Buffett told the Fox Business Network on Friday that CIT Group (NYSE:CIT) is in a competitive disadvantage in the money business because it’s paying too much interest on the dollars it borrows.
“You can’t pay loan shark rates and compete with people who are getting their money on a government guaranteed basis for practically nothing…one way or the other things have to get reconstituted there” Buffett said on Fox.
When asked if his holding co. Berkshire Hathaway Inc. (NYSE:BRK.A) would be interested in some of CIT’s businesses, Buffet said it’s conceivable that Berkshire could be interested in buying parts of CIT, but the owner of those businesses, he noted, should be somebody that gets government-guaranteed funding, which Berkshire does not. Buffett also said during his interview that the problem with the CIT is its liability side, not overwhelmingly the asset side.
CIT, which is giving $30 billion of unencumbered assets as collateral to a $3 billion loan, announced Friday it reworked its tender offer for $1 billion of notes maturing next month. Under the new amended note buyback offer, investors tendering their notes by July 31 will get an extra $50 per $1,000 principal of the notes for a total of $825 per $1,000 in principal of securities they own.
During his interview Buffett also touched on several other subjects including his Goldman Sachs (GS) warrants his holding co. got in September. For the time being Buffet said he has no plans to exercise Berkshire’s warrants to buy $5 billion of Goldman’s stock, although he could make a considerable profit by doing so.
“We’re getting almost $1000 a minute on preferred stock investments”, Buffett said, “so I try not to answer the phone if I think Goldman’s calling. We will hold the warrants… every instinct in my body tells me that we will want to hold those warrants until they’re very close to their expiration date. The preferred pays us the dividend and the warrants are going to make us the money.”
The warrants allowed Buffet to buy Goldman’s common shares at $115 each exercisable at any time until Oct. 1, 2013.
Here are a few more excerpts from Buffett’s interview with FOX Business Network’s Alexis Glick:
On having a jobless recovery:
“If we have a real recovery jobs will follow—the key word there is follow. It won’t be a simultaneous phenomenon. I would not worry about an extended recovery that will be jobless, but initially it will look like it’s a jobless recovery.”
On how far along in the recession we are:
“I can tell you that the movie we are watching has a happy ending, I just don’t know how long the movie will be.”
On how he spends his money:
“I do not attempt to time the markets at all. I don’t give a thought to timing markets. I do price individual companies.” (hat tip C. Cronin)
