Warren Buffett co-hosted Bloomberg TV’s “In the Loop” with Betty Liu this morning, where he discussed the U.S. economy, JPMorgan (JPM), Wells Fargo (WFC), Bank of America (BAC) and other Berkshire Hathaway (BRK.A) holdings.
On JPMorgan, Buffett said, “I’ve had enough mistakes of my own that I’m very forgiving when something like that happens” and advice to Jamie Dimon is to “keep your head down.”
Buffett said that Wells Fargo has “a sensational mortgage operation.”
Buffett went on to say that Americans are “quite disgusted” with Congress and that Congress should raise the debt ceiling “this afternoon.” He said that the debt ceiling shouldn’t be used as a “pawn” to embarrass the opposing side and that health care is the “tapeworm” of the economy.
Buffett also said that Berkshire reduced its holdings in ConocoPhillips (COP) and bought into “some of the refining operation.”
Buffett on whether he was surprised by JPMorgan’s $4.4 billion loss:
“Not surprising then bank in terms of the loss from a transaction of that size. My guess they pretty much worked out of it by now. They lost a whole lot more than that in loans and mortgages and reps and warranties that are coming back. It sounds like a whole lot of money, but it is not that significant relative to JPMorgan…I have had enough mistakes of my own so I am very forgiving.”
On whether he believes JPMorgan is doing the right thing in relation to the loss:
“Oh sure. They had losses on reps and warranties on mortgages that were substantial. They had loan losses that were substantial bearing the 2008 period. I just heard the Wells Fargo figure. That was $5 billion a few years ago. Banks are in the business of taking some risk. If they take risks, they are going to have losses as well. If you put it under a rock, you will not have any losses, but you will not earn any money.”
On whether he’s spoken with Jamie Dimon about the trade:
“We work on a panel together at Microsoft shortly after it broke. I heard him talk about it. It is pretty clear what happened. He does not need any advice from me.”
On Wells Fargo:
“They’ve got a sensational mortgage operation. The total mortgage market was at the $3 trillion level not that long ago. If it goes back up to $3 trillion, I hope Wells is going a third of those.”
“Wells did the best job of the big players in the mortgage market and therefore they’ve garnered a share as the other fellows have fallen by the wayside.”
On the housing market:
“It is starting to recover. The general economy has probably slowed down a little in the last few months. The bank the housing market is recovering…We are seeing an improvement. We have moved noticeably in the last few months. It was just a question of getting households in balance with housing units. That happens at different paces in different parts of the country. You have seen a much better balance developing here in recent months. That is why you are seeing a pickup in prices.”
On what advice he’d give Jamie Dimon:
“Keep your head down and you have a fantastic institution, and you are making money every day. You are going to run into things like this….I think it is the best shareholder letter. It is very, very good. He is a candid guy. When he made that statement in April, that is what he thought. I have no question about Jamie Dimon telling the truth.”
On Wells Fargo:
“I like Wells Fargo better than anything by far. It complicates life when I and buying things as opposed to the Berkshire Hathaway. I get what is left over…I like Wells Fargo better [than JPMorgan]. We have been buying Wells Fargo month after month for a lot of years. Among the big banks, I think it is the best. “
On whether Bank of America declined his investment:
“That is absolutely not true. The first time I’ve ever talked to Brian [Moynihan] was the day I called him and we made a deal…We have over nine years left. It is an attractive price. I wish I had done it for $10 billion.”
On whether the deal was a vote of confidence in Bank of America and Brian Moynihan:
“Both. Bank of America is a remarkable institution…Wells Fargo may have the best deposit base in the United States, but Bank of America’s deposit bases are absolutely fantastic. The real asset of a bank is its liability. Bank of America has a deposit base that is terrific. They got in trouble with a couple of acquisitions, but that was not under Brian’s watch. Brian has been doing exactly the things in terms of correcting problems in the past. I think he has done a terrific job. He is getting it back to basic banking.”
On the euro:
“It cannot survive with the present rules. That is what they are learning. The question is can 17 countries get together in a way to do something that will require much closer cooperation when their individual conditions are so different?”
On the Supreme Court upholding President Obama’s Affordable Care Act:
I think it is the right decision, but I think the health care problem is the number one problem of America and of American business…It is the tapeworm of the American economy. We have not dealt with that yet. Obamacare is a step in the right direction in many ways. In terms of cost, it is going to require a huge change. We have seen that number go up to 17%. That is a huge cost factor. I think Berkshire Hathaway’s costs are over $2 billion a year for health care.
On those who say that Obama’s push into health care will cost him the election:
“We will know in November. Not only what he does but what his opponent as. The American public is going to have their choice of two people bending. They will come to a judgment about which of two men they preferred to run the country. I think Obama is clearly the superior. Events from now until then will have an effect on that. Some people will be for or against because of the health care act.”
On why he’s investing more in newspapers:
“These are smaller newspapers generally. Newspapers used to be primary virtually everything. They have lost their primacy in many areas. If you lived in Nebraska and you are interested in at Nebraska football or your high school and what is going on with your neighbors, you are only going to find it in the independent papers. The smaller paper is still primary to many areas of interest.”
On whether he’d invest in News Corporation’s publishing unit that was recently spun off:
“I would rather buy newspapers myself directly…I like buying individual papers at the right price. The prices should be low because their revenues are going to decline over time. We are not buying into a business where revenues are going to increase. We have to buy them at the right price. We have to buy papers that are subject to less erosion because they have lost their primacy.”
On whether he’ll buy more newspapers this year:
“I think so…it depends on who calls us. We don’t go out searching for them. They come to us.”
On Facebook’s IPO:
“It either came out at the wrong price or it was handled the wrong way. A lot of stocks go down. All kinds of stocks go down. The question is whether Facebook is worth $100 billion or$50 billion or $200 billion. Probably a higher percentage of the people bought it because they thought it would go up the next day. That is a terrible reason to buy a stock. They were not buying Facebook (FB) because they thought the business was worth $100 billion. People bought it because they were told that it was going to be hot. You should not buy a farm because you think you could sell it the next day for more money.”
On ConocoPhillips and Phillips 66:
“They spun it off and actually one of the two [Buffett’s deputy stock pickers Ted Weschler or Todd Combs] bought some of the refining operation.”
On whether the U.S. will fall off the fiscal cliff:
“It depends on the election, but I think people are quite disgusted with Congress. The idea of having a debt ceiling — as this country grows, our debt capacity grows. To go through this charade, we are going to increase the debt ceiling, so why Congress does not do it in five minutes instead of spending weeks and weeks posturing and complaining and holding other things hostage, I think it is disgusting. I think they ought to do it this afternoon. They know they are going to do it, and they are all just sitting around using it as a little pond in the game to try to embarrass the other side. Only Congress passes bills, and the debt ceiling is up — to me it is the most obvious of all. I do not know why the majority and minority leaders of both houses do not say we are going to do that this afternoon. I think it would give the American public the confidence that at least these people will not use everything in the world as a political.”
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