Stock levels now would be high if rates were normal: Buffett
OMAHA, Neb., May 2, (RTRS): Billionaire investor Warren Buffett said on Saturday that stock prices would look expensive if interest rates normalized from their ultra low levels.
“If we get back to normal interest rates, stocks at these prices will look high,” said Buffett, speaking at the annual Berkshire Hathaway meeting of his sprawling conglomerate Berkshire Hathaway.
The US Federal Reserve is currently weighing raising rates from their nearzero levels of the financial crisis era, even as questions remain about the strength of growth in the world’s biggest economy.
The current environment of the US economy will not influence potential acquisitions at Berkshire Hathaway, Buffett said.
Berkshire tends to hold companies for decades — or forever, as Buffett has said in the past — making the short-term economic outlook less valuable as a predictor of a company’s success than longerterm trends.
“Any company that has an economist certainly has one employee too many,” Buffett added.
He also said that he expects the US dollar to remain the world’s reserve currency.
“I think the dollar will be the world’s reserve currency 50 years from now,” he said.
Berkshire Hathaway Inc shareholders on Saturday celebrated Warren Buffett’s 50th anniversary running the conglomerate, as the billionaire fielded questions about the company and its future, and explained some business practices.
Berkshire owns more than 80 companies including the Burlington Northern railroad, Geico car insurance, Benjamin Moore paint, Dairy Queen ice cream, Fruit of the Loom underwear, and See’s candies, and owns more than $115 billion of stocks.
But Buffett’s status as an investing legend, and his plain talk and humor, are key reasons why people trek to Omaha for what Buffett calls “Woodstock for Capitalists.”
Berkshire’s annual meeting is Omaha’s top annual draw other than baseball’s College World Series — reflected in hotel rooms that can fetch more than $400 a night and often sell out nearly a year in advance.
Buffett, 84, and his second-in-command Charlie Munger, 91, spend hours at the annual meeting in a downtown arena answering questions from shareholders, analysts and journalists about business, the economy, current events and life.
As is usually the case, no major controversy has been hanging over Berkshire despite its sprawl.
But Buffett did offer a defense of Berkshire’s partnerships with Brazil’s 3G Capital, which critics say ruthlessly cuts jobs at companies it acquires. In 2013, Berkshire and 3G bought H.J. Heinz Co, which in turn is now buying Kraft Foods Group Inc .
“The 3G people have been successful in building marvelous businesses,” Buffett said. “I don’t know of any company that has a policy that says we’re going to have a lot more people than they need.”
Buffett also offered a defense of Berkshire’s Clayton Homes manufactured homes unit, which was criticized in a recent Seattle Times article for predatory sales practices that can trap lowincome borrowers in homes they cannot afford.
“I make no apologies whatsoever for Clayton’s lending terms,” he said, adding that Clayton itself faces losses when borrowers default.
Devoted and sleep-deprived shareholders began lining up outside the venue hours before doors opened at 7 a.m. (CDT). Kyle Cleeton, a research analyst for an investment firm, may have gotten there first, saying he showed up at 10 p.m. the night before.
“I wanted to be first in line,” he said. “You’re not sure how many more years you’re going to have.”
Bill Guenther, a state forester from Brattleboro, Vermont, said, “I’m one who likes a good seat.” He arrived at 1:04 a.m. despite having last year suffered a major foot injury requiring crutches when he collided with another shareholder as he tried to get that good seat.
“My girlfriend said, ‘You’re not going to do this again,’ and I said, ‘I have to, it’s the 50th year.’”