International Investment Master Warren Buffett accepted a three-hour interview with CNBC TV in Omaha on Friday, August 22, 2008. The following is the full text of the Buffett interview compiled by Burrelles Luce, a major media testing agency in the United States.
Becky: Welcome back. We are now doing live broadcasts in Omaha, Nebraska. The national premiere of the movie "I.O.U.S.A." was held last night, and we asked staff to travel around the country to collect people's questions. Warren, audiences from all over the world have questions to ask you. We just received a question from Chicago . Let's listen to his questions first.
nameless male viewer 2: Hi, Warren. Given the current situation of the U.S. credit market and the bank’s deduction of advance loans from retailers, how do you think the real estate market will change in the next 18 to 24 months?
becky: yes. This question is well-raised. Given the changes in banks’ lending business, how do you think the real estate market will develop?
Buffett: The real estate market will become very difficult. We have a very serious bubble, and many people have loaned money they shouldn't have, they either cannot repay or they have lied about their financial situation. Many people have mortgaged loans, and many of them are doing things wrong. There are still many investors doing stupid things. So when these things come together and put into a $11 trillion mortgage market, those investors and lenders who are not able to repay will suffer a lot.
If you apply for a home purchase loan and have the ability to pay, you can keep your house, which is great. If you sign a loan agreement that you can repay, you will be safe unless you lose your job or have a divorce or death or something like that. But many people are speculating and buying a house without the ability to pay, they won't go bankrupt in a month or two, and in my opinion, they will last for quite some time. The benefit of doing this is that housing construction in our country has seen growth.
Our economy is not in a depression, and the real estate market will get out of the situation, but like the farm crisis in the early 1980s, it may take several years to truly get out of it.
Becky: Someone wants to express some opinions on the new home start data released earlier this week. They said the data is still falling, but the decline is slowing. Is this the best news that people can find from this data? Or the best news is...
Buffett: The best news they can find is that if no new houses start, we will consume the inventory of the house much faster. The data on new houses finally became a reverse indicator of the recovery of the real estate market, so it will take some time for the real estate market to recover.
first the developers suffered huge losses, and then the people who lost their houses, of course, they will lose their houses only when they cannot pay the loan. Lenders are suffering huge losses. People find that when they first bought CDOs and similar assets, they knew nothing about what they did. rating agency failed to return, and frankly speaking, the same is true for Wall Street . There are many reasons to blame, but we should not be overly concerned about it, and we should worry about how enough families can be found to absorb the excess housing supply. The United States now has a lot of idle homes, and the real estate market will not really recover until the idle home rate returns to normal levels or approaches normal levels. House vacancy rate refers to the ratio of houses for sale to the current sales level, and we are still far from our target at present.
Becky: We always hear people saying that they are in big trouble and cannot get a mortgage despite their good reputation.Some others say they can’t get a second mortgage to buy a second home. In your opinion, are the loans now much stricter than before?
Buffett: I don’t know much about every field in this country. But I think if you pay a lot of down payments, have a job, and by traditional standards, income is enough to pay for the loan, I don't think you'll have trouble with the loan.
Wells Fargo is offering a large number of loans, and they are also looking to provide more opportunities to lend. But they won't give loans to those who can't pay the down payment. If about half of your income will go to repay the loan, they won't give you a loan. Low-quality loans must be ruled out so that we can avoid bad debt problems.
Becky: Can you say that, because you think these problems will last for a long time, and housing construction stocks don't look cheap, so you haven't looked for cheap stocks in this industry yet?
Buffett: can't say that. Developers still face many problems, but that doesn't mean the timing of buying stocks is when these businesses improve.
When I buy stocks, I never tried to predict the turning point in the industry. Instead, I bought it as long as I think their prices seem cheaper than their long-term profitability. But it just so happens that I think housing construction stocks are still not cheap now, although it is very likely that these stocks are already very cheap. I just haven't believed it yet.
Becky: OK Warren, we still have topics to discuss. A long time has passed, and time has passed so quickly.
Buffett: You pay me your wages by hour. I mean, I have nothing to complain about.
becky: OK. As we return to the show, we will continue to have a discussion with Warren Buffett and see the latest news Carl sent back in Beijing. Please don't go away, this is the "Speaker" column, we'll be back soon.
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