February 2016 CNBC 3-Hour Interview with Warren Buffett

Buffett welcomes 2016 market correction (worst start to year ever) - says as net buyer since age 11, lower prices good news like cheaper hamburgers or Coke. Can't predict days/weeks/months but confident stocks will be much higher in 10-20-30 years. Only enemy is yourself beating yourself through bad behavior.

Buffett defends IBM position but clarifies wouldn't double down. Explains 10% ownership creates reporting requirements (every 2 days) and short-swing profit rules (can't sell for a year). Strongly discourages piggybacking his trades - best strategy for most people is consistent index fund buying over lifetime. Tells wife to do 90% index fund, 10% government bonds.

Buffett predicts all US railroads including BNSF will have weaker 2016 earnings due to industrial recession. Coal shipments biggest problem - utility stockpiles at high levels after catch-up period. Closely tracks Wednesday AAR carload data (crush stone, autos, grain, etc.) as economic barometer of 'arteries of economy.' Not broad recession, just industrial.

Classic Buffett analogy: If owned McDonald's franchise wouldn't check quotes daily - would focus on serving customers, limiting competition, hoping for good advertising and products. Same with farm owned 30 years without quote - just produces more annually with rising crop prices. Daily stock quotes cause people to do dumb things. Focus on business fundamentals, not price fluctuations.

Buffett calls prolonged low/negative interest rates 'really extraordinary' - never would have predicted continuation. Berkshire is interest-rate sensitive, will do very well when rates rise. Massive wealth transfer: borrowing class 'enormously subsidized' by lending class. Retirees keeping money in banks 'gotten killed.' 'Nobody's seen this movie before' - even great economists never discussed long negative rate periods.

Buffett acknowledges economic system working but 'leaving a lot of people behind that are very good citizens.' Can do more for them without 'screwing up the golden goose.' Context suggests support for EITC expansion over minimum wage hikes - helps workers without market distortions that destroy jobs.

Buffett shares Charlie Munger quote about Trump: 'Never underestimate the man who overestimates himself' - applies to politics and Wall Street. Christie endorsement 'very predictable,' didn't surprise at all. Trump's Republican popularity did surprise. Declares himself 'fan of Hillary's' and predicts she'll win in fall.

Buffett dedicates significant letter space to contrasting Berkshire's operating philosophy with private equity firms. Emphasizes long-term orientation, permanent capital, employee-friendly approach vs PE's leverage, short holding periods, aggressive cost-cutting. Defends capitalism while arguing Berkshire's model creates more sustainable value.

Buffett explains Coca-Cola's century-long bottling system problem. 1899 perpetual franchise deal for $1 to Chattanooga guys was 'dumbest deal ever made.' Spent 40-50 years with Don Keough 'loved and threatened and cajoled and pleaded' to reconfigure. 2010 CCE buyback expensive, won't get money back, but key is system vigor. Adapting 100-year-old local account model to modern Walmart world.

Buffett reveals 'almost every large company' asked to help law enforcement at some point with non-disclosure agreements. If convinced it's 'terribly important' to national security and Berkshire had unique capability, would cooperate. Believes 99%+ of Fortune 500 would too. Distinguishes between targeted security requests (would help) vs unlocking millions of phones (different issue). Predicts Apple would cooperate if truly targeted important case.

Buffett strongly defends Clayton Homes against Seattle Times/BuzzFeed charges of racial discrimination. Rates (averaging 8.8%) determined by FICO score, down payment, land ownership, income percentage - 'nothing to do with religion or color.' Loans ($60K average) to lower-income buyers (70% of sub-$150K homes are manufactured). 95.4% payment currency shows responsible lending. 'These people would not have a home otherwise.'

Buffett bets under 10% driverless cars by 2030 but notes faster advances than expected. If reach 50-75%, auto insurance premium volume 'very likely far less' threatening Geico. Dealership arrangements would change unpredictably. Cars would become 'more homogeneous product' - less about style, more about function. Advances faster than he expected few years ago but still skeptical of rapid adoption.

Classic Buffett story about Bill Gates Sr. asking group of 20 to write one word explaining success. Buffett and Gates (only met twice) both independently wrote 'focus' without knowing other's answer. Gates focused on software, Buffett on investments. Starting very young with focused obsession (age 13-18 per Gates) provides 'big advantage' toward world-class performance.