Ask Warren - Complete Transcript - 2009-03-09

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This is the completetranscript of Warren Buffett'sappearanceson CNBC'sSquawk Box on Monday,March 9, 2009.Buffett answered questionssubmitted by CNBC viewersand CNBC.com users.

ANNOUNCER

: This is a specialpresentation of SQUAWK BOX:ASK WARREN BUFFETT. Thelegendary investor will answeryour e-mails, fixing theeconomy, restoring trust,searching for value. Your chanceto connect with the "Oracle of Omaha." Squawk Box begins right now.

BECKY QUICK

: Good morning, everybody, and welcome to SQUAWK BOX right here onCNBC. I'm Becky Quick along with Joe Kernen. Carl's off today, but Joe, we have a veryspecial guest with us this morning. We are talking about Warren Buffett. He's here withus, and he is here with us for the next three hours. We are very excited to be spendingthis time. We are here at the Nebraska Furniture Mart. And, Warren, it's great to haveyou here. Thank you very much for joining us this morning.

WARREN BUFFETT

: I enjoy everything about it except the hour.

BECKY

: "Except the hour," and we do appreciate your getting up extra early. We shouldpoint out it's 5 AM here in Omaha, so you are quite the trooper for coming out.

BUFFETT

: Thanks.

BECKY

: I know we've got the next three hours to spend with you, and, in mostinstances, I might think, three hours is an incredibly long time, but I have to tell you,given everything with the state of the economy right now, three hours may not beenough time. So, again, we appreciate your time with us today.

BUFFETT

: Thanks. Mm-hmm.

BECKY

: Warren, why don't we start off talking right away about the economy? Becausethat's what people are wondering right now. What's happening with the economy? Wehear all the time from people who are very concerned and, frankly, quite frightenedabout what's happening right now.

BUFFETT

: Yeah. Well, when we talked in September.

JOE KERNEN

: Warren, hold on.

BUFFETT

: Yeah?

JOE

: I'm sorry to break in.

Merck and Schering-Plough

are merging, Warren.

BECKY

: Whoa.

BUFFETT

: Hm.

BECKY

: All right.

JOE

: I'm sorry.

BECKY

: Merck and Schering-Plough merging. We thought we already had enough to talkabout with you this morning, Warren, but why don't we start off with some news?

JOE

: I would never presume to jump in like that on the Oracle; but, I'm sorry, board of directors unanimously approving a definitive merger under which the companies willcombine under the name Merck in a stock and cash transaction. Schering-Ploughshareholders will receive .5767 shares of Merck and $10.50 in cash for each share of Schering-Plough. Each Merck share will obviously be a--become a share of the combinedcompany. Richard Clark, the chairman, president and CEO of Merck will lead thecombined company. This is--this is a real blockbuster and right at 6 AM on a Monday. AndI think you'd have to say, Warren, as far as animal spirits, this could be--you know, thismay not--this may not solve all of our problems, but it certainly is an endorsement of American business and--in that M&A is alive and well.

BUFFETT

: Yeah. Animal spirits are always there. The only question is who has the fundsto kind of carry out the ideas that the animal spirits come up with? But, particularly inpharma, they have good balance sheets, generally, and they can make deals.

JOE

: I...

BECKY

: Are you surprised to see a deal of this size right now, though?

BUFFETT

: Well, I'm surprised at any deal this size even now, sure. That's true. It's veryhard to make deals for companies in most industries.

JO

E: Guys...

BECKY

: Joe?

JOE

: Yeah. Schering-Plough closed at $17.63, and, at current values, this is $23.61 forSchering-Plough for a total of $41.1 billion for this deal. I guess you'd also have to saythat the whole Vioxx controversy. We can lay that to rest now for the them to be feelingcomfortable enough to acquire Schering-Plough for $41 billion, but...

BUFFETT

: Yep.

JOE

: ...this is a pleasant, pleasant ride. And, Warren, you own--you're all over the placewith--you own foreign drug companies, you own stakes in--stakes in foreign drugcompanies and in some domestic companies as well. It's always been one of yourfavorites.

BUFFETT

: But we don't own any Schering, that's why you see these tears coming downmy face.

BECKY

: What about Merck? Do you own any Merck either?

BUFFETT

: No, not any Merck.

BECKY

: Not in your private account either?

BUFFETT

: No.

BECKY

: OK. What is...

JOE

: What's your biggest holding? You do have some--I know you--what are your foreigndrug company that you have stakes in, Warren?

BUFFETT

: Sanofi and the biggest one is Sanofi-Aventis, and we have J&J domestically.

JOE

: Right. OK. All right, Beck.

BECKY

: OK. So, Warren, we're going to talk more about this merger and what thismeans. I mean, do you expect to see other deals that would come as a result of this?

BUFFETT

: Well, every deal does tend to brew another deal, I mean.

BECKY

: Hm.

BUFFETT

: Particularly with people in the industry. If, you know, if Coca-Cola buyssomething, Pepsi thinks about something in the same arena.

BECKY

: Hm.

BUFFETT

: I've been in enough board meetings to hear that. There's a--there's a lot of--every CEO has, you know, has a little bit of that `all the other kids are doing it,' youknow.

BECKY

: Right. We'll talk a lot more about this, but let's get back to the state of theeconomy...

BUFFETT

: Sure.

BECKY

: ...in general as well. What do you see right now? You spooked a lot of peoplelast week when you talked about how the economy was in tatters and would be there forquite some time.

BUFFETT

: Yeah. The economy,

ever since we talked in September

, we talked aboutit being an economic Pearl Harbor and how--what was happening in the financial worldwould move over to the real world very quickly. It's fallen off a cliff, and not only has theeconomy slowed down a lot, people have really changed their behavior like nothing I'veever seen. Luxury goods and that sort of thing have just sort of stopped, and that's why

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