Warren Buffett on Real Biz with Rebecca Jarvis

Jarvis and Buffett talk about everything from the struggling middle class to what's in Warren's wallet.
17:15 | 04/24/14

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Transcript for Warren Buffett on Real Biz with Rebecca Jarvis
Hello and welcome to -- special edition of real -- I'm Rebecca Jarvis here in New York City and here's what's happening. One on one with the Oracle of Omaha Warren Buffett he's one of the richest man in the world. And one of the most respected investors in the world we talked about everything from the struggling middle class to the Smartphone. -- keeping college that's the one he's carrying you'll take a look at that coming up. Also on tap apple they had blow -- earnings yesterday and announced a major stock split. What does that mean for your money keep in mind it's one of -- most heavily invested stocks in America. But first to want to turn to Warren Buffett I caught up with him at his annual power lunch at Smith and once -- in New York City. To benefit San Francisco's glide foundation since 2000. He's raised more than sixteen million dollars to help hungry displaced families there. And just this week we learned that America's middle class is no longer the richest in the world. So I asked him how can you be so bullish on America when that's -- case take a look. What was the toughest question about it -- -- they -- somebody asked me who my favorite comedian was double time and I did. I do think of a lot of my like but I did want to pick yeah what are your top three or half. I can I came up -- Billy Crystal I saw him -- performance wasn't. But. You know Michael I go back to the days of Jack Benny and some of those so I I get I think -- -- -- you've never heard of. A lot of people are looking back Thursday that Jack Benny and they're thinking where they -- -- especially this week when you get news like. US is no longer the richest middle class in the world now -- out Canada yeah holding that position. How troubling is that. Well I've read that story and I I don't exactly I was measured but all I know is that our GDP per capita. You know is is that what 52000 or something that you wanted to do dog we are very very very rich country and it's gone up in my lifetime one person's lifetime. Six for one in real terms not inflation just real terms so imagine. My father and mother you know in the waiting room in 1930 and -- their little boy would see something was going to be six times per person. Output and in the country it's a remarkable country and and and it's not over yet -- in this country will be doing better haven't won in thirty years is now. If the middle class were to continue losing ground now as asked by this measure they have lost -- significant amount grabbed ten that he's just really hold that. You're bullish on America for -- That is it's not a good thing I mean -- the Forbes 400 this past year had aggregate net worth of 2.000000000002e+24. And twenty billion. That's an all time record by some margin. In 1982 the first here today -- per -- they did -- it was would like. 9090 billion so it's up 2122. Times for one since 1982. That has not been through the middle class so it is really true that the particularly the -- rich. I've gotten far far wealthier. And more and more of the national pie has moved to them and away from. Way from the middle class. What do you see as the number one driver that trend of the acceleration. Of inequality in the disparity between the top and bottom. I think is actually a natural consequence of a market system over time that it's more more specialized. And the market system. -- wonderful creative we'll. Produced goods and services like nothing else and that's what people want that it encourages people going to the right job at all sort of things up. You don't want to for a too much -- system that that is produced bountiful America. But it will more more leave behind the people whose skills are well adapted bookmark system. Let's talk about what Americans are seeing now you have the stock market near all time highs but and flip side of things. Most investors the average investors have their lowest amount of trust and stocks -- Now that they're wrong. -- well. It trusts and stocks distrust and American business. -- -- that's all stocks are as a part of American business and American businesses -- very very well for people. For a long long time now there's lots of -- -- options and there can be market panics and there can be all kinds of things but. Business will keep turning out more and more goods nobody earning more and more money overtime and the people who -- American business are going to do well over time. I don't have the faintest idea what's going to happen next year. Or two years should -- our next week or next month but I -- know the ten years from now twenty years now thirty years now the people who own stocks will have done well. Do you think though that we could be at a tipping point here if if corporate America in this year doesn't make big investments. In some cases do some wage increases and really think about. Growing and expanding their businesses does that hurt the framework of this recovery. -- the -- most businesses are think about it. Every business trying to sell more goods this year than last year including all the ones Berkshire as we spent eleven billion dollars on plant and equipment last year and we'll spend more this year. American business. It wants to do more business and and they're doing it I mean -- -- that's what's happened in the last four years ever since the fall of 2009 year after year. Are rare road is hearing a lot more goods and it was two or three or four years ago there's somebody else's goods but we're moving him. So which is always it's for academy Kerkorian -- culture they're -- our economy is is moving forward and has been moving forward ever since the fall of 2009. There's not been galloping forward -- but it has been moving forward perfectly decent clip. Is there something that would get it out right -- What everybody wants but you know I -- sure you can drop a million dollars from the sky and every household. And if they don't rush out spend it and you know money won't be -- much after that but you could create an -- his various ways -- -- society but. The trouble is -- a cop an economics you always have to say and that what. And there's a big and that what do. Pushing that -- that sort of stimulus fourth. You've been very vocal about the housing recovery. If I am a potential first time home buyer in most the markets in America I've got a job prices have increased so much in my community. Do I buy a house this very what does Warren -- Why save if you if you plan to live. In the locale where you are for some time I don't the only survivor that it's only a year later two years later if you plan to live. For a significant period of time by all means fire at one of the best -- driver made you know 55 years ago 56 bought the house I'm living in the day. Brought all kinds -- happiness today you can buy it was very very cheap money -- mean you're you're getting a terrific deal on the mortgage now so so if I put it. By my slugger by the what you think I'll I don't -- -- -- -- -- -- -- -- -- -- -- speculate treasury futures idea I'm no good at sort of -- We also had a little fun with Warren Buffett and we did a real -- rapid fire check -- -- quite honestly at your vote at gun because. We are about to do it rapid fire real biggest challenges are you ready. Okay okay you got going I read it out right it would travelers and. We'll show in my area. Because of my cellphone. Between Alexander it's falling apart as a matter fact. Not Alexander Graham -- get rich yeah right we just -- definitely we're actually with Alexander -- That's that's actually. I don't. Five tweets and another person that are -- another person to -- -- My assistant has more for -- Jeanne what about your book will bucks yeah let's look at about him and -- -- -- -- but. Actually they were old books that I've already got my library but I too much trouble and part of my -- I just want another -- -- are too many have. Which industry that we rely on today is going to be on our grandchildren for example cars -- they still going to relax. Over time that that will diminish dramatically. What are we going to be surprise has barely changed it years from. Human nature. Enough that people will be doing exactly the same beliefs things they do now we -- gonna see it Jetsons like world food milk and jet packs. Not with an -- for me. What's -- it while. I'd say about. Before 500 dollars or 500 dollars in -- Out is that you're always -- -- I generally. Terrorism. Is perfect either actor Alan got a few hundred does anyone else yes -- -- I'll gamble while most women do. You're not unusual. -- I got I got. 5100. 100 on them. -- a couple of -- died as a you're ready to get it ready to do right now just -- It's pretty standard. We passion here's yet sure what -- We're gonna keep it hassles and I gently used cash haven't -- -- who have we will then look what wolves -- credit cards are eligible. Lots -- as -- payment but will have a lot of cash. Would you rather have lunch with at -- us we like we like we -- -- line me but. Take it back to our top -- us. Have a root beer float and subprime rant with what of the two marks Mark Zuckerberg -- Mark Cuban who -- Probably Mark Cuban -- understand more when he was. What do you talk about it -- we talk we talk basketball and probably gambling a few things like that -- a. Higher award it really appreciate your thanks so much okay. And guess what right after that interview -- message Mark Cuban you remember him for real busy few days ago. Message him on his new -- cyber dust. We're working on getting them together -- -- hopefully. Real -- will be tagging along for that lunch. I also want to bring in Yahoo!'s Lauren list are Laurie -- -- so much to get to today apple FaceBook and Amazon's numbers after the bell. What's your take on this Warren -- interview I think one of the things that really stood out to me was -- -- his take that even though our middle -- -- having issues and even though a lot of people are losing that faith in the stock market that ultimately he still has the underlying faith in company -- Yeah definitely which is kind of what you would expect from -- and -- act. That definitely interesting to hear it again I must interstate we're back and what you got into did open up its opening up his wallet AT and went. You know really telling a little bit about his life I didn't want any thing. Inside that -- by the way -- just wanted to see -- I was just curious. Well -- -- in the Reagan dinner and thank you -- and I appreciate that let's talk about earnings because apple came out both apple and FaceBook came out. Better than expected there's been so much talk recently about the tech bubble and is it going to burst. Does this put that on the back burner that make it looked at -- these earnings reports make it look like that's not so much can happen. Well -- -- this conversation we had earlier with our tech reporter BK's it was put out there hate is this sat. Seven to one stock -- that apple announced showed that this is a sign at the tech bubble because looking back to the last big bubble. Stock -- were very prevalent and very common name -- tech reporter Aaron Pressman said that. Looking 888 what Apple Stock -- and dying and -- difference ending in its valuation compared to US stocks back in the dot com. Bubble he thinks that this is no -- sighing. Of course there is a larger conversation by different Carrey isn't taxi can get -- -- but. And turns and apple and what they reported the stock split. Is -- kind of financial engineering you know I can cook says getting the price down will help individual investors. Invest in the stock it may be that you know above 500 dollar stock -- has been prohibited. For that it doesn't do anything to change that I you this stock and same with that that thirty billion dollar share repurchase again that's kind of financial engineering move. Raising they did an 8%. Those kind of things to a piece of of these very loud investors like Carl Icahn and -- want apple to do more with its cash for shareholders. But beyond knowledge that apple reported really impressive results I mean I son. Sales came in better than expected despite expectations for a slowdown really giving a sense that -- now. -- -- -- businesses in -- is -- strength and I think sales in emerging markets and especially in China went. Remember there had been concerned that even with iPhone fights he was still too expensive percent of these markets where there aren't big cell -- and cities so just real impressive results even though apple hasn't come out -- that big new blockbuster pot might send people have been standing glory years. Four years yeah. I'm out came out. I don't back -- sorry I went back to that now point -- about. Meet these two different elements of financial engineering as you called it they're splitting the stock Apple's splitting the stocks that more people can buy it basically retail investors are at a biased stock that's 500 dollars because you can barely get -- -- -- -- -- 500 dollars. Now they're trying to make it more accessible and their buying back stock. Now that's sort of what I was getting at with Warren Buffett which is and how much can our economy really grow if the major. Growth that you're seeing in stocks is based on financial engineering as opposed to you underlying investment in the business. If apple hasn't come out with a new product for four years. And yes they're making some investments but we're not seeing apple or any other company in America right now a massive hiring push right now we're not seeing massive wage increases were not seeing. Huge investment. In capital and and huge investment rather in the business and expanding the business. Can the economy the underlying economy really grow if most of the growth we're seeing in stocks is coming from accounting. I completely -- coming from there are playing at people that -- share your sentiment. About stock buybacks -- this financial engineering -- -- your point we've being hearing how. And companies have so much cash on their balance sheets and what's it gonna take to get them to spend more and to really. Up their cap back spending and we've seen so many articles and reports just this year. Think this is the year. This is when it's gonna happen I mean remember how much rhetoric surrounded -- fiscal -- an either shenanigans going on in Washington with folks from the business community saying you know we just have a clear roadmap from Washington. Companies will -- and that spending will be at least you can don't know where they're going and then that happens you get an agreement you get -- -- your budget deal and then it's something else you know from the -- mean we've recently heard a once again tax reform then companies will start spending and really felt comfortable but we haven't seen that big ramp and cap -- spending that kind and that's meant. It will help the economy -- like. -- hear your point. I hate you for hearing my point -- you wanna crash tests. We we love having people on real busy here -- -- that's really got our back in academic. Amazon's coming out earnings after the -- you heard Warren Buffett. He buys books on Amazon through his -- -- -- Amazon gonna do here. Yeah also went at -- also looking for -- earnings of 23 cent a share on nineteen point 43 billion dollars in revenue and people wanna be hearing. More data behind sales of the -- Everything from data on its prime -- -- -- deal that they just denounce. With HB notes used dream there archives are all content which is the first such deal. It HBO has reached with an online streaming service which sent Netflix shares in a competitor Amazon in this department. Down yesterday after Netflix reported better than expected earnings earlier this week sending a stock -- so. I think a lot of interest around out of -- Amazon's always -- mean there's so much interest in so looked up and be watching that after the bell. And at just interestingly to -- to go back to face -- you know another. The I didn't apparently did -- attacks on any day and it reported really impressive and growth I mean here's a company -- A year ago people were concerned about the moving in mobile and -- second at work and is -- but -- succeed in advertising on mobile and -- but then reports an increase in 82%. 88 in its -- ad revenue and -- -- at more than half backing from mobile users so there is a real court strength but then. To your point about you know this stock aspect of this. You got the -- strength and base but the thing else have an expensive stock so it's you know what it trades at eighty times. Price earnings ratio which is which is high eight and -- kind of get your point and -- -- tech bubble but most tech. PE ratios are much much lower but based but it's certainly want to watch it's going to be interesting Lauren thank you so much for joining us today on -- -- back. We'll hear from Yale what did you think about the decline of America's middle class Canadians. Are now the richest in the world tweet us -- real -- with RJ until next time. This is Rebecca Jarvis from New York have a great life.

This transcript has been automatically generated and may not be 100% accurate.

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