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Warren Buffett: Stocks Will Go 'Far Higher' Over Time
Published: Monday, 6 May 2013
By: Alex Crippen
Even as U.S. stock indexes hit all-time highs, Warren Buffett predicts
they'll go "far higher" in the long run.
Right now, he very much favors equities over bonds, warning some
investors could lose a lot of money in long-term fixed-income assets
when interest rates eventually start to rise.
In a live appearance on CNBC's Squawk Box Monday morning, Buffett told
Becky Quick, "You'll see (stock) numbers a lot higher than this in
your lifetime."
Acknowledging that milestones like Dow 15,000 can draw Main Street's
attention to stocks, Buffett said people should pay more attention
when indexes cross those milestones on the way down because that's
when stocks are "cheaper" and more attractive to buy.
While not as "cheap" as they were a few years ago, Buffett thinks
stocks are now "reasonably priced" and not "ridiculously" high.
Warren Buffett: Stocks Will Go a 'Lot Higher' Over Time
Warren Buffett tells CNBC's Becky Quick that stock indexes will go a
"lot higher" in her lifetime and advises investors not to pay so much
attention to short-term moves.
There could be a pullback for stocks at any time, Buffett said, but
warned against attempts to time the market. "People pay way too much
attention to the short term."
Buffett said that bonds are a "terrible" investment right now because
they are "priced artificially" high due to the Federal Reserve's
massive asset buying program and could lose people a lot of money when
inevitably interest rates start to rise. He doesn't know when that
will happen and he doesn't know how much rates will rise, but he's
certain they will be going up eventually.
Warren Buffett: Bonds Are 'Terrible' Investment Right Now
Warren Buffett tells CNBC's Becky Quick that people could lose a lot
of money in long-term bonds when interest rates inevitably start to
rise.
While he has bought bonds in the past under different circumstances,
he generally prefers "productive" assets to fixed-income investments.
Buffett also warned that it's "crazy" to get enticed into a risky
investment because someone promises you a higher yield. "I can take
you to the waterfront and they'll promise you 15 percent," he joked.
(Read more: Wealth Effect Is Fueling Surge in Private Jet Travel)
Buffett said he sees no major changes for the U.S. economy over the
past four years. It continues to show "gradual improvement ... moving
forward, but at a slow pace." From his viewpoint, "Demand has come
back, but slowly." He does see some "fairly strong" improvement in
housing.
_He called Fed Chairman Ben Bernanke a "gutsy guy" who has done "very,
very well" keeping the economy on the right track. Buffett did concede
he might have lifted his foot off the "accelerator pedal" earlier, but
he's not sure how to do that.
Warren Buffett on CNBC's Squawk Box on May 6, 2013 in Omaha, Nebraska.
Buffett also endorsed JP Morgan Jamie Dimon as the bank's CEO. Asked
aboutefforts by some shareholders to split the chairman and CEO roles,
Buffett said Dimon should keep both jobs.
He also said, however, there are times when it makes sense to separate
the roles. "Either system is OK." He also thinks directors should
spend some time talking without the CEO present, recalling that he's
been on one board where "a lot of change happened" after the CEO left
the room.
Buffett said each year when the Berkshire board meets, he gives them a
chance to talk without him there.
Warren Buffett speaks with Squawk Box's Becky Quick in Omaha, Nebraska.
Among other topics covered by Buffett during the interview:
• Buffett revealed that Berkshire has been buying some stocks and
companies in the past year. He said Europe "is going to be around" and
its economic problems present a buying opportunity.
• Buffett said he's still bullish on Wells Fargo. Berkshire has
bought some additional shares almost every month this year.
• He wouldn't say why Berkshire recently sold a small chunk of its
Moody's stake, but noted the sale price was six times what it had paid.
• Even though it's been buying newspapers in small and medium-sized
cities, Berkshire probably won't be investing in media companies
because it is hard to know which ones will be successful in 10 years.
• He thinks JC Penney has a "very tough" road to recovery after it
"alienated a significant portion" of its customers, but has "good
management." While he doesn't have an investment in the retailer, he
is rooting for it to recover.
• Buffett said government isn't solely responsible for rising health
care costs, "it's the whole system."
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