Quick: Let me ask you a question. What would you put a bet on? Which company goes to $1 trill first: Apple or Berkshire Hathaway?
Buffett: Oh, I’d bet on Apple just ’cause they’ve got a stronger position.
Buffett: Well … I’ve been talking this way for quite a while, ever since the fall of 2008. I was a little early on that actually. But I don’t think you could time it. And we are not in a bubble territory or anything of the sort. Now, if interest rates were 7 or 8 percent then these prices would look exceptionally high. But you have to measure, you know, you measure everything against: interest rates, basically, and interest rates act like gravity on valuation. …
But measured against interest rates, stocks actually are on the cheap side compared to historic valuations. But the risk always is, is that — that interest rates go up a lot, and that brings stocks down.
Buffett: … We spent $14 billion with … we probably spent … since a little before the election, maybe. ‘Cause we were b — maybe $20 billion, even.
Buffett: I absolutely look at individual stocks. It has nothing to do what the Federal Reserve, it has nothing to do with the election.
What are the businesses? Should I assume it’s Apple and the airlines, based on what we’ve seen?
Buffett: I think that’s a good guess.
Buffett: You know, we could change our mind tomorrow and all of that, but we have not bought Apple in the last … well, since the earnings report came out because it shot up some then.
Apple Chart in USD (Nasdaq)
Note: I recommend to read the whole section about Apple
Note 2: here is the report (link)
Buffett: You know, we could change our mind tomorrow and all of that, but we have not bought Apple in the last … well, since the earnings report came out because it shot up some then. But we would have, one of the fellows in the office has about 10 million shares, and I have for Berkshire’s account about 123 million. So, we got about 133 million shares.
Buffett: … If you look at the last 30 years you can look it up on the internet, I think there have been almost 100 airline bankruptcies. I mean, that is a lot. So it’s true that the airlines had a bad first century. I mean, they’re kinda like the Chicago Cubs, you know, everybody had a bad century now and then.
Buffett: It’s a very tough business because it’s got the marginal cost of a seat … is practically nothing. You have these huge fixed costs, and yet if you take one more person on there’s virtually no cost to it. So you’re very tempted to sell that last seat too cheap, and if you sell the last seat too cheap it becomes the first seat for, in a way, so it has- it has this dynamic to it. And unless the airlines operate in the well over 80 percent capacity — what kills ya is when they really have too many airplanes around.
Quick: What did you ultimately end up making on Dow Chemical shares.
Buffett: we ended up making about a billion dollars and plus we had an 8.5 percent coupon those years.
Buffett: Yeah. Joe, in 1951, I proposed to my wife. And my father-in-law was the most conservative guy in Nebraska except maybe for my dad. My father-in-law said, “I want to have a talk with you.” So I went over to his house to have a talk. And he sat there and he said, “Warren,” he says, “I just want to absolve you from any worries. You’re going to fail. And the reason you’re going to fail – my daughter may starve to death and you’re going to fail, but I’m not going to blame you because it’s because the Democrats are in and they’re all Communists.”
But Alex Behring, who’s chairman of Kraft Heinz, and part of the 3G operation with Jorge Paulo and they and I agreed on making a friendly offer for Unilever if they were open to it. And Alex Behring went over to London, I don’t know how long ago, maybe four weeks ago or whenever it would have been, and met with their CEO and had a conversation. And he brought up the idea of possibly making an offer late in the conversation. And he didn’t get a yes, he didn’t get a no, he got perfectly polite conversation. And the CEO actually Greg Abel of Berkshire, knowing him 20 years ago I mean, we had nothing but good reports about him. We felt fine about it. So Alex came back and said that he hadn’t been thrown out. And so would we want to go ahead? So we went to see him again maybe two weeks later. And he had a letter that was an outline of a deal, which he thought if he got a neutral response, he would give
Buffett: Well, I think that Freddie and Fannie were broke in September of 2008, and they were a big cause of what happened in that month. They were the first of the really big dominoes. I mean Bear Stearns had been some months earlier, but those were huge dominoes, huge dominoes. Holdings of their paper around the world and everything else. And they were broke…