Warren Buffett's 88th Birthday Interview - CNBC Annual Glide Foundation Lunch 2018

Warren Buffett explains the annual Glide Foundation charity lunch tradition where the winner paid $3.3 million to have lunch with him. He notes they can discuss any topic except what he's currently buying, and mentions that people rarely ask for stock picks, often discussing family matters instead.

Buffett argues that stocks are considerably more attractive than 30-year bonds yielding 3%, stating that businesses earning high returns on capital will beat bonds over time. He explains that while bonds pay out all interest, stocks reinvest earnings through plowing money back or share buybacks, creating compounding value.

Buffett shares his experience buying stocks continuously since March 11, 1942, through seven Republican and seven Democratic presidents. He emphasizes that while he doesn't know when to buy stocks, he knows whether to buy them, preferring ownership in great businesses over fixed income regardless of timing.

Buffett discusses Berkshire's 5% ownership stake in Apple worth $56 billion at the time, the largest holding. He explains he started buying around $100 per share and bought as fast as he could initially. He notes he would prefer the stock to go down so Apple can buy back more shares at better prices, increasing his ownership percentage.

Buffett explains why he values Apple not as a tech company but as a consumer product with unmatched 'real estate' - hundreds of millions of users who live their lives through the device. He shares insights from Nebraska Furniture Mart showing customers wouldn't accept substitutes for iPhones, and discusses how the iPhone's utility far exceeds its $1,000 price point, comparing it to his private plane.

Buffett discusses owning just over 9% of the four largest airlines and explains he can't buy more due to self-imposed 10% ownership limits. He mentions having to trim positions slightly when airlines buyback shares to stay under 10%, but would have been happy to own 20% if he could.

Buffett analyzes Campbell's strategic initiatives and the challenges facing packaged goods companies. He explains that while these businesses earn high returns on tangible assets, they face tougher competition from retailers and changing consumer habits compared to 10-20 years ago, making it difficult to pay significant premiums for acquisitions.

Buffett explains the significant policy shift from buying back shares at 120% of book value to using intrinsic business value as the metric. He notes book value has become less relevant as Berkshire shifted from investments to operating businesses. He and Charlie Munger require a sufficient margin of safety to ensure continuing shareholders benefit from buybacks.

Buffett describes the economy as firing on all cylinders with nine years of progressive improvement since the 2009 financial crisis. He notes American household wealth exceeds $100 trillion and business conditions are consistently good, though growth rates vary from 1% to over 2.5% quarterly.

Buffett reports seeing cost increases across Berkshire's businesses, particularly in steel, building materials, and paint. He acknowledges seeing inflation effects well before tariff discussions but notes tariffs will aggravate the situation significantly, though he cannot precisely separate the two effects.

When asked about President Trump's criticism of Fed rate increases, Buffett strongly endorses Jay Powell as a terrific Fed chairman who will do what's right for the American economy. He expresses confidence that Powell has the data and judgment to make appropriate decisions, even if mistakes occur.

Buffett distinguishes between quarterly reporting, which he values as an investor with hundreds of billions in stocks, and earnings guidance, which he considers very bad practice. He opposes guidance because earnings can change dramatically from unpredictable events like hurricanes, and the practice becomes a game with negative consequences.

Buffett explains why he doesn't use Twitter despite a fake account gaining 200,000 followers. He prefers the annual report format and doesn't have daily views to share. When asked about Elon Musk's frequent tweeting, Buffett diplomatically states it hasn't helped Musk much and considers daily commentary on Berkshire particularly dangerous.

On his 88th birthday, Buffett discusses his technology habits, using an iPad extensively for checking financial markets and research. He rarely listens to podcasts due to time constraints, preferring to read faster than listen, but recommends a Tom Murphy podcast. He reflects on learning from Murphy since 1968-69, crediting him and Charlie Munger as mentors who made him a better person.