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Bear Corner

CNBC/DOW JONES BUSINESS VIDEO: Transcript of Jan. 19, 2005, interview with Warren Buffett

BILL GRIFFETH, CNBC ANCHOR: How much would you pay to have lunch with the world's greatest investor? Well someone registered in Singapore, bid $202,000 on that an eBay charity auction last July for the opportunity to sit down with Warren Buffett.

That lunch takes place today at New York's famed Smith & Wollensky Steakhouse. We take you there live, where Mr. Buffet is, I'm told, looking over the menu.

How you been? Thank you for joining us. What's for lunch?

WARREN BUFFET: Well, I'll tell you, since Smith & Wollensky is buying, I think I'll order one of everything! Incidentally, the buyer of the lunch, you mentioned correctly, I think bid $202,000, or $205,000, but because there was a little mix-up at the end and one fellow didn't get to bid, he voluntarily, the fellow that bought me, increased it to $250,000, and on top of that, Smith & Wollensky has contributed dollars $10,000 to Glide, so Glide is going to come out of this with 260,000. And I'm going to come out with a free lunch! )

GRIFFETH: Not a bad deal. Tell me about the Glide Foundation. You've been quoted as saying some incredibly wonderful things about it. Tell us about it.

BUFFETT: It's a remarkable place, Bill. Glide, a young black minister 40 years ago went out to San Francisco to a dying church that had 100 elderly white parishioners. And they quit when he came.

And he took this shell of a church and built it into an incredible social organization that now it has served over 800,000 meals last year, 20,000 volunteers. It takes the people who are hopeless and gives them hope. And I've seen it in action, and I really have never seen a better social service organization.

GRIFFETH: Did I read correctly that the staff members now themselves are former homeless people or recovered addicts?

BUFFETT: A lot of them. And you'll find people -- Oprah has been there, the President and Senator Clinton have been there, Bill Cosby, Sharon Stone, Robin Williams. All of these people pitch in there because they have seen the job that Cecil Williams does. He's the real deal.

GRIFFETH: Well, they can't have a better sponsor than you, as well.

BUFFETT: Thank you.

GRIFFETH: By the way, if I'm spending $250,000 for lunch and I ask questions, do I get some straight answers? I mean, you're going to divulge some information to these folks today?

BUFFETT: I do my best, Bill. You might check with the person that bought it last year but I try to give them their money's worth.

GRIFFETH: I'm going to ask questions for free, if I may?

BUFFETT: We'll give you the children's portion.

(LAUGHTER)

GRIFFETH: I know I'm not going to get you to tell us what you're buying or anything, right now, but your thoughts on the stock market right now in light of what's going on with the economy and corporate profitability, the Fed raising rates? I mean, just big picture, what's Warren Buffet think of the U.S. stock market right now?

BUFFETT: I never try to predict the market. I've made money over the years by buying into good companies, run by good people, at attractive prices. And I don't try and make it out of buying into the market at one point and selling at another point.

I'm having a hard time finding things to buy, if that says anything about the market. But really -- if I find something tomorrow to buy, I don't give a thought as to whether the market is going up or down. I just barrel in.

GRIFFETH: Are you bullish, as it were, on the dollar? Do you think it goes much lower from here?

BUFFETT: I think over time that -- unless we have a major change in trade policies, I don't see how the dollar avoids going down. I don't know when it happens, I don't have any idea whether it will be this month or this year, or next year. But we are force-feeding dollars on to the rest of the world at the rate of close to a couple billion dollars a day, and that's going to weigh on the dollar. I see no way around that.

GRIFFETH: I know that you have taken positions, sort of against the dollar, but do you want to look overseas more for acquisitions instead, as a result of this?

BUFFETT: Well, I certainly welcome the chance to buy businesses, or for that matter, stocks, denominated in the other currencies, or businesses that do -- make their money in other currencies. But I've always been interested in that. But I would say that it would be a small plus to be in half a dozen other countries versus earning money in the dollar.

We still have most of our money in dollars. That's the nature of running all the businesses we do. But we've never -- prior to 2002, I had never owned a dime's worth of foreign currency. I mean, when I got back from a trip, I couldn't wait to cash in my eight euros, or whatever is was that was left over. But I've changed my views.

GRIFFETH: Everybody is talking about China, and it's impact globally on the economy, and commodity prices, jobs and, whatever. Anything you like in China?

BUFFETT: Well, we own -- as you may know -- we own about a billion dollars worth of PetroChina, which I bought a couple of years ago. But I really bought that as a very, very major oil company that was selling at a very attractive price.

And it wasn't because specifically it was in China, but it was very cheap, it's a huge company, it pays out 45 percent of what it earns. And I thought it was very attractive, and I feel very good about it.

GRIFFETH: Econ 101 would suggest that if the dollar goes as low as it does, for as long as it does, that inflation can't be far behind. Today's consumer price index report, notwithstanding, do you see inflation too far down the road. And I know you have that silver play a few years ago. Do you look to raw materials or commodities as a decent investment as a result?

BUFFETT: Well, we haven't been buying commodities, but I do agree with what you said inflation. I've been wrong on inflation over the years, in recent years, because I thought it would heat up more than it has. But in the last 12 months in our businesses we have seen huge increases in raw material prices.

I mean, steel prices have doubled on us, all kinds of fiber prices have increased dramatically, and those are going to be pushed through into consumer prices. So I think you're going to see more inflation and I think it ties in with a weakening dollar as well.

GRIFFETH: And it certainly doesn't help corporate profitability then either, does it?

BUFFETT: Well, it depends on the company, but normally inflation is bad news for everybody.

GRIFFETH: Can you shed light -- I mean, obviously this is a legal proceeding an you're not going to want to comment on the legal part of it at all, but the subpoenas from New York State Attorney General Eliot Spitzer for General Re, one of your divisions, you got the same thing eight days later from the SEC late last month.

Are you looking into this yourself, are you conducting an investigation into what's going on to your reinsurance unit there?

BUFFETT: Well, we're having our law firm actually conduct investigations and look at all the transactions of the past, to supply that information to both the SEC and to the Attorney General Spitzer's office. So we have them working on it. And a number of other insurance companies are doing the same thing, and we'll cooperate fully.

GRIFFETH: I mean, I got to be frank, the first time I heard about this, Warren Buffett, of all people, you're doing the due diligence before you buy a company. And I'm not saying that General Re is in the wrong on this, but you are -- like many reinsurance companies and insurance brokers receiving these subpoenas from the attorney general's office and the SEC. I can't imagine you didn't do the due diligence ahead of time, yes?

BUFFETT: Well, I think every big reinsurer that I know has received requests for information. I may be wrong on that, but certainly as I read the papers it sounds like they've all received it. I think it's an industry-wide investigation and we'll have to see how it turns out.

GRIFFETH: We haven't heard anything publicly but has GEICO been contacted as well?

BUFFETT: No, GEICO is a personal lines company selling auto insurance and I don't think you'll see the any of the personal lines companies will be looked into in this connection. It's the reinsurance companies and big commercial insurers.

GRIFFETH: Before I get off this topic here, I had an e-mail from a colleague of mine in Europe who said there are rumors you're looking at a European reinsurance company over there. Are you finished acquiring reinsurance assets at this point?

BUFFETT: Well, I'll never say never. I like buying things, Bill. But I don't -- I don't even talk in my sleep about that sort of thing.

GRIFFETH: I don't mean to needle you too much.

BUFFETT: That's OK.

GRIFFETH: But you know those airlines -- airlines are at $1.50 in some cases. I mean, do you see value there yet?

BUFFET: In the airlines?

GRIFFETH: In your favorite investment over the years?

BUFFETT: I have an 800 number I call when I get the urge to buy an airline stock. And I call them up at midnight and say my name is Warren and I'm an airholic and they talk me down. No more airlines!

GRIFFETH: Before I let you go, we were asking our viewers today if they would pay, what was originally billed as $202,100 to have lunch with Warren Buffett today. Let me ask the great value investor himself, would you pay that much to have lunch with yourself?

BUFFETT: I don't think I'd pay that much to have lunch with anyone, except you, Bill!

(LAUGHTER)

GRIFFETH: Well, bon appetite, enjoy, and good luck with the Glide Foundation. It sounds like a wonderful organization. Thanks for joining us.

BUFFETT: It is a terrific one. Thanks for having me.

GRIFFETH: You bet.