Warren Buffett: Some People Should Not Own Stocks | CNBC

in 1982 or three when the long government got to 15% a company that was earning 15% on equity but with no words no more than Book value under those circumstances because you could buy a 30-year strip of bonds and guarantee yourself for 15% a year and a business that earned 12% it was a subpar business then but a business in turns 12% when the government bond is 3% there's one hell of a business now and that's why they suffer very fancy prices so 3% is a long way from 15% you're just talking about but I watched it go from 3 to 15 to right is there an inflection point on that way cuz people think oh my gosh we've gone from 2.4 percent to 2.9 percent difference historically speaking that's still the way we should be measuring these things not on the absolute movement or the percentage gain movement over time 2.4 to 2.9 is nothing if you're comparing it with businesses that earn 12% on equity and reinvest and the SP you can just look at the vigor for decades has earned on tangible equities earned a lot more than that and it translates into more higher prices and it should is there a tipping point along the way or is it a gradual decline in those yeah but it's it is gravity I mean if if you told me interest rates were going to be 15% next year on bonds you know there's a lot of equities I wouldn't went home now and I wouldn't I would I would buy a lot of governments at 15 and that kind of wish I had in 1982 but I didn't yeah if I told you that the long bond was gonna trade at four and a half to five percent next year it makes a difference but it's been idiotic the only long bonds during the light you know I talked about this in the report endurance part it's just been idiotic and big public pension funds and all that they sat there and they owned bonds now they may have bought them on a four or five percent basis but if they go to a three percent basis there's something way above par the the way people think about it is they do some very silly things I mean you lay this out in the annual report but a lot of investors are told retail investors are told that they should have a certain percent of their portfolio in bonds maybe they're told 60/40 maybe they're told 70/30 stocks to bonds that's something that you should do and that's the safe way of doing it what am I missing some people should not own stocks at all because they just get too upset with price fluctuations if you're gonna do dumb things because your stock a stock goes down you shouldn't own the stock at all what are dumb things selling a stock because it goes down I mean that it you know if if you buy your house at $20,000 and somebody comes along next thing says I'll pay you 15 you don't sell it because the quotes 50 look at the house or whatever baby and but some people are not actually emotionally or psychologically fit to own stocks but I think they're more of them would be if you get educated on what you're really buying which is part of a business and the longer you hold stocks the less risky they've become whereas the longer the maturity of a bond the more risky it becomes hey there thanks for checking out CNBC on YouTube be sure to subscribe to stay up to date on all of the day's biggest stories you can also click on any of the videos around me to watch the latest from CNBC thanks for watching

Channel: CNBC

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Keywords: CNBC, Financial News, Finance News, Stock News, Trading, Investing, Stock Market, US News, World News, warren buffett, warren buffett interview, warren buffett cnbc, buffett, buffett interview, berkshire hathaway, annual shareholder letter, warren buffett shareholder letter, shareholder letter, oracle of omaha, warren buffett buying criteria, buffett buying criteria, interest rates, bond market, equity market, warren buffett on interest rates, buffett on interest rates

Id: lg9jPLoeWJc

Length: 3min 20sec (200 seconds)

Published: Mon Feb 26 2018