Buffett bullish on future of U.S. business
Investor says beware negative interest rates in Europe
Warren Buffett, famous for advocating greed when others are fearful, said he’s not worried about recent stock turbulence because he’s optimistic about the state of American business.
“You can’t predicts what stocks will do in the short run, but you can predict that American business will do well over time,” he told CNBC in an interview Monday.
“American business will do fine over time,” he said.
Buffett, 85, is famous for saying investors should strive to be “fearful when others are greedy and greedy when others are fearful.” He reiterated that sentiment as the S&P 500 is down almost 5% this year on fears that a slowdown in China could spread to the rest of the world.
“Anytime stocks go down, as far as I’m concerned, I like it because I’m a net buyer of stocks. We are a more aggressive buyer when they are going down,” said Buffett, whose holding company, Berkshire Hathaway, has “bought more stocks since the end of the year.”
The bullish comments come just two days after Buffett admonished the nation’s political candidates for presenting a pessi- mistic view of the nation’s future. “For 240 years it’s been a terrible mistake to bet against America, and now is no time to start,” he said in the closely watched annual letter to Berkshire Hathaway investors.
“America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did,” Buffett, who has endorsed Hillary Clinton for president, wrote in the letter.
Despite his bullish tone, the socalled Oracle of Omaha sounded alarms over negative interest rates in Europe, calling it an experiment with unknown consequences that distorts valuations. Federal Reserve chairman Janet Yellen has said negative interest rates in the U.S. are not “off the table.”
“We are doing something the world hasn’t seen,” Buffett said of central banks in Europe and Japan pushing rates below zero to stimulate growth. “It distorts everything,” he told CNBC.
Negative rates can push down the value of currencies while pushing up the values of everything else as investors flee cash and other safe havens for yield. Low interest rates in the U.S. have been blamed for both the housing bubble of the last decade and the more recent increase in junk bond investments.
Berkshire’s insurance companies, which have billions invested in euros, would “be better off with a big mattress in Europe that we just stick all this stuff in,” he said. “We do not know how this movie plays out.”
Despite holding a number of stocks that plummeted in 2015, Buffett said Berkshire Hathaway grew its book value by 6.4%, or $15.4 billion.
Berkshire lost 12.5% last year on a per-share market value basis, however, compared to a 1.4% gain in the S&P 500.
Some of Buffett’s troubled holdings include American Express, which fell 25% last year, IBM, which dropped 15%, and Walmart Stores, which plummeted 28%.