Buffett: Stocks still reasonable but bonds awful
OMAHA — Investor Warren Buffett said even though the stock market is soaring, prices appear reasonable and stocks would be a better investment than bonds for most.
Buffett, who had a weekend full of events for Berkshire Hathaway shareholders, conducted interviews Monday on CNBC and the Fox Business Network cable channels.
“Bonds are a terrible investment right now,” Buffett said. He said bond prices are artificially inflated because the Federal Reserve continues to buy $85 billion worth of bonds a month, and owners of long-term bonds may have big losses when rates rise. He said inflation is likely when the Fed stops buying bonds.
He said the average investor should keep enough cash to be comfortable and invest the rest in equities.
Buffett said he remains a fan of Fed Chairman Ben Bernanke.
The current low interest rates continue to make long-term borrowing like 30-year mortgages attractive, Buffett said, but he expects significant inflation eventually.
“Anybody who's borrowing money should borrow out for a long period of time. And if you ever want to get a mortgage, today is the day to get a mortgage,” Buffett said on the Fox Business Network.
Buffett, who heads the Berkshire Hathaway Inc. conglomerate, was asked about aspects of that company, which owns more than 80 companies and holds major investments in iconic companies.
He defended the way the pending $23.3 billion takeover of ketchup-maker H.J. Heinz Co. was structured.
He said he expects Berkshire to own a stake in Heinz forever, and he doesn't have a problem in taking a partner — the Brazilian investment firm 3G Capital — in the deal.
Buffett said on CNBC he doesn't consider 3G a traditional private equity firm because it is investing a significant amount of its own money and it runs businesses. Some people had questioned whether the deal that will give Berkshire a 50 percent stake in Heinz represented a change in investment style for Buffett's conglomerate.
Generally, Berkshire buys entire companies outright and allows them to continue operating largely unchanged.
Buffett said he hopes Berkshire's stake in Heinz will grow over time.
Berkshire's newest board member, Meryl Witmer, joined Buffett for part of the Fox Business interview. Witmer, 51, is an investment manager with Eagle Capital Partners.
Buffett said Witmer would join the discussion on succession planning at Berkshire when she attended her first board meeting on Monday. He says succession is always the top subject the board discusses, but he said the board is unanimous about who should take over as CEO if he died tonight. That person has not been disclosed publicly.