The globe’s most recognizable and respected investor, Warren Buffett, sat down with CNBC’s Becky Quick Monday morning for a three-hour, live “Ask Warren” segment for CNBC’s Squawk Box. In a far-reaching interview, Quick touched on a number of topics. But what seemed to attract the most attention was Buffett’s view on the economy.
In the fall of 2008, when things appeared to be falling apart at the seams, Buffett was quoted as saying that we were experiencing the equivalent of an “Economic Pearl Harbor.” Now some fifteen months later, Buffett believes that the U.S. economy has survived the attack and is faring well in the war.
Buffett said, "We got past Pearl Harbor. We will win the war, and it's going slightly our way at the present time." However, the Oracle of Omaha warns that the recovery process continues to be slow. “The spill-over from the financial panic into the real economy was huge and particularly things like housing had to stop,” he remarked.
Buffett’s Berkshire Hathaway (BRK.A, BRK.B), which is now part of the S&P 500, owns more than 80 businesses at the present time. Thus, Buffett is able to monitor the progress of the economy through his diversified portfolio of operating companies.
Buffett said, “We've got about 80 businesses now, and I get figures on them on a very real time basis. And I would say that there's a few businesses that really have had a fair amount of bounce.” However, Mr. Buffett added that from a big-picture standpoint, Berkshire’s businesses are “getting better,” but at a “very, very slow pace.”
It shouldn’t be surprising to learn that the core problem in the economy lies with the consumer. Buffett told Quick, “Consumer businesses are struggling. The American public is deleveraging to some degree. They can't refi anymore. I mean, they have a whole different mindset about buying things than they had a couple of years ago and that means that business in many areas is slow.”
On the subject of the improvement in the business climate, something that Wall Street Bulls have been pointing to with enthusiasm for some time now, Buffett warns that recent comparisons can be misleading. “You have to be a little careful about the comparisons now because if you're into February and March, you're comparing with a period when we were in free-fall last year.”
Ever the pragmatist, Buffett says he looks back a little farther than just a year ago in order to gain a more realistic comparison of how his businesses are doing. “I compared it two years ago, and our businesses are not doing… anywhere near as well as two years ago,” Buffett says.
When asked about the jobs market, Buffett was not-surprisingly cautious. “I think they'll be slow to come back. But we're going to hire more people.”
Mr. Buffett used his carpet business as an example. He said that the company payrolls are down about 22% from their recent highs. Buffett’s common-sense approach is that when orders start coming in again, his company will hire more people. “We're dying to hire people, but we're not going to hire people to stand around.”
Looking ahead, Joe Kernen asked how long it might take in the “new normal” environment for things to improve in the banking sector. “Well, it's going to come back a lot quicker than 10 years, Joe, but it--I don't think it's going to bounce back fast.”
Mr. Buffett warns that the banks are still not completely out of the woods and warns that commercial real estate continues to be a problem. “The banks are in better shape than they were a year or two ago. Although a lot of smaller banks have got troubles. They've got particular troubles in commercial real estate. So the FDIC puts out this list of problem banks and that list, we had 140 banks fail last year, we'll probably have more than that fail this year,” he said.
On the subject of the stock market, Buffett says that his enthusiasm for stocks is directly proportional to how far they go down. Thus, given the recent rebound, Buffett says, "Stocks are a lot less attractive now than they were a year ago."
When asked about how much of a portfolio should be in the emerging markets, Buffett once again espoused a down-to-basics approach saying that he wouldn’t worry about where a company is located. Buffett says it is far more
