Warren Buffett: Stocks are 'ridiculously cheap' if interest rates stay at current levels

gentlemen just taking a look at what we've been watching with the markets today obviously things are under a little bit of pressure today but we have been looking at much higher markets if you go back to the Christmas Eve low and the concern that about what would the Fed what might or might not be doing since that time the Fed has sounded much more dovish and I just wonder if you couldn't talk a little bit about your own take on the markets and Bill again I've spoken with with Warren and Charlie earlier about this a little bit so how about your take when you hear that the Federal Reserve is probably not going to be raising interest rates anytime soon how does that change your outlook on on equities or equities versus Treasuries well the interest rate is like gravity and all these valuations are dramatically affected by it at the start of the year people didn't think that ten-year bond would be where it is today and that's provided a lot of lift so it was a big first quarter for US equities we still if you look forward or at these very high valuation levels and so it's hard to see that the mark will be gaining a lot over the next few years I think people should have fairly modest expectations on what what their portfolios will make in the year the years in front of us have you changed your your position so in your own portfolio as a result of this have you done any major no it's it's a very equity oriented portfolio it's overweight in the u.s. even though it's got a lot of overseas exposure you know it's a bullish portfolio that the American economy over time will do well you know fortunately even if we have a few years here where markets aren't are doing that well you know we've been lucky we have a cushion the foundation continue to spend generously [Music] but I'm in prayer I'm amazed at how high the valuations are if you look broadly charlie do you think that well sure I think that if you drive interest rates down to zero and all the countries print money like crazy it's lifted the asset vote for everybody and I think it really is a didn't have anything else to do in the Great Recession and so they took the only weapon they had and used it aggressively I don't think we should quarrel that it did cause the people were already rich to get richer and but that wasn't done purpose or anything like that and I think that will correct over my automatically do you think we should still be using that weapon aggressively which is what president Trump would like to see happen he wants them to cut interest rates again I think he said by one percent and also push up quantitative easing once again but I am so afraid of a democracy getting the idea that you can just rent money to solve all problems and eventually I know that will fail Singapore which has a marvelous economy has zero debt if I were running the world I would like the United States to be in that position that is not typical that's that's nobody's position you know all these politicians in Europe and America have learned to print money and if we keep at these extraordinary measures for the Fed I guess not just the Fed here but central banks around the globe yes but who knows when money for any runs out of control and we at the end if you print too much you end up in something like Venezuela you're not suggesting that happens - no I don't like the ideas and both parties that you're a politician to say well we've learned as we printed all the one who want we don't have to raise taxes we just print we're on you share those concerns yeah I probably could not have conceived of a world recently is 10 years ago I'd learned not have conceived world where you would have full employment 5% budget deficits with actually the probability of those rising from that level and at the same time have the long bar the 3% I would have said that that couldn't happen and then then people now you have this modern monetary theory which there's no question he's you're borrowing any country should borrow money money and its own currency I made that that is not like it's some great discovery yeah and that's the point I mean it that doesn't solve anything just to say what it's much safer to currency but the the convergence of these factors would have seen impossible to me and generally if I feel something is impossible it's going to change over time I don't know in what way but I don't think we can continue to have these variables in this relationship now if we can then stocks are ridiculously cheap the one thing I will say though is this is a conversation I feel like we've had for at least four or five years right where you're watching and continuing to wait for these interest rates the yields to rise we're still sitting at two-and-a-half percent on the 10-year which and we're sitting with very very little inflation with a Federal Reserve that put a target for two percent on it not that long ago and it looks like Nirvana it looks like we've found the promised land where we just essentially money doesn't cost anything and you can put lots of money and have full employment and no inflation and I would have thought that something would have happened before now I don't know what would have happened but I didn't I wouldn't think you could have these things in in at these these levels that long-term rates inflation rates budget deficits and to have that be a stable situation for a long period of time and I still believe that but I so far I'm wrong so in the meantime you haven't really changed how you I think stocks are ridiculously cheap compared if you believe that you're going to have the 3% interest 30-year bonds makes sense that's a big if though that's what makes going to work well this three so it's comfortable if everything goes down not by 90 percent so we're not a fair cross-section I'm sorry Charlie what was that say this threesome is comfortable if everybody if everything goes down by 90 percent no arrests yeah but we wouldn't want that kind of a world that remain to everybody else you

Channel: CNBC Television

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Keywords: Squawk Box U.S., CNBC, business news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable, cable news, finance news, money, money tips, financial news, stock market news, stocks, Warren Buffett, Warren, Warren Buffett worth, Warren Buffett net worth, Buffett Warren worth, Warren Buffett stock, Berkshire Hathaway, Berkshire stock, Berkshire Hathaway stock price, Berkshire Hathaway warren buffett, cnbc interview

Id: KIslBZxp5zQ

Length: 7min 51sec (471 seconds)

Published: Mon May 06 2019