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00:05Berkshire now owns more than 10% of each of the top 5
00:09And the company's CEO, Greg Abel, is in Japan right now
00:13He joins us for a business update and what he's seeing there
00:16And Greg, it's great to see you. Thank you for joining us
00:21Good morning, Becky. Great to be on Squawk Box
00:24Although I see it's evening there in Japan, as we would anticipate
00:27One of the things that you all did when you started making these moves into Japanese equities
00:32Was to start issuing bonds in Japan, yen-denominated bonds
00:38And I think that's been a pretty profitable position for you all
00:42Because of where interest rates have been with Japanese bonds
00:45We are talking this morning about how the Japanese 10-year bond
00:49Is now yielding the highest levels that we've seen in 30 years
00:53I believe, just according to the latest filings
00:58That you all have something north of $15 billion worth of Japanese yen-denominated debt
01:06How does that stand? Will you still issue that debt?
01:08What are the maturities on some of those things?
01:10And what does it mean to see higher interest rates in Japan?
01:16Yeah, it's very topical, obviously, here in Tokyo and in Japan
01:23In the newspapers
01:24I will say, Becky, I found it interesting
01:27Not a single one of the trading companies
01:30Raised it as a fundamental challenge right now
01:33Really?
01:34Because there's still, when you think about, they're talking about, yeah
01:37But they're still relatively modest when you think about it
01:41I think the 10-year hit a 30-year high
01:47And it's, yeah, it went right to 3% as you're highlighting
01:52So I think they see it as very manageable
01:54And then from our perspective, you're right
01:57We have a debt portfolio there in yen
02:02That pretty much reflects the cost basis of our investments
02:05And the 10-year or the remaining life on that debt is a little more than five years
02:14And so we still have a significant carry
02:18I.e. the difference between the dividend and the interest we're paying
02:22But I would highlight that we would envision still raising debt as appropriate in yen
02:30And at the same time, we do see the underlying companies earning performance growing
02:37We do see an increase in dividends likely over the coming years
02:41And continued share repurchases
02:43So, yes, there's an incremental cost
02:46But clearly within the various trading houses
02:50We do see nice increases in the underlying returning capital
02:56They're delivering back to shareholders
02:59Greg, we spoke with Warren Buffett back in July
03:02Right here on CNBC
03:03And talked to him about a lot of things
03:05But one of the interesting things he brought up was the Berkshire portfolio
03:08Obviously, you're running things
03:10He said that you're the decision maker
03:13But that you all talk frequently, almost daily
03:17And that the position that was initiated in Alphabet, he said, was his
03:21I just wonder if you can talk a little bit about your relationship with Warren
03:25How you all are doing
03:26And how you're managing that portfolio at this point
03:29The stock portfolio for Berkshire
03:32Yeah, great
03:34Well, a great example of it is
03:37Warren turned 96 on Sunday
03:40So before I left to come to Tokyo
03:43Stopped in, had a great celebration with Warren as he turned 96
03:48With his family and friends
03:51So we had a very nice afternoon
03:55After that, flew here to Tokyo
03:58And Warren absolutely loves the Japanese investments and the companies we've invested in
04:09So I could tell it wasn't easy for Warren that off I went to Tokyo
04:13But yeah, we have a great working relationship in that we discuss a variety of things on a regular basis
04:22So we would have had some discussions even on Sunday about our Japanese investments
04:30And I talked to him earlier this morning just to give him an update on how each of the meetings
04:35went and how the companies are performing
04:37But it's a very much just a dialogue we've always had
04:41We love talking business
04:42We love talking about what we're seeing across our portfolio
04:46And you're absolutely right
04:50Relative to the Alphabet position
04:53Warren initiated that
04:56Probably close to 15 months ago or a little bit more
04:59And so we initiated the initial purchases in Alphabet
05:08We continued or he continued and we discussed it then
05:11And continued to discuss it
05:13Initiated a variety of purchases
05:15And then I want to say in late May
05:18I received the call
05:21On a Sunday morning to see if we wanted to participate in their upcoming equity offering
05:29Really no terms or amount were set
05:31And I said, well, I'd get back to him right away
05:35And very much consistent with how we manage Berkshire
05:39But also how we, the governance around it
05:42I called Warren and I said, we had a significant opportunity to invest in
05:46Continue to invest in Google
05:47But with a significant block
05:51Discuss the size
05:53They hadn't set the size
05:55But recommended that we consider $10 billion
05:57And Warren and I discussed the size
06:00We discussed the size of discount
06:03And I'd recommended 6.5% discount
06:06And we were comfortable with that
06:08And we went back to him and highlighted
06:11We would be interested in a block on those terms
06:14And then ultimately consummated the transaction
06:19Why do you like Alphabet?
06:26I think from the, just from a real high level
06:29Obviously we don't discuss the underlying specifics of any of the concepts
06:33And around any of our equity investments
06:37But the one thing that is unique with Alphabet
06:40And I guess we do see this across our other businesses
06:42But number one, obviously we all are seeing and feeling the impact of AI
06:48So we knew it was going to have a significant impact on America and businesses
06:55We have a lot of visibility from within our companies
06:59As to how we're using AI
07:01What type of benefits it's delivering
07:04So that brought incremental interest
07:08And then we saw Google as a significant player
07:12Now, there's a lot more to Google than what I just said
07:15And why we like it
07:16But those were the fundamental reasons as to why we took a serious look at Google
07:23And now have a significant investment in it
07:27Well, let me ask you a little more about AI and the data center build out that's taking place
07:32You're somebody who spent decades working in infrastructure building at Kiewit
07:37And also at Berkshire Energy
07:40So you understand one of the key places that's seen as a limiting factor for AI build out
07:46And that's energy
07:47Where are we right now in terms of that data center build out?
07:51Where do you see opportunities specifically for Berkshire?
07:56Yeah
07:56So it's really interesting as they continue to announce all the data centers and data center sites
08:03I've sort of always had a strong view that energy would be the constraint
08:09And there'd be energy, we can produce the energy
08:12It's do we have a
08:13How long it would take to get the sites prepared
08:16And being in a position they could serve the data centers
08:21And I continue to see that as a big constraint
08:24We'll come to one of the other challenges
08:28But we do still see it as a significant opportunity for Berkshire and Berkshire Hathaway Energy
08:34In that, for example, if you look at Iowa where we have a number of data centers
08:40I want to say last year approximately 8% of our load came from data centers
08:46And we see incremental load coming on
08:50Both customers requesting it and what we can serve
08:54But we've really operated to some pretty basic principles right from the get-go
09:00And we've shared that with each of the hyperscalers
09:04And it's really policy we've discussed with our state, our governors, and our regulators
09:11And we highlighted we are interested in serving these hyperscalers
09:16One, if there was no impact to the rates of our other customers
09:22And in fact, we've pretty much taken the approach
09:26There has to be a net benefit to our customers
09:28The communities have to understand the impact on water
09:33And that has become much more manageable as they address that
09:42Use, you know, the technologies that are available to minimize water use
09:46And then lastly, the communities have to be open to having the data center in their community
09:54We very much believe in the fact that you have to be a welcomed member of the community
10:02Now, that's a decision the data center has to make
10:06But we can encourage them to seriously evaluate their reaction from the communities
10:13And I know you've had many discussions around it
10:16There is a lot more pushback in the communities across the U.S.
10:21We have not had any specific site rejected to date
10:26And we're continuing to move forward on the various sites we have under construction
10:31And our sites would be the energy infrastructure, not the data center site
10:36But it has to be done on the terms and conditions I just highlighted
10:41You know, Greg, if you don't define a narrative, if there's a vacuum
10:48Then other people are going to define it for you
10:51There's a piece in the journal today just about the data centers
10:55Protect the earth, build more data centers
10:57Their need for reliable power drives innovation
11:01While AI helps develop new clean technology
11:03It just points out this could be a once-in-a-generation opportunity
11:08To clean up the electricity grid
11:10And to learn how to improve water quality across the board
11:14And accelerate technologies
11:16That, you know, that the people that don't like this
11:21They're behind a lot of these technologies
11:23And there's a need for so much power
11:26It could actually generate the type of change that they're looking for
11:32But if you don't sell it that way
11:35They're going to sell it a different way
11:38I guarantee it
11:42Joe, you're absolutely right
11:43I mean, the narrative around these is so critical
11:47And it continues to evolve
11:49So it really did start from the impact on rates
11:52And were you impacting other customers?
11:55You can see they've, as you've just highlighted
11:58They've moved on from that narrative
11:59I would say that the water narrative is very strong
12:04Coming from the data centers and how they minimize the use
12:07And now they're starting to evolve to, you know, other narratives
12:11I think a very strong narrative on the side
12:15At least in Iowa, where it's still a strong farming community
12:21When we see both the energy infrastructure put in place
12:24And a data center put in place in an individual county or community
12:30The tax relief specifically on property taxes
12:33And also revenues that come into the county to support other services
12:39Schools, police, fire
12:42It's very, very substantial
12:45And that equally has to be part of the narrative
12:48And make sure people recognize the benefits that come with that type of development
12:57Hey, Greg, let's shift gears a little bit
12:59And talk about housing
13:01Specifically in the United States
13:03Obviously, since the last time we spoke with you
13:05You all bought, or you bought
13:07Made the acquisition in Taylor Morrison for $6.8 billion
13:11We also saw in the latest filings that came out
13:14You had increased the stake in Lennar
13:16So these are just some of the ways that Berkshire kind of plays into housing
13:20But you have so many different places
13:21That you are kind of measuring how the housing market is doing
13:25From the paints that you sell
13:27From other things that go into housing building
13:29But also from the real estate portfolio
13:33In Berkshire Hathaway real estate
13:36That follows through all of that
13:37What do you see happening in the housing market
13:39Particularly as interest rates and mortgage rates are rising in the United States
13:47Yeah, it's really interesting
13:48Because it was an important part of the discussions with Taylor Morrison
13:53And the discussions I had with Cheryl, their CEO
13:58In that when we looked at housing
14:00And housing specifically in North America
14:04We were taking a very long-term view
14:07That that American dream will continue to exist
14:11And five years and ten years from now
14:14This will be a very strong asset for Berkshire
14:18I.e. Taylor Morrison
14:20And I'll come back
14:21We did combine and are combining some of our operations
14:25From Clayton Homes
14:26We had 15 site
14:28What we call site builders
14:30But home builders
14:32Over in Clayton Homes
14:33They're now joining the Taylor Morrison team
14:35But the conversation we were having, Becky
14:38Was that we didn't see any type of immediate recovery
14:42Or any type of hockey stick there
14:45That we did see it from Berkshire's perspective
14:48That it was going to be a bumpy road for a while
14:51And obviously, as you're discussing it with people in the industry
14:56There's, and we've got a great leader in Cheryl
14:59And brings great optimism
15:02But you can see as we discuss it
15:06We don't envision a quick recovery there
15:09But we do see it as an industry
15:11That we definitely want to be invested in
15:14And we're invested in for the long term
15:18And Greg, just when you look at the economy
15:19In the U.S., around the world
15:22How are things doing from a business perspective?
15:24How's the consumer doing?
15:29Yeah, it's really interesting
15:30I mean, here in Tokyo
15:34Incredibly vibrant
15:35You can feel a great deal of energy
15:39And when I met with the five companies
15:42The trading houses
15:44Very strong results they're having
15:46And feel very good about their businesses
15:50And that would be a number of my resource base
15:53But a number of the businesses
15:55Also have what they call non-resource businesses
15:57And they're performing very well
16:00If you look across our businesses
16:03And our results through the second quarter
16:05Again, very strong in our larger businesses
16:09Including our manufacturing businesses
16:12So you can see there's still strong demand
16:16But I think you do feel the customer
16:20There's a consumer that is still clearly feeling the pain
16:25And struggling
16:26And having to stretch a lot further with that dollar
16:31And I think that does exist
16:34There's no question when we look at the underlying results
16:36But at the same time
16:38The fundamentals around the economy
16:41At least from what we're seeing
16:43Through the second quarter
16:44Remain very, very strong
16:48Greg Abel
16:49Greg, thank you very much
16:50For joining us this morning
16:52This evening in Tokyo
16:53We appreciate it
16:57Thank you, Becky
16:58Thank you, Joe
16:59Have a great day
16:59Thank you very much
17:00Thanks, Greg
17:01Again, Greg Abel
17:02The CEO of Berkshire Hathaway
17:04Thank you
17:04Thank you
17:04Thank you
17:05Thank you
17:06Thank you
17:06Thank you
17:07Thank you
17:07Thank you