Warren Buffett on CNBC: I'd Buy Up 'A Couple Hundred Thousand' Single-Family Homes If I Could
By Alex Crippen
Feb 27 2012 6:17 AM
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Warren Buffett says along with equities, single-family homes are a very attractive investment right now.
Appearing live on CNBC's Squawk Box, Buffett tells Becky Quick he'd buy up "a couple hundred thousand" single family homes if it were practical to do so.
If held for a long period of time and purchased at low rates, Buffett says houses are even better than stocks. He advises buyers to take out a 30-year mortgage and refinance if rates go down.
Buffett revealed that he put 175 million euros into each of eight European stocks on behalf of Berkshire Hathaway at the end of 2011, but did not reveal the names of those stocks.
He also said Berkshire bought just a "few" shares of IBM this quarter. He would have bought more but the price went up. Buffett tells Becky he probably won't buy a tech stock again, but if he understood a company and liked its management and price he wouldn't rule out another tech purchase.
Buffett says if he could only own one bank stock it would be Wells Fargo and Berkshire also added to its position in that stock during the current quarter.
On Bank of America, Buffett says the bank's deposit base is a "huge asset" and CEO Brian Moynihan has done exactly what he would do.
Buffett also repeated his praise for JPMorgan Chase CEO Jamie Dimon and says he owns some of those shares in his personal portfolio.
He does have some criticism for a big Berkshire stake: Johnson & Johnson. He believes too many mistakes have been made at the recall-prone company and while it is still attractive at its current price, he would sell some shares if he needed to raise capital. It's "obviously messed up in a lot of ways in the last few years."
Buffett on CEO Succession
Buffett defends Berkshire's decision not to disclose the name of the person the board has chosen to be his successor as CEO, saying he has invested in many companies where he didn't know who would be the next person running the company.
He does say the next CEO is "probably the CEO of some operation" within Berkshire.
Many people had interpreted Saturday's letter to shareholders as saying the board had only decided last year on a CEO successor, but Buffett tells Becky the board has actually known for years who it would go to if Buffett were suddenly unable to continue at the helm. That person, he says, has remained the same for more than a year and wasn't former Berkshire executive David Sokol. Answering a viewer's question, Buffett says the successor doesn't know he or she has been chosen by the board, and it isn't a board member.
Buffett says Berkshire is required by law to pay Sokol's legal bills, spending $1.4 million so far. He "assumes" something is happening with the SEC's investigation into whether Sokol was insider trading when he bought shares of Lubrizol before Berkshire announced its acquisition of the company.
Buffett on the Economy
Aside from the housing sector, Buffett says the U.S. economic recovery is healthy and won't be derailed by rising oil prices. He repeated what he's been saying throughout the recession, that it's always been a "terrible mistake" to be pessimistic on the U.S. over the long term.
Buffett says that except for its housing units, Berkshire's businesses have increased their hiring and that each business will have more employees at the end of this year than they did at the start.
But for the nation, he wouldn't be surprised if the unemployment rate returned to nine percent.
Buffett says that in "hindsight," he now thinks the government's bailout of the U.S. automakers was one of the best things to happen to the economy.
Buffett on New Portfolio Managers
Buffett heaped praise on the two Berkshire portfolio managers he's hired, Todd Combs and Ted Weschler. He says Combs did extremely well with his investment choices in 2011 and has been compensated accordingly.
While he's not actively thinking about hiring a third manager, Buffett says he won't rule it out if a great person comes along.
Buffett on Taxes
On taxes, Buffett says it's a myth that U.S. corporations are paying anything close to a 35 percent tax rate and maintains those taxes are not "strangling" American competitiveness.
He dismisses suggestions by critics that if he wants the super-rich to be taxed at a higher rate then he should write a check and make a voluntary donation to the Treasury. Buffett responds that contributions aren't going to solve the massive debt problem facing the U.S.
He says it is a "travesty" that everyone else is being asked to make sacrifices but not America's most wealthy people.
While he would accept Joe Kernen's suggestion for a tax on a person's total wealth, he says he doesn't think that's the best way to go, in part because it's hard to value assets like farms.
He also says he would accept taxing dividends at the higher ordinary income tax rate, depending on what that rate would be.
In response to a emailed question from a viewer suggesting he owes it to Berkshire shareholders not to antagonize people by pushing his controversial views on taxes, Buffett says he doesn't think a CEO needs to put his or her political beliefs into a "blind trust."
He's also calling on Congress to vote this year on the Bowles-Simpson fiscal reform proposals. Buffett dismisses the idea that Congress can't get anything done in a presidential election year, saying they shouldn't be paid for the year if they're not going to do some work.
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