Warren Buffett says new tax law ‘good’ for Berkshire Hathaway
Warren Buffett, CEO of Omaha-based Berkshire Hathaway, said Monday that the new federal tax law will benefit his company in the long run.
“It’s really good for Berkshire, no doubt about it,” he said.
Buffett appeared on CNBC’s “Squawk Box” early morning program to discuss his annual letter to shareholders of Berkshire Hathaway. Buffett appeared on the show with interviewer Becky Quick.
The letter was posted Saturday on Berkshire’s website.
Buffett said he has views on gun laws, but he keeps his personal views on political and social issues separate from Berkshire.
“I think what the kids are doing is very, very admirable,” he said, referring to students talking about gun laws after the recent Florida school shooting.
Companies have to be careful before letting social and political views influence their business decisions, he said.
Berkshire investment executive Todd Combs is “looking for the right CEO” to head the initiative that Berkshire is starting with Amazon and JPMorgan Chase, Buffett said.
The companies are forming a nonprofit group to address costs and other health care issues for their 1 million employees, seeking solutions that could help other groups, too.
So far, the health care initiative has been “inundated” by people and companies wanting to help, he said.
It would be easy to shave off 3 percent or 4 percent from costs by negotiating, he said.
“We’re looking for something much bigger than that,” he said.
One goal is to reduce the growth of health care costs, now at 18 percent of the national economy, Buffett said.
Buffett said he expects the initiative to have a CEO in place within a year, saying the job is very important because of the negative impact that riding health care costs has on business and the average person.
Costs per person have risen from $170 per year in the 1960s to $10,000 today, he said, or a total of $3.3 trillion a year.
He said the initiative seeks “fundamental change” in U.S. health care, with medical care at least as good but with costs not continuing to eat up an increasing share of the economy.
The country should be generally pro-trade, Buffett said, with as close to a balance of imports and exports as possible.
“We can take a small imbalance” or trade deficit, he said.
Buffett said he keeps his hands off investment decisions by Combs and Berkshire’s other investment deputy, Ted Weschler.
Each manages about $12 billion of Berkshire’s $170 billion investment portfolio, with the rest managed by Buffett and Berkshire vice chairman Charlie Munger.
He also said Berkshire remains a net buyer of company stocks despite relatively high prices.
Instead of paying a dividend, he said, he would lean toward buying back Berkshire stock, even if it means changing the formula for buybacks.
Buffett said Berkshire functions like a savings account, so it doesn’t pay dividends. Shareholders voted 47-1 a few years ago against getting a dividend, he said, preferring instead to let Berkshire manage their money.
“It’s a way of saving money over time,” he said.
Buffett said he believes Wells Fargo will get through its problems with misconduct and government penalties.He said Wells Fargo had bad incentives for some employees, which led to serious misconduct that was not stopped by its previous management.Now, Wells, as all other businesses, must obey what government regulators say.Berkshire owns nearly 10 percent of Wells Fargo’s stock, its largest stock holding.Berkshire’s policy on buybacks lets Buffett purchase the stock for the company if its price falls below 120 percent of its book value.
Book value is a company’s basic value, or assets minus liabilities.
If the formula changes, Berkshire would buy back its stock at a higher price than the current formula allows.
Buffett also said that the Berkshire Hathaway employees’ annual college NCAA tourney pool begins in a couple of weeks. He said, as always, if an employee picks every game correctly, that worker earns $1 million a year for life.
This year, if an employee selects every game correctly and Creighton or Nebraska wins the NCAA title, the winning pool player will earn $2 million a year for life.