Tune in Tonight: Nightly Business Report Interviews Warren Buffett
Published on - January 22nd, 2009 (by J.D. Roth) As part of its 30th anniversary, Public Broadcasting’s Nightly Business Report is airing an interview with Warren Buffett tonight (Thursday, January 22nd). Susie Gharib spoke with “the oracle of Omaha”, asking him about the economy, about President Obama, and about investing. Here are some excerpts from the transcript, posted with permission. Update: Video of the interview is now online.
Susie Gharib: One thing that Americans aren’t buying these days is stocks. Should they be buying?
Warren Buffett: Well just as many people buy a stock everyday as sell one, so there are people buying stocks everyday and we’re buying stocks as we go along. If they’re buying into a business that they understand at a sensible price they should be buying them. That’s true at any time. There are a lot more things selling at sensible prices now than they were two years ago. So clearly it’s a better time to buying stocks than a couple of years ago. Is it better than tomorrow? I have no idea.
SG: This financial crisis has been extraordinary in so many ways, how has it changed your approach to investing?
WB: Doesn’t change my approach at all. My approach to investing I learned in 1949 or ‘50 from a book by Ben Graham and it’s never changed.
SG: So many people I have talked to this past year say this was unprecedented…the unthinkable happened. And that hasn’t at all impacted your philosophy on this?
WB: No, and if I were buying a farm, I wouldn’t change my ideas about how to buy a farm or an apartment house or a business and that’s all a stock is. It’s part of a business, so if I were going to buy stock in a private business here in Omaha, I’d look at it just like I would have looked at it two years ago and I’ll look at it the same way two years from now. I look at how much I am getting for my money, how good the management is, how the competitive position of that business compares to others, how durable it is and just fundamental questions.
Any stock I buy, I will be happy owning it if they close the stock market for five years tomorrow. In other words I am buying a business. I’m not buying a stock. I’m buying a little piece of a business, just like I buy a farm. And that doesn’t change. And all the newspapers headlines of the world don’t change that. It doesn’t mean you can’t buy it cheaper tomorrow. It may turn out that way. But the real question is did I get my money’s worth when I bought it?
SG: One of your famous investing principals is, “be fearful when others are greedy and greedy when others are fearful.” So is this the time to be greedy, right?
WB: Yeah. My greed quotient has risen as stocks have gone down. There’s no question about that. The cheaper something gets that you’re going to buy, the happier you feel, right? You’re going to buy groceries the rest of your life; you want grocery prices to go up or down? You want them to go down. And if they go down you don’t think gee I got all those groceries sitting in my cabinet at home and I’ve lost money on those. You think I am buying my groceries cheaper, I am going to keep buying groceries. Now if you’re a seller, obviously prices are higher. But most people listening to this program, certainly I, myself, and Berkshire Hathaway, we’re going to be buying businesses over time. We like the idea of businesses getting cheaper.
[...]
SG: Investor confidence was so shattered last year, what do you think its going to take to restore confidence?
WB: If people were dependent on the stock market going up to be confident, they’re in the wrong business. They ought to be confident because they look at a business and think I got my money’s worth. They ought to be confident if they buy a farm, not on whether they get a quote the next day on the farm, but they ought to look at what the farm produces, how many bushels an acre do they get out of their corn or soybeans and what prices do they bring.
So they ought to look to the business as to whether to be confident compared to the price that they paid and they ought to forget about what anybody is saying, including me on television, or what they’re reading in the paper. That’s got nothing to do with whether they made a good decision or not. What’s got to do with whether they made a good decision, what kind of business they bought and what they paid for it.
[...]
SG: So are you saying that investing has gotten so complicated that investors should stick to what they know? Is that the take-away lesson?
WB: You should always stick to what you know. I say the “know-nothing investor” and there’s nothing wrong with being a “know-nothing investor”. I spend 60 hours a week, thinking about investments and most people have got jobs and other things to do. They can buy index funds. And they’re not going to do better then an index fund if they go around and trust some guy who’s promising them very high returns.
If you buy a cross section of American business and you don’t buy it during a period when everybody is all enthused about stock, you’re going to do fine over 10 or 20 years. If you buy something with the idea that you’re going to do fine over 10 months, you may or may not. I do not know what stock is going be up 10 months from now, and I never will.
[...]
SG: As you know, it’s the 30th anniversary of Nightly Business Report. As you look back on the past three decades, what would you say is the most important lesson that you’ve learned about investing?
WB: Well I’ve learned my lessons before that. I read a book what is it, almost 60 years ago roughly, called The Intelligent Investor and I really learned all I needed to know about investing from that book, in particular chapters 8 and 20 so I haven’t changed anything since.
SG: Graham and Dodd?
WB: Well that was Ben Grahams’ book, The Intelligent Investor. Graham and Dodd goes back even before that which was important, very important. But you know you don’t change your philosophy assuming you think have a sound one and I picked up I didn’t figure it out myself, I learned it from Ben Graham, but I got a framework for investing that I put in place back in 1950 roughly and that framework is the framework I use now. I see different ways to apply it from time to time but that is the framework.
SG: Can you describe what it is? I mean what is your most important investment lesson?
WB: The most important investment lesson is to look at a stock as a piece of business not just some thing that jiggles up and down or that people recommend or people talk about earnings being up next quarter, something like that, but to look at it as a business and evaluate it as a business. If you don’t know enough to evaluate it as a business you don’t know enough to buy it. And if you do know enough to evaluate it as a business and its selling cheap, you buy it and don’t worry about what its doing next week, next month or next year
Check your local listings to see when Nightly Business Report airs in your area, if you’d like to catch the entire interview. Update: Video of the interview is now online.
GRS is committed to helping our readers save and achieve your financial goals.Savings interest rates may be low, but that’s all the more reason to shop for the best rate.Find the highest savings interest rate from Ally Bank, Capital One 360, Everbank, and more.
This article is about Gurus, Interviews, Investing
Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.
Discover is a paid advertiser of this site. Reasonable efforts are made to maintain accurate information. See the Discover online credit card application for full terms and conditions on offers and rewards.
SEARCH FOR RECENT ARTICLES
Mr. Buffett is always a pleasure. Thanks for the post.
loading....
That man has to be so tired of answering the “what is your top ten/five/one tip for investing” question. He’s got a canned response (genuine and reliable though it may be) and he’s sticking to it.
loading....
“If you don’t know enough to evaluate it as a business you don’t know enough to buy it.”
couldn’t have said it better myself. most people shouldn’t be out there buying individual stocks. if you have trouble reading the intelligent investor (which is written for laymen as opposed to his other classic, security analysis), you probably shouldn’t go about buying businesses.
index funds are where it’s at.
loading....
“In other words I am buying a business. I’m not buying a stock.”
This is the difference. Everyone else (myself included) is buying stocks. But that’s trading, speculating, or gambling (same thing, really). If you do that, you have to play by different rules.
So Buffett has his own game, and plays by the rules only a few play at. Long term, value investing in businesses, NOT STOCKS.
The only other person I know who talks like this is Mark Cuban, who says he buys stocks in his industry, to 1)buy into a competitor who has an excellent business model, or 2)a supplier to make sure he has their attention and that he has a say in how his suppliers decide to do business.
Notice also that it depends on a time-frame (a question I’m working on for my blog now, probably up tonight). Mr. Buffett’s favorite holding period is “forever”, and his ideas do not apply to people holding for 1 year. Heck, I wouldn’t try them if I needed the money in five years right now…
loading....
The first question about “no one buying stocks” illustrates just how little the general public knows about the stock market. I really wish that everyone would just buy index funds because people trying to “play the market” end up losing so much.
On a separate note, I will be tuning in to hear the tone of his answers. For whatever reason, I feel (from reading this) that his responses are more abrupt than what I’m used to hearing from him.
loading....
Also on the tube tonight, on CNBC at 21:00 Eastern, is “Marijuana, Inc: Inside America’s Pot Industry”. Which may or may not be more interesting than watching Warren Buffett.
loading....
Interviews and articles always make ‘WB’ out to be a financial saint because he has made millions of dollars. They never talk about how many people his businesses has put out of work because they have sent jobs to foreign countries. That’s part of the reason we are in the shape we are in now. We are now reaping the benefits of sending jobs off shore and there are no jobs in the US to support the economy.
loading....
Watching the video is much more interesting than reading the transcript. The interviewer asked him several questions that were basically, “What stock or what sector should I look at”. He seemed almost annoyed whenever she asked them. He came back to his basic answer every time.
It seems like she was looking for a good sound bite, something flashy to put on the next Money magazine cover. He wouldn’t give her one. But his advice was better than anything in the Money-type magazines. Buy what you know and understand if it’s a good value and it’s going to make money.
I especially liked his comment about index funds. He said, “if you’re a clueless investor, you shouldn’t be buying stocks. Buy an Index fund, and you’ll do fine.”
loading....
Thanks for the post.
Maybe some of the fallout of this mess is that we will become more intelligent, more educated investors. He said it well…We are buying a little piece of the action (we’re buying the business.)
Take the time to learn how to read a balance sheet. Spend time learning about the market the company competes in. Determine the challenges that may be ahead for the company. What is the company’s debt burden. Only then should you consider spending a penny on a stock.
loading....
The quote about looking at buying stock as if you are buying a farm resonates with me. I remember back when the tech bubble was flying high and every website with a decent number of views was holding an IPO for huge gains, I kept saying to my husband “But none of these business models are sustainable! There’s no revenue stream built in to their plans and as soon as something new comes along, they’ll lose all the hits they’re getting!”
Of course, eventually people began to look for more than a “.com” at the end of the name, and eventually the mania subsided to where sites had to actually show that they had a maintainable source of revenue from the website.
loading....
Berkshire Hathaway can afford to buy and hold forever, and they can afford to buy whole business (or major chunks). Most private investors have neither of those two advantages, which makes it even more important to understand what you’re buying – at some point, you’re going to want to sell.
loading....
FYI:
You can watch the whole interview online:
http://www.pbs.org/nbr/site/research/learnmore/090122_buffett/
loading....
“Just as many people buy a stock every day as sell one.”
That’s my favorite line, and I never thought of it that way. I guess the difference comes down to which side the media is reporting about. In an up market, it’s the buyers. In a down market, it’s the sellers that scream the loudest.
So simple, and so true.
loading....
I like reading anything I can get my hands on that is Buffett related. I enjoyed most these quotes:
Any stock I buy, I will be happy owning it if they close the stock market for five years tomorrow.I am buying a business. I’m not buying a stock.
They ought to be confident if they buy a farm, not on whether they get a quote the next day on the farm, but they ought to look at what the farm produces, how many bushels an acre do they get out of their corn or soybeans and what prices do they bring.
Thanks a lot!
loading....
@Amy:
“They never talk about how many people his businesses has put out of work because they have sent jobs to foreign countries. ”
Have you ever read Warren Buffet’s parable of Thriftville and Squanderville? You’ll understand his view on outsourcing if you do read it. If you have read it, you’ll understand that your comment makes little sense. His solution to the trade deficit is in effect a market controlled protectionist tax on imports.
loading....
@Amy:
Yes, we sent a lot of jobs overseas. But it isn’t the only reason for the economic crisis. I think the big reason is that we get used to spending money instead of saving it. We used too much of credit cards and get our country out of money.
loading....
Actually, I think that’s a natural part of a company’s life. The growth it takes to get to be a publicly traded world-class company is not really sustainable, so you have a progression of one person out of the garage to small business to growing business to large corporation, and then to cutting costs, cutting employees, or failing business.
But it’s a lot like population growth – one end is shrinking, but the other end is growing. Death rates are balanced by birth rates. Downsizing or outsourcing is balanced by growing small businesses. And, other than our current recession, usually it works. Searching Google, I found that 1995 was a bad year for downsizing – Kodak alone cut 20,000 jobs! And the economy slowed to only 3% GROWTH, keeping unemployment even.
So I don’t get the whole problem with outsourcing or downsizing. If the alternative is that the company goes under and everyone loses their job, I’d think most would be for it. And of course if the higher-ups didn’t make so much for it, that would help too.
loading....
Like so many others I have been reading, watching and listening to so many of the money/wall street gurus as we try to keep our heads above water. Unless I’m missing something, time and again the same advice is given, buy stocks in things you understand and hold on for the long haul, however, the majority of people who are really suffering in this mess are those who purchased stock in mutual funds offered by their employers 401K, 403B plans. They were not buying individual stocks, and they were told that they needed to be in the stock market so they would accumulate the amount of money necessary to sustain their retirement years. Warren Buffett’s advice while honest, wise and on the mark, seems irrelevent for the huge numbers of Americans who are in the stock market because of our country’s change from traditional pension plans. And by the way, these stock funds, most index or index- like have lost 30 to 40% if their value.
loading....
Buffet still sticks to the investing principles he learned many years ago. That makes him different to those people who act like lemmings, reacting and over-reacting to the media, making sure the panic stricken headlines become fact.
Granted not everyone is in it for decades, but the general advice he offers can still help people make gains when the market turns – buy when they’re cheap and sell when the value has gone up will always make money. But if you want to buy when they’re cheapest and sell when the value is highest you need a really good crystal ball.
loading....
You know, I don’t think I’ve ever heard Buffett say buy low, sell high. Buy value yes, which is similar – though not really: something could be cheap but not a good value.
And that’s a problem too: buy low, sell high does not mean the cheapest and the highest. Always chasing that last margin is a recipe for disaster. You’ll be second guessing, selling too early, or hanging on and creating losses. Yuck. Buy a good value or a growing price, and put in a trailing stop so you sell 10% off of highs. Well, I did that until stocks started swinging 10% in a day…
And if you’re not in it for decades, you’re not investing like Buffett, and you shouldn’t study him. Then, you’re a trader, and you should learn from Van Tharp or other traders.
loading....