Edition of squawk box, which is starting right now. Good morning, everybody. Welcome to squawk box on cnbc. Im becky quick along with joe kernen and Andrew Ross Sorkin. Weve been watching with the u. S. Equity market and things are under pressure dow was down by 600 points on friday and adding to those losses today dow futures right now down by 273 points earlier this morning we were down by 350, so this is some improvement from a half an hour ago. The s p is down by 28 points the nasdaq off by 61 lets get rightto our big stor of the morning that is, of course, the Berkshire Hathaway meeting that was health over the weekend. Warren buffett speaking out about the Global Pandemic and his recent investment moves. This was a little different this year no crowds. Usually theres 40,000 people there. This time it was just buffett and Berkshire HathawayVice President on stable but his message was still received loud and clear. Buffett made the case that you should never bet against america, but he also admitted he doesnt know how all of this economic ripples will play out from this pandemic and that he has readjusted his own thinking about what will work he dropped a bit of a bombshell on the market, saying he sold the huge stakes in the four Major Airlines those were 10 stakes he held in american, delta, united and southwest. Heres his explanation as to why. The Airline Business and i i may be wrong, i hope im wrong, but i think it changed in a very major way and its obviously changed in the fact that the four companies are each going to borrow, perhaps, an average of at least 10 or 12 billion you have to pay that back out of earnings over some period of time youre 10 or 12 billion worse off if that happens. In some cases they have to sell stock or right to buy stock at these prices that takes away from the upside. I dont know whether two or three years from now that as many people will fly as many passenger miles as they did last year they may and they may not. Its but the future is much less clear to me, how the business will turn out through absolutely no fault of the airlines themselves. Now, buffett made a big point of trying to explain this was, again, no fault of the airlines themselves and no fault of the ceos he said, all four of the ceos who run those companies are excellent ceos he said those are all wellmanaged companies he just said the equation has changed and he has big concerns about what happens from here guys, terms of what hes been doing, his cash pile built up over the First Quarter, it went from 127 billion that he had at the end of the year to 137 billion. So, instead of deploying that capital when the markets went down so significantly in february and march, he was continued to build up. He did say he spent about 1. 8 billion on stocks in the First Quarter. He spent 1. 7 billion on buying back berkshire shares. That was for the First Quarter he also talked about what hes been doing in april. The pattern has not changed in april. I think he spent 427 million on equities in the month of april that tells you a little about his broader concerns his huge thing is wanting to make sure that hes managing for any crisis who knows how long hell be in that position, defensive. Any indication he could have is he there today thinking ill do something today now that identify said i havent done anything yet . In the next quarter do you expect him he said that if there was a big deal that came along, a right deal that came along, that he would be more than willing to deploy that cash said they spent a big chunk of it if they got the right opportunity. He talked about how they havent stepped into the market like they did back in 2008 and 2009 when things were in real problems there had been eight companies they stepped in to finance during the Great Recession they havent done that this time he said part of the reason is because the fed and the treasury did the right thing. They went out of their way to stabilize markets. As a result, these companies, he said, got better deals in the open moshgt place and from the fed and treasury than they would have gotten from Berkshire Hathaway to me, i thought this was the most cautious id ever seen warren and i wrote about it actually yesterday. The idea that he did walk he at up with point said, i dont want to walk through the worst Case Scenarios and then in proceeded in certain cases to sort of walk through some of them talked about that 137 billion and said, you know, in a worst Case Scenario, that actually isnt a huge amount of money it was a sobering comment because, you know, you look at where we are and i think theres a lot of people that are very hopeful and optimistic we put this either behind us or were about to move forward. And he clearly talked about his company as wanting to be ft. Knox in a way thats very different, as becky said, than the way i think he was thinking back in 208 or even, by the way, in 2016 when he wrote in his annual letter about the need, the once a decade opportunities that come when it looks like there are dark clouds and you run outside with the wash tub rather than the teaspoon to collect as much gold as you humanly can. I think a lot of people watching those comments hes not doing it. Thats why a said, what do we know about the next quarter . Im not saying he would be trying to hide his intention but he does things but with the great, like, Flagship Properties right now that are 30 less than they were and him still not using 137 billion to try to, as you say, collect those things, thats probably notable. But, you know, hes like the rest of us he doesnt know whether a vaccine is possible at the end of the year. He doesnt know whether a therapeutic is going to work he doesnt know whether herd immunity is coming hes Warren Buffett but hes not nostradam nostradamus. He went out of his way to say he doesnt know anything else on the medical front. Hes been listening to dr. Fauci and bill gates thats where he gets his information from he doesnt know anything else on that front he said he doesnt want to answer questions because hes not an expert in Something Like that again, he did say he would be there to take big deals if the terms were right i dont think he things the terms are right. In some instances, his entire view of industries has changed i dont think this is necessarily any different than what he was doing during the Great Recession because he wasnt talking all the time. People keep sending in these questions. Why has he been that silent . He didnt talk that much during 2008 either. It was months between when he came on. I think hes looking to see how this plays on you the in the market and just waiting to see like you said, the fed and the treasury did the right thing these businesses have gotten better deals in the open marketplace than they would get from Berkshire Hathaway. What he did then is get a 10 convert iblg from a company. It wasnt nearly as important about the whether he got the convert to work out properly he was going to get 10 to 11 to weight and do you know if youre going to get 10 or 11 when the businesses youre buying not right now. There are no customers. What did the Royal Caribbean or princess cruise line, one of the cruise lines got a huge amount of money at way lower than you would have anticipated given whats been happening. Theres been more people who have been willing to weigh into the markets because the market was stabilized by the actions the government took. You can get that i mean, theyre giving away cars right now the only thing i would say is, yes, the big opportunities were were missed or didnt exist because the fed came in, but because the fed came in, as you said, there are other people coming in now thinking this is still a Good Opportunity at least my perspective just listening to him is he was still planning to weight when he talked even about the airlines, it wasnt simply a call straight up on the airlines it was a call that that there may be less passengers on these planes two and three years from now and the knockon the demonstrable economic effects of that to sobering to hear it from someone who has had so much certainty over the years. Thats how i felt about it by the way, i thought it was humbling, human and i admired all of it. It definitely made me sit down lets talk about some i think he was hoping with your position youve been saying all along, yes, buffett is agreeing with me, therefore thats what it looks like to me. I dont know if thats necessarily true or not. I dont know if you can say because he doesnt like the airlines you paint that with a broad brush of the entire reopening of the economy. Youre talking your book because youre doughnuts thats fine. Youre looking good on the doughnuts so far youre down see, now youre down about 80 or 90 s p points. You bait me into taking this ridiculous bet, which i didnt want to take. Youre going to with in. Now youre going to use it every day against me. Im not using it against you. Im wondering, are you going to share . Will you share im sitting pretty. I get a puppy. Who buys you that you were becky took it with me follow the videotape. Who cut your hair, sorkin you owe me a puppy. Im coming out to your house. Do you have someone knowing what theyre doing. Who cut it i did myself. With a flowabout. Ee no, with a scissor. We have a lot of emails i have gotten a lot of emails and tweets about this. Next time i do it, ill do it for a couple minutes on the show and ill show you how to do it, joe. I learned myself i literally take a scissor, im doing this with my scissor if i just send this to you, can you cut it and send it back . Piece of cardboard . Yeah. Lets get back to becky i had becky, i had people write in, see, buffett buys buybacks im like, shut up. Buffett talked about a corporate practice thats controversial, stock buybacks. He defended the practice that so many, especially in washington, are attacking right now. Weve distributed some of the capital we dont need for growth now, whether the company should buy it depends on a couple of things one is they ought to retain the money they need for intelgts Growth Prospects thats fine. And, secondly, this is a point thats never mentioned, they should be buying it back below what they think its worth now, theyll make mistakes in that, but you make mistakes in a lot of businesses. But over that should be the guiding principle. And, to my knowledge, jpmorgan, jamie dimon said it once, weve said it various times, we retain we will repurchase shares when its to the advantage of the continuing shareholder to have us do so but you read about all these buyback programs were going to spend 5 billion buying it back or10 billion thats like saying im going to buy a business for 5 billion without knowing what youre going to get for the money it should be price sensitive, obviously. It should be need sensitive, obviously. But when the continues are right, it should also be right to repurchase shares and there shouldnt be the slightest taint to it any more so than dividends and people have taken up the cries how terrible it was that companies bought well, you can say it was terrible to pay dif ends, too. They were doing what was intelligent at the time. I hope they continue to do what is intelligent as they go forward. This is a practice hes defended in the past he did it more vigorously this time because that practice is more under attack. His point all along, if youve been listening to him for years about this, look, if a partner wants out of the business and the other partners in the business want to buy that partner out, that should happen. You should have a way out. Companies, when they do buyback shares, just increase the percentage of the business that the existing shareholders have, therefore, making every share more valuable. Right if you buy stuff i mean, boeing, you know when youre buying things at 400 and its going 100, obviously, it just looks like youre an idiot Eastman Kodak over the years weve seen it. Thats what hes saying. The mindless when ceos remember the financial crisis, dont give them cash, give them performancebased compensation, so if they can shrink the float, they get just so the mindless robot buying back stock is probably not great because look what happened. Weve discussed, where does that money go again when you buy it at 300 and the stock goes to 100 . Where is it . Its not money heaven. Its money heaven. Goes to money heaven. Could have been better spent probably sometimes if youre apple and you dont know what else to buy and you think your shares are remember how undervalued apple was . That would have been a good move to buy that back, right, at that point . You cant just paint it with the same brush where are you, sorkin . I dont know where you are on any given day. You take these i can tell you exactly where i am im exactly where warren is. Im exactly where warren is. Theres nothing immoral at all about buying back shares but something very wrong about the system with which we have today for the most part, which is that as you said, a lot of these Share Buyback problems are relatively mindless. Meaning a robot is doing them. They make these grand proclamations and announcements and do them. Theyre done in certain cases, as you know, probably immorally which is to say, to help prop up the stock price and push up executive compensation the process is not to eliminate p buyback but to make it more mindful. Look, people will get them wrong. We will back back you look at boeing and say, oh, that what a mistake that was i think the question is, how do you get the system to a place where its the default is not to approach it in the mindless way that much of the Corporate America is doing it today. I think thats where i land. Okay. Guys, let mel tell you about one more headline coming out of the meeting. There were a lot of them there was a shareholder question, a lot of shareholder questions about berkshires performance versus the s p 500 that was a question brought by several hareholders. Heres his response. I have a number of variations on this next question. Some more polite than others this one is right down the middle this is from mark blakley who writes in from tulsa, oklahoma, and he says, like many, im a proud Berkshire Hathaway with shareholder. Comparing the berkshire with the spd s p over the last 5, 10, 15 years identify been berkshire is trailing the s p 500 by 8 . To what would you attribute berkshires underperformance while i cant imagine ever selling my berkshire stock, at some point money is money. Well, i agree with everything that i forget his name, but what was said. The truth is, i recommend the s9500 to people and i happen to believe berkshire is about as sound as any single investment can be in terms of earning reasonable returns over time. But i would not want to bet my life on whether we beat the s p 500 over the next ten years. I think theres you know, obviously i think theres a reasonable chance of doing it, but and weve had periods i dont know how many out of the 50 55 years weve been doing it i dont know how many weve beaten or not. I mentioned earlier that 1954 was my best year, but i was working with absolutely peanuts, unfortunately. And i think if you work with small sums of money, i think there is some chances, some chance of a few people that really do bring something to the game but i think its very, very hard for anybody to identify them and i think when they work with large funds, it gets tougher and its certainly gotten tougher for us with larger funds. I would make no promise to anybody well do better than the s p 500. What i will promise them is that ive got 99 of my money in berkshire and most members of my family are may not be quite that extreme but theyre close to it. And i do care about what happens to berkshire over the long period about as much as anybody could care about it. But, you know, caring doesnt guarantee results. It does guarantee attention. You know, its harder and harder for a big pile of money to outperform like that. Thats the point hes made frequently i think a lot of people have questions because theyve invested in berkshire because they think it will outperform in down times thats not been the case here to date i wonder what will happen in the next two, three years. That will play out there were some shareholders pushing back about that. All right andrew, i still need to we still got these delays and they told me they were done i thought you were going to take it they told me you didnt know whether to take it some day well all be back here together we couldnt come back here ill take it away. Do you have any idea when it will be a threeway thing here we cant do masks and we would have to because we would be next to. We could be in different parts of the building. We could do that. Weve done that before. Do we have a third spot . Weve done that before. We could find a third spot. That may not happy us either. I dont know to be continued. When we return, a lot more on squawk box ahead. Weve got to talk about the futures because theyre under pressure this morning. Were going to talk about the new tensions taking place between washington and beijing well do that next next, Mohamed El Erian will join us on his reactions to warren he was tweeting saturday the slide for stocks in the month of may so far. Right back after this. These days staying connected is more important than ever. So were working 24 7 to maintain a reliable network, to meet your growing internet needs. Were helping customers who are experiencing Financial Difficulties stay connected. Were increasing internet speeds for low income families in our internet essentials program. And delivering selfinstall kits to your door. Nos comprometemos a mantenerte conectado. Were committed to keeping you connected. For more information on how you can stay connected, visit xfinity. Com prepare. Welcome back to squawk box. Lets get to the latest headlines from the pandemic this morning. Global cases have now topped 3. 5 million, more than 1. 1 million of those are in the United States in new york, confirmed cases rose to 316,000 and the death toll hit 24,000. New yorks death and case numbers have been slowly and steadily decli