and, sure, there are going to be all kinds of products. And some products sell well in certain countries and dont sell in other countries. Georgia coffee is a huge cocacola item in japan. Huge. It doesnt sell that well in some other places. So there will always be local tastes and changes in tastes. Cocacola has hundreds of different products and there will be a different array of products in five years from now, ten years from now. The one thing ill promise you is the kind of cocacola ill drink will still be a huge huge item at that time. At heinz, weve got four new products coming out very soon and theres always some evolving. But theres also a huge base for most products. If you take heinz ketchup, take a1 sauce. Kraft does. 57. I was using heinz 57 on a hamburger when i was 8 or 10 years old and i had a steak last night and put some on it at 84. There is a lot of continuity in brands and also change. And any Intelligent Company is going to try and anticipate those changes and when they find them, try to come up with a best product to satisfy them. Gentlemen, we have more coming from mr. Buffett still ahead. We are also going to be joined by plenty of other guests along the way. One of the biggest stories of the nfl off season. Suh leaving detroit for a monster 116 million contract. Soaking up some investment wisdom at the berkshire meeting. Hell join us e next. Come on out, flo [house band playing] you have anything to say to flo . Nah, ill just let the results do the talking. [crowd booing] well, he can do that. We show our progressive direct rate and the rates of our competitors even if progressive isnt the lowest. It looks like progressive is not the lowest ohhhh when we return well find out whether doug is the father. Wait, what . Ameriprise asked people a simple question in retirement, will you have enough money to live life on your terms . I sure hope so. With healthcare costs, who knows. Umm. Everyone has retirement questions. So ameriprise created the exclusive confident retirement approach. Now you and your ameripise advisor. Can get the real answers you need. Start building your confident retirement today. The network that monitors her health. The secure Cloud Services that store her genetic data. The servers and software on a mission to find the perfect match. And the mom who gets to hear her daughters heart beat once again. Were helping organizations transform the way they work so they can transform the lives of the people they serve. Theres some facts about seaworld wed like you to know. We dont collect killer whales from the wild. And havent for 35 years. With the hightest standard of animal care in the world, our whales are healthy. Theyre thriving. I wouldnt work here if they werent. And Government Research shows they live just as long as whales in the wild. Caring for these whales, we have a great responsibility to get that right. And we take it very seriously. Because we love them. And we know you love them too. Welcome back everybody. Special guest joining us right now ndamokonsg suh. His new contract made him the nfl highest paid defensive player. He met Warren Buffett when he played at nebraska and they have been friends every since. He joins us right now and ndamokong, welcome. Thank you for being here. A pleasure to meet you. I have heard a lot about you. This is not your Berkshire Hathaway meeting . No. It was two years ago we had the paper toss earlier in the morning and see all the, excuse me, all the festivities and it was a lot of fun. I enjoyed it and it probably wont be my last one, i hope not, at least. I have been hearing it a lot about you two and i loved wall street journal story last year that called you a secret finance nerd. Lets talk a little bit about this. Youre not somebody who is just a football player. Youre not on field for your very aggressive tackles and where you go after people but lets talk about the finance side of things. How did you get into that . Always something that fascinated me. Im at an engineer at heart and i always loved numbers. Id like to be involved in and like to understand what is going on and not just a person that wants to take great advice which i have been lucky enough to know somebody who can get me great advice and for me i like to understand things. Understanding my investments and sustainable and how i can progress my family to the future is going to be huge. I am lucky enough to be around mr. Ross and mr. Buffett and a mentor in gary shipman. How did you get to know Warren Buffett . The first time we actually met, he came to my oklahoma game my senior year in college and i had a brief meeting right before the game. So, i was like wow. All right. Now, i got to get focused. But then there was, i had the true pleasure and honor from coach osborn to set up a meeting and have a facetoface and we sat down and it was like speaking to my father. I mean, just had a great, long conversation. It was good. Warren i know youre a nebraska fan. Why did you see with ndamukong the first time around . He is a smart guy. He listens, he asks the right questions and its true. We did an oklahoma game and i was an honorary coach for one quarter and i with filled up a commanding 270 lead and ndamok ndamokong held it for me. Other athletes and Football Players that go through it. There was a Study Released that shows one in six nfl players file for bankruptcy within 12 years of retirement from the nfl. Thats kind of stunning when you think about people that make over 3 million for their career. Something we need to understand and really Financial Literacy that we have to become sharper in. At the end of the day, educating our selves and finding people. Im a guy that i feel like im fairly smart and i get compliments and at the end of the day i dont know everything. Asking questions and meeting different people that can show you the ropes of it and understand. Thats where i think, thats where we lack as athletes. We feel like were untouchable and nothing will go wrong to us. Especially when were in the limelight and everything is going well. Football is only for so long. Warren it seems to me that athletes movie stars and people who are newly into money like this probably have a lot of people going after them. Trying to prey on that money. What advice have you given them . That always happens. And then theres some smart guys like ndamokon dwrxg that recognize that. Theyre going to get it. They get female groupies and then natural groupies. Which do you prefer . I always and i know joe kernen back in our studio has a question too. Joe, go ahead. Six years for only 114 million. I think you could, i think you could kick Floyd Mayweathers butt right now and make it in one night. I look at you, i mean it just seems like a long time. A long time to spend making that. Can you believe he will make 200 million on that fight. No. Its a great, great opportunity for him and i would love to be able to have a lot of respect for that sport, but i dont know if i could cut down to 145 or Something Like that. That would take a lot for me to get down there. Ill stick to where i am at and stick to my daily workouts where i can be in the 300s. Let me ask you a serious question. Ndamukong, did you get to watch Leonard Williams play . They said he mayight have been the best player before the draft that the jets ended up picking as far as a defensive player. Did you get to watch him . Do you get the feeling that he will be as good as you are . I didnt get an opportunity to watch him, but i feel like at any level when youre a young guy coming into the nfl and a guy that has great talent and athleticism, you have an opportunity to grow. When i came the first time into the league y didnt understand everything i was doing and as i go into my five years i continue to grow and grow and grow. Ive been fortunate enough to be successful and see a lot of great things in myself on the football field. I still have room to grow and thats why my contract is so long so i can hit my peak in the next six years and go from there. Let me ask you, you are somebody who is pretty serious about mentoring others too. Youve given back a lot of money to try and help, let me make sure i get this right. Kids from your high school that are playing football and engineering interest, too. Thats pretty specific. Youre trying to reach out. Its exciting for me. I know that i was very very lucky to get where i am right now. One of thiwae ways i was able to get there is because of people. I very much so believe in that and i feel its my duty and its my want to, its the way i was brought up to help other people and especially a great experience that i had here in nebraska. I wanted to continue to share it more and more and thats what scholarship is shipship is about coming to nebraska. We have a table in front of you because warren asked for it. You have done an arm wrestling challenge before and you want to recreate it. You won last time. What did you do . You must have completely distracted him before. It was only fair to give him a return match. Im game. You ready . I am. Okay now. Okay. You ready . Im ready. Im toying with him. Im toying with him. Watch it. Just let me know when you want me to give it to him. Becky, tell me when. Okay. Smart man, ndamokong. At least this time he didnt make me sign the affidavit. I had him sign a release last time. Pleasure meeting you. Its an honor. Thanks for having me. When we come back this morning, Charlie Munger and microsoft founder bill gates will join us right here in omaha. Big lineup this morning. Stick around, squawk box will be right back. Man you run a business. Could be any kind of business. And every day youve got important decisions to make, like hiring. Where are you gonna find those essential people you need . With ziprecruiter, its simple. We post your job to over 100 job boards with just a single click, so you can reach millions of qualified candidates. Then well give you the tools to help you manage, screen and rank your applicants all so you can find the right one. Try zip recruiter for free today. Coming up, the Party Getting big out in omaha. The brain power hour. Charlie munger and bill gates going to join becky and Warren Buffett in just a minute. Sustainable tea tree oil and kale. You, my friend, recognize when a trend has reached critical mass. Yes, when others focus on one thing you see whats coming next. You see opportunity. Thats what a type e does. And so it begins. With e trades investing insights center, you can spot trends before they become trendy. E trade. Opportunity is everywhere. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. A billionaire trifecta. Charlie munger and board member bill gates. From investing in america, three of the nations biggest thinkers and investors right here in one place. A burger flip for mcdonalds. The Company Expected to reveal a turn around plan in just minutes. The details and Market Reaction just ahead. And the mothership. Comcast kicking off a week of media earnings. Well go through the numbers and tell you what you can expect in the week ahead as the final hour of squawk box begins right now. Live from the most powerful city in the world, new york. This is squawk box. Welcome back to squawk box here on cnbc first in business worldwide. Im joe kernen along with Andrew Ross Sorkin. Becky quick is in omaha. Well hear from her in just a minute. Were less than 90 minutes away from the opening bell and futures continue to trade up higher. About 60 points on the dow jones and up over 9 on the nasdaq. Couple big stories that were watching this morning, lets tell you about them. Mcdonalds expected to outline latest turn around plans. The chain admitted its u. S. Menu got too complicated and samestore sales have fallen for two straight engineers. Also in global news chinas factory suffering their fastest drop in activity. The decline in new ord oer sparking stickulous measure and here in the u. S. On the economic march factory orders well get that at 10 00 a. M. Eastern time. In the meantime lets send it out to becky quick in omaha this morning. Becky . Andrew, thank you. Ibm announced last week that it would raise its dividend by 18 . That marks the 20th straight engineer that the company has increased its payout. Shares outstanding, by the way, down 17 . I asked the ibm ceo what investors should be reading into that news. You know the right message to take out of this weve been so clear about this. We think, you know in returning value to shareholders, you do it a couple different ways. It isnt an either or and we can and do invest in our business. Whether its r d or acquisitions and our capital and we line it up. Its very consistent. And you can return to shareholders. So, what you saw, the 18 dividend, which is the 12th year that it was double digit and hundredth year that we have paid one. Is our ability to balance these two things. I think, that again, has a lot to do with always this view of a Business Model, which is keep moving to higher value. At the same time do the right decisions and sustain the company and reinvent it for the long term and balance return to shareholders. Berkshire hathaway is the largest shareholder of ibm. Its also revealed we found out over the weekend warren told us that youre buying more shares or at least you were in the First Quarter and those purchases will be revealed in sev statements that are coming soon. Sec filings, i should say. When i spoke with jenny about this, i just brought up the idea that on wall street a lot of people were looking at this 18 hike in the dividend as very good news because they see it as a way of getting money back to shareholders that maybe means ibm wont be making as many Share Repurchases. Thats how a few houses on wall street read it. Just as happy as buying back shares because it increases your stake in the company. I like both. Dividends and repurchases are really two different animals. I dont look at repurchases as shareholder value or Something Like that. I look at those as a decision to buy a business at less than its worth and hopefully its done for that reason. Sometimes they buy it back. Other Companies May buy it back for more than its worth. And theres no in my mind no connection between Share Repurchases and dividends. Share repurchases should be made when youre buying your stock for less than its worth. Its Pretty Simple formula. The one thing it does emphasize, but this is true throughout the tech field and this is true with microsoft and true with apple and its true with oracle and its true with qualcomm, those companies earn extraordinary returns on that tangible equity. They dont really need much money. Apple doesnt need much money and microsoft doesnt need much money. They spend money, but they dont really need much tangible capital. And ibm operates with a negative net tangible assets and you can do the same thing with most of the other tech companies. Its a terrific business when it works. Lets shift gears and talk about a few other issues. Another question that came up over the weekend at the Shareholder Meeting is what the impact would be on berkshire if it is designated systemically important financial institution. What do you think about that . First of all, the likelihood of that happening and secondly what would it mean . I really dont think there is any likely. Certainly no way exist. As i understand, metropolitan they spent a year before anything became public and they had lots of conversations with him and that has not been the case. Simply being large is not the reason to be designated. Exxon mobil is large. Apples large. Walmarts large. You know theres plenty of Big Companies around and the question is whether you pose a risk to the system because if youre interconnectedness with the financial system. And 20 of oour revur revenues in Insurance Business and we dont write in any quantity at all. We dont write Life Insurance where people can demand their cash and theres no way at berkshire that we can have large demands for cash in any period. You can the greatest insured disaster in history or anything of the sort. And we will always have loads of cash, just like we had in 2008. And we do not pose any remotely any threat to the system i can think of hundreds of companies that would be much more likely to be in that category. Warren let me ask you about a move that president obama is continuing to push this week. He is dpoeg togoing to be getting a aggressive and trying to convince the senate and the house and particularly the house to go along with some of these issues. His plan is to go visit nike later this week and talk about the important oance of open trade for us and Companies Like nike. What do you think about this . There are a lot of democrats in the house, in particular, that think this is bad for american jobs. Cant tell you anything specific but its good if the world and not good for us and not good for specificdry industries at time. The more the world trades the more specialized Certain Industries will be in terms of where theyll be located. There are places where theres natural advantages to doing. You better try and raise bananas in Central America and not try to raise them in nebraska. So, but trade ben fits both sides. Thats why there is a trade. If youre trading your services to cnbc and they think theyre getting something out of it in terms of viewership it makes it worth their while. And trade, we have 13 or 14 of our economy in exports and we have somewhat more than that in imports. It would be better if we had more exports and imports o. It means country are doing what they do best and theyre getting things that they dont do as well and producing. I am very pro trade. I dont know all the specifics of this act. Mr. Buffett, thank you. Well continue this conversation, but we have some special guests that will be sitting down with us in just a moment. Joe, ill send it back over to you. Okay becky, thank you. News on bank of america this morning. Vote to give the change back to omoynihan. The amendment that split the jobs as explained by the company, it was, he wasnt chairman 2009. When the chairman left they made him chairman. And said, okarxy, they changed it. A number of shareholders said you know what the shareholders changed the bylaw. If you change it back shareholders should get a say in that change until now, between now and some time in 2016. Shareholders will get a say, but the company is characterizing it as almost a, you know almost just doing it to almost a done deal. Supposedly, this is just tying a bow on the process. Well see whether, do you know that is not the case . Some shareholders that dont love the chairman and the ceo being together. What do you think the vote will be . How lopsided . Pretty lopsided. I think you get 10 , 15 will vote against and everybody else will vote. Even when jamie diamond you remember the chairman and ceo, i believe that unto itself was but 80 plus. In that range. What do you think . I think so. There we go. We can ask Warren Buffett about it. When we come back Berkshire Hathaway vice chairman Charlie Munger will join. Bill gates joins the conversation after the break. Take a look at the futures right now. Dow will open up about 56 points higher and s p 500 up about 6 points. Were back in just a moment. Boys . Stop less. Go more. The passat tdi clean diesel with up to 814 hwy miles per tank. Just one reason volkswagen is the 1 selling diesel car brand in america. [ male announcer ] your love for trading never stops. So open an account with schwab. And when a market move affects, say a Cloud Computing stock youre holding, we can help you decide what to do. With tools that help you see how market activity is affecting your positions. So when the time comes to decide whether to scale in or scale out. You can make your move wherever you are. And start working on your next big idea. My name is julia grinberg. I work in Energy Efficiency for pg e here in san francisco. My job is to help my customers save money, save energy and save the environment. When it comes to renewable energy, pg e is absolutely committed to creating a clean energy future. One out of every four solar rooftops in america is in our service area. Its wonderful to work in the city where i live and help my neighbors and i feel like the work that i do reflects that every single day. Together, were building a better california. Welcome back to squawk box, everyone. We are speaking this morning with Warren Buffett. The chairman and ceo of Berkshire Hathaway. Also joining us right now Charlie Munger and microsoft founding bill gates. Gentlemen, a pleasure to have all three of you here this morning. Thank you. Thank you. From time to time we get sit down with you three. I think of this as brain power hour. Three of the smartest people on the plant and i know your conversations with each other often get into world problems. World issues and how you see them. Sometimes you see them the same sometimes you differ with each other and i was hoping we could just kind of have a conversation and let the viewer spy in on the conversations that you three have with each other all the time. So im going to throw out issues and then step back and let you guys debate it and discuss it. Why dont we start with energy. I know this is an area that all of you have a lot of knowledge and interest. Your past Nuclear Program that you have been building. I know the two of you went to the Canadian Oil Sands and checked things out. Charlie, huge thoughts of your fans how American Energy independence. What are we doing right in this country right now . What are we doing wrong . If you were in charge how much would you change things . Bill, can i start with you . Sure. Well the shell Oil Phenomenon is a fantastic thing for the United States and for the world. Those resources people did not think they could be unlocked and now now the u. S. Is the Worlds Largest oil producer. We still import a lot, but with the right increase, north america as a whole is likely to get to a point where there is no more in port taking place. The toughest thing is we have Climate Change. So over time you have to shift to the sources of energy that dont emit co2 and natural gas is a reduction but it doesnt get you where you need to go. So things like renewables and nuclear need to come in and be a gigantic part of the mix within the next 30 years. Where are you right now in terms of your Nuclear Project and what the promise is . Its early stage. Were hoping in the next couple of years to actually Start Building it. Were talking with various countries, including china about where it should be built. Nuclear doesnt move at the speed that Computer Technology does. Things go well by 2025 this new design, the prototype will have proven itself. So other people will want to build it and it could become a significant contributor. But it takes a decade for that protoo type to prove itself. Charlie, bill just said something that i know you disaagree with. The idea of american independence on energy and the idea of whether we should be exporting our resources and the idea that we should even be using them. Could you explain why you think thats a bad idea . Im not sure we disagree. I think its great that we found all the shale oil, but i want to conserve oil and gas in the United States to the maximum extent we can. So im not in a hurry to have Energy Independence. Im glad to use up the oil and conserve our own. I see any real substitute for oil as a feed stock and so on. And running airplanes and so i want to conserve it. So im not, if there were no threat to Climate Change i would be totally in favor of shifting rapidly to sun, wind and so forth. Bill and i would disagree. He may think Climate Change is more important than i do. I really want to conserve it. I wouldnt explore it an item of gas if i was lets talk about Climate Change because you did make some changes at the meeting over the weekend where you questioned what some people who believe in Climate Change are actually doing at this point. I am much more afraid of running out of hydrocarbons than i am of Climate Change. Climate change, 30 of holland is under sea level. We have to spend a few percent of gdp to adapt to clime change. I think we can. I know of no substitute for hydrocarbons if we ever ran out. Warren where do you weigh in on this conversation . I certainly think that if there is a we always underestimated the amount of oil and gas in the world and now we just had this big in terms of what we can do with shale techniques. But on balance i would use the other guys. I would always have enough for strategic reserve. I mean you do not want to be without oil productive capacity or lots of oil, if something should happen in the world where you needed to have your own independence. But, but, you know some things are very precious and charlie uses the example of top soil. We have great top soil in much of this country and we wouldnt dream of exporting it. You know exporting the top soil oil. People would think youre out of your mind. I think the hydrocarbons are just as precious. Although the argument that comes from people is that you need independence, Energy Independence from other places because youre taking our money and shipping it to people who dont like us. That creates problems as well. Hes thinking long term enough. Theyre shipping a very valuable asset to us in return for little pieces of paper. And over time 500 years from now, well be hydrocarbons and if you really have the longterm interest in the country, you use the other guys. One of the advantages of being a rich country is that you dont have to use up your most precious assets. Energy is spongeable. Theres nothing magic about hydrocarbons. You can make, if you have energy, you can make hydrocarbons. So, to me, revictstricting the market. There are people who dont think we should be allowed to export. I dont see any real reason why you would restrict that. I believe in free trade in this and other things. Lets shift the conversation to education. Bill obviously, youre well known for your support of common core and you have spent a lot of time and effort and energy trying to fix the Education System in the United States. But id like to hear from all three of you. A big problem were faced with right now. Its a problem that seems like its very difficult to move the needle when it comes to attacking this. But if you were education czar and given free power to change the american Education System, what would you do . Well one piece of good news is that the Charter Schools are doing a very good job of educating kids in the inner city where typically dropout rates are very very high and very few kids go to college. The good charters overcome that. So by using long school day, long school year different way of working with the teachers amazing results have taken place. But youre absolutely right. We havent moved the needle for most students. Charters are only a few percent. We have to spread those best practices in order to get real change. How do you do that in the Public School system . Its not easy. School boards have a lot of pow oer. So, they have to be convinced. Unions have a lot of pow oer. Teachers need to see the models that are working because although change may be scary, they want to be part of the successful model. And so we need more pilot programs more dialogue to get all the entities Government School board unions moving towards more intensive educational process. Charlie, you said something several years ago to me that has really stuck with me. You talked about mcdonalds and the role that a company like mcdonalds plays in educating the workforce. Yes. Its from the elite academics of america saying mcdonalds is their own kind of food and jobs dont pay very much. But i have quite a different view. I think mcdonalds is most successful educational institutions in the United States. They take people and give them a first job, which enables them to get a second job. They do a very very good job of educating troubled young people to be good citizens. And theyre probably more successful in Charter Schools. So, i still have a big fan of mcdonalds. I stop by there many mornings. First of all, put my order and then i go where i pay for it and that person is very nice to me. They know me by name now and we have a nice interchange and then i go and pick up the food further down the line and they tell me to have a nice day and everything. Those people are learning good habits. They have to be there at a certain time and learn how to count money and items and smile at people and happy customers. You know ive seen dozens of them just at this one mcdonalds i go to over otime. Warren what would you do if you were the education czar . We are spending the money. I mean it isnt like there is any lack of resources going into it. Its ungodly and trackable, the system. Half facetiously and if the only choice available were Public Schools, wed have better Public Schools. But the wealthy in many many cities have opt out of the Public School system. They may, they may vote for issues out of conscious and some of them may engage philanthropically. But with their own kids and by having this division essentially between rich and poor in schools, the rich get the education they want to get for their kids and a lot of them have a conscious so they try to do something for somebody else but they dont try the same way as if their kids were in those schools. You just said it wasnt an. Educate people not focusing on. I think were probably spending 12,000, you know roughly. And its a lot of money. And its gone up over time in real terms. Very significantly. And, you know so money hasnt my argument the most Expensive School and the worst of it in terms. But, in the end, the people that dont have their kids in Public School and know their kids are not going to go to Public Schools or their grandkids are not going to have the intensity of interest across the board. Plenty of exceptions. But across the board, theyre not going to care as much about those schools than the ones that have no choice. Bill . Absolutely right. You want in every community the top people to really be aware of what is the dropout rate. Why is it that these inner city schools do such a poor job. This is the issue for the country, in my view, that in terms of countrywide success and individual opportunity you know, the promise of our country. This is the most important issue. And were not making as much progress as id like. In fact of all the foundation areas we work in id say this is proven to be the most difficult. Why do you think that is . Well there are some entrenched practices. Its a very big system. You know its over 600 billion a year being spent. And its a system very resistant to change. The best results have come in cities where the mayor is in charge of School System. So, you have one executive. And the school board isnt as powerful. So new york city made real progress. In chicago theyre making real progress. Those are the only cities where the mayor has a strong role. Hey, charlie, youve been very involved in Higher Education and institutions, too, where you have not only given money, but helped design buildings on some of these campuses. What do you think about our higher Education System at this point . Higher education . Just our our Higher Education is meaning the universities. Its probably the best in the world. And, so thats one of the reasons i do it. Im not any good at constant failure. I tire easily. I dont try to fix the Public Schools in our worst neighborhoods. Just you had to be a gates to do that. Im neither. Hard to make that distinction. It wasnt heartfelt. Either or. But our Higher Education is the best in the world. And i really like making it top bet better. Charlie went to the Public School system in omaha, as did i. We had a very good parochial School System and there was one private school but really for kids that had troubles mostly. And, you know everybody cared about it. My dad cared enough about the Public School system to run for the school board, which was a thankless, payless job. You got nothing out of it and he just felt it was important because his kids were going to go to Public School in omaha. And that intensity of interest by people that really are good citizens could make a difference. But in too many cities, the riches essentially, opt udout of the Public School system and theyre going to stay out. A good Public School system is like preserved but not restored. It is a very very tough problem. Well on that note were going to continue this conversation and continue our brain power hour in just a moment. But in the meantime andrew ill send it back over to you. Thank you becky. Breaking news for you. Mcdonalds detailing a turn around plan. Steve easterbrook said the companys performance has been in his words, poor. So he is reorganized the companys structure and doing it into four segments. The u. S. International lead markets, highgrowth markets and foundational markets. Eliminate layers of bureaucracy and in other headlines mcdonalds is going to be moving to become 90 franchise globally by 2018. Right now i think its about 81 . More on that story when we return and well also be heading back to omaha to continue our conversation with Warren Buffett buffett Charlie Munger and bill gates. Take a look at the futures. We are back in a moment. Man you run a business. Could be any kind of business. And every day youve got important decisions to make, like hiring. Where are you gonna find those essential people you need . With ziprecruiter, its simple. We post your job to over 100 job boards with just a single click, so you can reach millions of qualified candidates. Then well give you the tools to help you manage, screen and rank your applicants all so you can find the right one. Try zip recruiter for free today. Welcome back to squawk box. Couple stories front and center. Comcast earnings and revenue beating the street. Parent company adding 2. 5 billion to its existing stock buy back program. Dow chemical cutting 3 of its Global Workforce releteated to its previous plans to cut costs. Tyson helped by acquisition of hillshire brands. Well go back to see becky quick who is with Warren Buffett, Charlie Munger and bill gates. We were listening in to andrews comments when we were hearing about mcdonalds. Mcdonalds looks like its changing its Corporate Structure pretty dramatically. Your comments were what . When we talked about 3g and what they did when they came in and making obvious changes. They did that at burger king when they went in and reduced the number of companyowned stores dramatically and had them franchised and now mcdonalds is doing the same thing. So it made sense that burger king and im sure it makes sense at mcdonalds. The difference is when they come into burger king they do it very fast. We have three now. They make less sense. But you need somebody that changes the system once they sort of get into doing the same thing over and over again. Lets get back to fixing the worlds problems with you three. Dairy queen is much more important. Inequality. A massive discussion on inequality in this country and despate on how to change that. President obama laid out the idea that he would like to see the minimum wage raised. You supported the president and yet over the weekend you made comments over the weekend saying youre not necessarily a supporter of minimum wage. Why . If you increase the minimum wage dramatically youll change the number of people employed in a significant way. Everybody can give you their own equation of it. Usually proves what they want to prove to themselves. But no question if you make it a really meaningful change you change Employment Opportunities and i think that i do want to see people have more money in their pocket lowincome people and i think the earned income tax credit is a far superior way way. If rewards work and it does not destroy the normal demand supply curve so that you keep people employed. In fact you even induce them to become employed and you put more money in their pocket. I happen to think that is the superior way to take care of take care of the problem we have which is that we have a whole lot of people that are very poor. Bill and charlie, your thoughts on minimum wage and how to try to resolve inequality issues. About 70 of the people who benefit from the minimum wage are in households that are not poor. And, so, if you have a child in a household that is well off and you raise the minimum wage youre raising the cost of food for the poorest and only 30 of that money is going to into poor households. So, its fine you know getting that 9, 10, 11. I dont think were saying were against the minimum wage but its the mechanism that will get more wealth. Its and absolutely a fantastic and good piece in the economist this week on it. Charlie . I agree. I think the people who want huge, high minimum wages will hurt the people who are frying to help. I regard it as massively stupid. I agree totally with warren. I think the earned Income Credit makes nothing but sense. And i think you opt to be very cautious in raising the minimum wage. Okay. We have some breaking news that is just crossing the wires. Joe, i think you have a handle on that. Cisco today is giving some executive succession details announcing that the board of directors has appointed chuck robins as ceo taking over for John Chambers on july 26th 2015. He was also elected to the board of directors. John chambers will assume the role of executive chairman on the same date july 26 2015. And that is that will be just before johns 66th birthday. So hes 65 years old right now. He says this is had perfect time for chuck robins to become and selected at a time when cisco had very strong position. Mr. Robins has been there since 1997 quickly moving through the companys ranks. He most recently served as ciscos Senior Vice President of worldwide operations. So its a 17year employee. And carol barts, who is the lead independent director on ciscos board said i had the opportunity to watch chuck grow as a leader over the last 17 years and im convinced there is no better leader for cisco today. Hes demonstrated the same energy in passing to make cisco great that John Chambers has demonstrated during his entire 20year career as ceo. Much speculated about as a potential successor. A number of articles. What it does mean is that there are a number of people who didnt get the job. Some people had speculated that gary moore, chief operating officer and longtime i. T. Exec was going to get it. Hes the same age as chambers. He was probably not the person. Peter lloyd had been in the hunt as well as overbeak and chuck robbing robbins got the job. Do any of those folks end up going else where . We will see. Andrew and joe, some thoughts from our panel on this news, too. Weve been listening in. Warren you want to jump in . Berkshire is having a board member in a couple hours and we dont like to get one up by cisco. John chambers is somebody you have known in the industry. John has done a fantastic job. His optimism and bringing together partnerships with microsoft and others. You know hes amazing. And hes had the job a long time. Gentlemen, well send it back to you. But more coming up and other problems of the world, but well tackle in a little bit. Joe . Thanks becky. More from Warren Buffett, Charlie Munger and bill gates after the break. First, check out the shares of cisco. The tech giant naming Chuck Robbins replacing John Chambers who will resume the role as executive chairman. music boys . Stop less. Go more. The passat tdi clean diesel with up to 814 hwy miles per tank. Just one reason volkswagen is the 1 selling diesel car brand in america. Man you run a business. Could be any kind of business. And every day youve got important decisions to make, like hiring. Where are you gonna find those essential people you need . With ziprecruiter, its simple. We post your job to over 100 job boards with just a single click, so you can reach millions of qualified candidates. Then well give you the tools to help you manage, screen and rank your applicants all so you can find the right one. Try zip recruiter for free today. The network that monitors her health. The secure Cloud Services that store her genetic data. The servers and software on a mission to find the perfect match. And the mom who gets to hear her daughters heart beat once again. Were helping organizations transform the way they work so they can transform the lives of the people they serve. Welcome back to squawk box, everyone. We are speaking with Warren Buffett, the chairman and ceo of Berkshire Hathaway. Vice chairman Charlie Munger and microsoft founder bill gates this morning. Again, three of the smartest, most educated people on the plant and people who are constantly curious about things. We are taking this opportunity to pick their brains on some of the most pressing issues that are facing not only the country, but the world right now. Gentlemen, we have not talked financials with you this morning or anything that is happening around the globe when it comes to the economy. But i think probably one of the most difficult tasks right now would be to be sitting in Janet Yellens chair and deciding whether to raise Interest Rates and by how much. We spoke with warren about this this morning, but, bill if you were in Janet Yellens position right now, what would you do . Not an expert on that challenge. Its the environment with low Interest Rates globally is so unusual. And it really shouldnt persist. It creates problems in terms of leverage and bubbles. But how we get out of it without creating some economic setback, its very very difficult. The fact that most of the other central bankers are still lowering Interest Rates so people do expect the u. S. To sort of take the lead in pushing our way out of this situation. But its not, not a set of easy choices she has. Charlie, what about you . What would you do . Im deeply suspicious about printing money and throwing it around instead of printing money and Building Infrastructure and so on. So i get very nervous. I get made all these central bankers woo have pushed throwing money around as if it were the only tool they had. I think theres a lot to be said for physical infrastructure interventions by governments. And i think that everybody is relying too much on these monetary tricks. But how long do you think youll have negative Interest Rates in europe . I dont have the faintest idea, but the situation is very peculiar and i dont think its good. Warren what would you do . Based on what charlie and bill have just said you laid out the same issues earlier, where this is a conundrum however, there are bubbles where they are inflated potentially. A lot of money around means its got to go somewhere. Yeah. If you could borrow money at negative rates, it has to be very tempting to borrow. We borrowed the 3 billion in euros the other day. I mean we certainly were affected by the fact that we could get a rate of o1 or Something Like that for a dozen years. But i do think, and i may be wrong on this but i think that Janet Yellens hands are somewhat tied by what hes doing. Very hard to raise rates dramatically or significantly and have europe to continue to do what its doing. Every person in the world with money would be thinking about do i do move it from x toz to y and they can create their own momentum, too. I mean when something gets going it has a tendency to get going and keep going bigger and bigger. So, i do not envy her job. Where have you, i assume the three of you have talked about this quite a bit on your own. Yeah. Its one of the most ounbelievable things. Fascinating. It shouldnt be possible to have such low Interest Rates like this. But negative rates. Have you seen anywhere where you think bubbles might be developing . Places where it wouldnt be so high . Warren, you said stock prices are high if we had normal Interest Rates. Its affecting real estate in a big way and you can understand why. Market money is cheaper if you want to finance anything and you are comparing it all the time. All these Pension Funds and everybody else and usually they either have some kind of an assumed rate that is built into it or they have what to expect to get if theyre a college or something of the sort and, obviously, when they see negative Interest Rates or flat rates in this country, they say, we have to do something. They may finance activist funds and they finance anything that anybody comes along with. But it changes the value of the real estate dramatically in this country and changes the prices of stocks pretty dramatically here. And whats happened of course is it has gotten more extreme as it has gone along. Instead of moderating, you have a situation now where when poland goes to negative sells negative interest bond you know youre not in kansas any more. The temptation to say borrow tenyear money to buy stock back in is very high because although the multiples are high by historical standards, relative to Interest Rates, they are actually quite a bargain. Let me ask the three of you this. If you had to put a bet because these Interest Rates have also been wreaking havoc in the currency markets. We watched what happened to the dollar. But if you had to place a bet for the next 10 20 or 50 years on the dollar versus a basket of other currencies which would you take . Charlie . Im not sure my judgment on that is better than anybody elses. We have not made it our way in life by guessing currency rates. Bill . Id probably pick the chinese currency. The u. S. Currency has this unique reserve role which right now is making it stronger than the underlying economics would suggest. And the chinese currency is more priced to their economics. So not to be disloyal i love the dollar. But i wouldnt put my bet on it. Warren . Well you said a basket. So i would take the dollar against a basket of other currencies. I think other countries, as a group, well behave more foolishly in terms of the currency. I wanted to ask, bill how much chinese currency he had in his pocket. None. You do travel to china a lot, though . I do. But somehow i dont end up using cash all that much. Other people buy things for him. He gets upgraded. One of the things weve been watching is whats been happening with greece. And the eu. And trying to figure out how this whole situation will end. Charlie, my favorite line from the entire weekend was your line referencing this. When you said commenting on the whole idea of the european union, you said its not a good idea to go into partnership with a shiftless, lazy brotherinlaw and expect it to work out. Can you comment a little bit more about i think did you come up with that on the stage . Yes, of course. Its i have this feeling on macroeconomics that the democracies are getting dysfunctional at doing infrastructure intelligently and fast. Therefore, everybody plays all these monetary games and it looks to me like sort of running out of effectiveness. I regard it as a hell of a mess and i think we ought to get better at doing infrastructure vigorously and fast and skillfully. And were getting to be more like india. Its not a good idea. Theres probably not much coming from washington at this point. I dont think you would get the houses of congress or anyone in government taagree the plan. One of the reasons theyre relying so extremely on monetaryism and monetaryism and why the results are so extreme is they dont have any alternative and i think thats probably a mistake. Would the central bankers be better off they have no power to create infrastructure. Doing nothing to its probably better if they do what theyre doing than nothing. But is by no means sure to work well. Look at japan. Lets circle back to question of the easternian union. I want to get bill and warrens thoughts on this. This is a tough situation and it looks like its coming to a head with greece in may. What happens . I think its more likely than not that the european monetary yuan exists. There sbrn flaws pointed out big time and i dont think it will have the identical membership that it has now. There will have to be more teeth of the members and they may be beginning to realize that they need. And the question is whether people are willing to pay the price to stay in it by really adopting a behavior a little more like what was expected when they set it up. But it has to evolve somewhat to work. And i think it probably will but who knows for sure. Bill you agree with what charlie said about the brotherinlaw . I love my brotherinlaws. The construct where you have no fiscal control and your Exchange Rate is locked that doesnt work. And some people argue that greece leaving would, you know sort of enforce that theyre serious about rules and theyre going to be more home yeenogeneoushomogeneous. There are people assuming greece would stay in. Contracts have been made. A lot of ambiguity about Financial Relationships in greece. So i agree with warren there is so much commitment to it. You ask german voters should we exit the euro you dont have much sentiment even though what comes along with that subsidizing the credits of the other countries. They dont like that. Theres a contradiction there. Are they willing to make some substantial change. Well theres a sovereignty deficit. Voters dont think of themselves as europeans. So its tick ki to move physical power to the center. Well continue this conversation. Were going to finish our power hour with Warren Charlie and bill. Two stock to watch, mcdonalds announcing two steps in its turn around plan. Also cisco naming Chuck Robbins as its next ceo effective july 26. Hes going to replace John Chambers. Were back in a moment. Tdd 18003452550 [ male announcer ] your love for trading never stops tdd 18003452550 even on the go. Tdd 18003452550 open a schwab account and you could earn tdd 18003452550 300 commissionfree online trades. Tdd 18003452550 so when a market move affects one of your positions, tdd 18003452550 schwab can help you decide what to do. Tdd 18003452550 with tools like free livestreaming cnbc tv tdd 18003452550 that give you the latest Financial News and trends. Tdd 18003452550 and bubble charts and price charts that let you see exactly tdd 18003452550 how market activity is affecting your positions. Tdd 18003452550 so when the time comes to decide whether to scale in tdd 18003452550 or scale out you can make your move, tdd 18003452550 wherever you are. Tdd 18003452550 and start working on your next big idea. Tdd 18003452550 open a schwab account and you could earn tdd 18003452550 300 commissionfree online trades. Tdd 18003452550 tdd 18003452550 call 18777292379. Tdd 18003452550 or visit schwab. Com trading. Tdd 18003452550 schwab trading services. Tdd 18003452550 your goto for trading knowhow. Tdd 18003452550 welcome back to squawk box. Weve been talking about a lot of big issues. Gentlemen, i thought we could take a little bit about the Health Care System. And charlie, i thought wed start with you. Where do we stand right snow . How are we doing . What should we be doing differently . Our Health Care System is very complicated and very expensive. Of course, a lot of things are subsidized we would be better off not doing, like prolonging death so you can bill the government more and more and hopelessly impaired people. Its very difficult to get the system to work right. But theres a lot wrong with it. You had one or two things you would like to change if you could. Whats at the top of the list . I would come down hard if i had any pow ner the system against prolonging death so you can bill the government more and more. I think that isnt doing the patient any good not doing the family any good. Youre lining your own pockets in a perfectly disgusting way. I think the Health Care System has a lot of sin. The pushback you get on that is the idea of death panels. I know that. Theyre buzz words. When you go into the hospitals, youll find people just lying there with huge invoices going out, no possibility theyre ever improving and both the hospitals and doctors billing one hell of a lot. I regard this as disgusting and i think it should be faced. They do a much better job in europe. They just do it better than we do. Im ashamed of the way our Health Care System prolongs death to make money. Bill . Warren . Well, charlie has been involved in running a hospital. Im not. The one piece of the system i think about is how we insent innovation in things that will reduce costs. Some innovations raise costs, like very expensive chemotherapies that have modest impact. But if you could, say, cure alsz alzheimers or parkinsons, then the Long Term Care costs would improve dramatically. The incentives are such that the r and d is way below where it should be. I think theres some works on the incentive system for innovation that could make a big difference. Joe has a question too. Joe . Totally different. Warren, i know youre a state of democrat and Hillary Clinton is the presemp tif nominee and youre a long time supporter. Given everything weve seen everything youve read all of the recent sufficient serves and the clinton foundation. Is there anything that gives you pause at this point in terms of ethics or transparency is Hillary Clinton in. I listened to you very carefully every morning, joe. So i know the whole range of things that could be said about hillary but im 100 for her. Is there anything ever that she could do where you would waiver . I would say this. I dont know anything thats worse about her than worse about me. Well gentlemen, we are out of time. But i want to thank all three of you for being here today. Retruly appreciate it. Guys well send it back to you in the studio. Thank you. Have a good day. Thank you to our big three. Absolutely. Great conversation. You watched the fight. Yeah. We were going to bond. I watch the fight but it was a lousy fight. Terrible. Terrible. It portends the end of days, to see ou od and strange and surreal. It was almost like wrestling. Well talk about it tomorrow. Make sure you join it tomorrow. Sidewalk on the street is next. What is show by becky in omaha. Welcome to squawk on the street. Already a busy news day. A new ceo at cisco, a turn around plan unveiled at mcdonalds. A big week for media and consumer earnings. The jobs numbers on friday. Oil continue to toy around with 60. And then the ten year right about 21 this
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