Warren Buffett on Charlie Rose 20th Anniversary - Buffett Rule, BofA & Economic Recovery

Rose notes Buffett announced Berkshire buyback despite previous stance. Buffett clarifies: 'I haven't said I wouldn't. I have said you should buy back your shares only when you think they're selling at a discount to their intrinsic value.' Since intrinsic value 'is not a precise figure, it's a guess,' you need a meaningful discount. His only motivation: 'If I think I'm buying dollar bills for 80 cents.' When Berkshire buys back stock, 'we're intensifying our interest in a whole bunch of mostly American companies. Our shareholders will own a greater percentage of BNSF Burlington Northern, greater percentage of GEICO. The pie will be as big but there won't be as many slices.'

Soros, Spence, Krugman said 50%+ chance of recession. Buffett: 'I don't buy it. I'm looking at 70 some companies and our railroad carried 193,000 cars last week. In terms of candy sales and jewelry sales - three different jewelry operations, four different furniture operations - they're all up. They're not galloping but there has been no downturn.' Exception: 'Home construction is flat on its rear.' When will it turn? 'When we've created enough more households than houses that inventory gets down.' Current problem: 'We created more houses than households 6-7 years ago. Now we're creating more households every day than houses. When we get back to a million units a year, you will see unemployment drop significantly to perhaps 6-7% and see full economic recovery.'

On Fed policy: 'The Fed has been very good for the economy. We would have paid a huge price without their actions. But they've used up most of their bullets. The chairman would probably disagree with me, but in my opinion monetary policy has been played out about as far as it can. It's been useful but I don't think there's a lot to be done there that's going to change the course of business recovery.' On Operation Twist: 'Interest rates are not the problem in the economy now. Short rates are nothing and long rates are pretty darn cheap. I don't think anything further that direction is going to have a big impact on the economy.'

Chinese worried about inflation. Buffett: 'They may have some and they may have a lot sometime. Look at what we've had over the years. A dollar when I was born is worth about six cents now. We've had inflation something in the area of 15 for one since I was born. If you told my dad that in 1930, I'm not sure he would have had me. He would have thought the world would come to an end.' But reality: 'During that same period real GDP per capita has gone up six for one. I'm against inflation, I'm for tempering inflation, but when you have a booming economy you may well get some and sometimes it may get out of control. But most of these things aren't the end of the world.'

Buffett's historical perspective: 'When I was born on August 30th, 1930, that was the high day for the Dow for the whole year: 242. Went straight down to 41. My mother must have felt guilty as hell witnessing what had happened, little did she know. 25% unemployment, all kinds of things. This country comes back. It came back from what happened at Pearl Harbor, it comes back from all kinds of things, and it's coming back now.' Message: 'We always think they're the end of the world at the time, but you know, as I mentioned, I was born at the Dow high for the year and we've done pretty well since then.'

Two ways to implement Buffett Rule: (1) Raise rates for all making $1M+ - 'about 250,000 people, just raise the thing 5 points or something.' (2) Minimum tax on those who game system down to 15% or lower - Buffett's preferred approach: 'The fairer way is to take people that have found ways to bring their rates down to 15% level, or 17% in my case. Some I know are below 10%. Just have a minimum tax for them. That would hit about 50,000 in my guess - might be 70,000, might be 40,000. They would be brought up into the 30s in terms of their tax rate overall.' Buffett clarifies his income: some years huge capital gains from Freddie/Fannie mortgage pass-throughs or Korean stocks - 'those companies did not pay any U.S. income tax' disproving double-taxation argument.

On corporate tax reform and repatriation: 'They would like to be able to repatriate money that was taxed at very low rates in various places around the globe - some sort of legitimate in terms of where they manufacture, sometimes sort of artificial. They would like to bring that back as they were allowed to do 5-6-7 years ago where there was a one-time repatriation.' The problem: 'If they're allowed to bring it back and pay very little tax on it, where do you think they're gonna want to keep earning money? Over there, aren't they?' Buffett owns stock in companies with 'trapped' money overseas: 'If they were allowed to do it without paying any tax to speak of or 5% tax, they'd bring it back. But what it would mean is: My god, we can earn a lot of money over there at 5-10% tax rates, so let's keep bringing it back.'

On debt ceiling: 'It played out in technicolor and stereophonic sound for the American public and the American public feels that Washington is in some ways dysfunctional because they WANT it to be dysfunctional and they think they win by dysfunctionality.' The calculation: 'If you can convince the American public who are not feeling good about how their country is going that it's the other guy's fault, that's a win.' Rose asks: 'You think American public would rebel if they could find out who showed least regard for their well-being?' Buffett: 'I really hope so and I think there's a possibility.' The strategy: 'Plenty of people in both parties - not limited to one party - are thinking that things are going to look bad over the next 12 months, unemployment won't fall much, so: how do we lay this on the other guy's doorstep?'