Monday, March 03, 2008

Buffett Interview on CNBC

by Calculated Risk on 3/03/2008 04:39:00 PM

Warren Buffett was interviewed for three hours on CNBC today. Here is the transcript and a brief excerpt on housing prices (hat tip cord):

LIESMAN: One of the most striking things in this poll is for the first time--we've done this for four quarters now--Americans now look for a decline in their home values. What's the significance of that from an economic point of view, Mr. Buffett?

BUFFETT: Well, it has a huge effect because, you know, with 60 percent-plus of the American people being homeowners, as being a huge asset--and in many cases it's a leverage asset--it obviously is going to be on their mind big time. And I get the figures every month. We have a number of real estate brokerage operations around the country, and I get the--I get the figures from many markets on listings and sales, and I've seen something like Dade and Broward County go from 6,000 listings and 3600 sales a month to where they're now, I think, 82,000 listings and about 1500 sales a month. So unless there's some major intervention by the government in some way, or something of the sort, home prices have not stopped going down. Now, they will at some point.

QUICK: Any of the intervention plans we've seen from the government strike you as being a good idea?

BUFFETT: Well, that--I haven't seen the details on many of them, but I think it's very hard to start interfering with markets without having a whole lot of unintended consequences.
And on a recession:
QUICK: Let's move on to David from Defiance, Ohio. He asks, `How would you define a recession?' This is something we talk an awful lot about on the show, but he says, `I've been listening to a lot of discussions on CNBC, some of which can be very annoying because they tend to be so outrageously vocal and the experts believe two quarters of negative growth qualifies as a recession.' Is that the surest definition of it? Or do you think it's broader than just that?

BUFFETT: Well, it's the standard definition, but if you think about it, population grows 1 percent of year. So you could have growth of GDP of a 1/2 a percent, but GDP per capita would be going down. So the very definition, you might say, is a little bit flawed if it--if it doesn't allow for the fact that GDP per capita can go down while growth GDP's going up. Beyond that, I would say by any common sense definition, we are in a recession. And...

QUICK: You would?

BUFFETT: Yeah, we wouldn't--we haven't had two consecutive quarters of GDP growth, but I will tell you that, on balance, most people's situation, certainly their net worth has been heading south now for a considerable period of time. And if you owned a house, and you had an 80 percent mortgage on it, and so you had 20 percent equity a year ago, you might not have any equity now. And millions of people are in positions somewhat similar to that, and people would--people that own municipal bonds feel poorer today than they did a few months ago.

QUICK: Mm-hmm.

BUFFETT: So business is slowing down. We have--we have retail stores in candy and home furnishings and jewelry; across the board I'm seeing a significant slowdown and, of course...

QUICK: That's the first time I've heard you say you think we're actually in a recession right now.

BUFFETT: Yeah, well, I think, when we talked earlier, I said we might be.

QUICK: Right.

BUFFETT: But it--no, I would--I would say that--but when I say we're in a recession, it doesn't meet the technical definition. We aren't in the second quarter of--we can't be because we don't know what the fourth quarter of last year was. But I think that, from a commonsense standpoint, we're in a recession now.