According to Warren Buffett, gold fans are right to be afraid of a paper currency and should believe that paper money will be worth less in the years to come. However, he believes that gold bugs have the wrong strategy on how to protect themselves.
By: Alex Crippen
Published: Monday, 7 May 2012
Warren Buffett says that Berkshire Hathaway is buying shares in two U.S. companies and will continue to buy them today, especially if they become cheaper in today's global stock sell-off. As usual, he's not naming those stocks, but does say they are names that are already in the Berkshire portfolio.
Buffett is live with CNBC's Becky Quick at the Hollywood Diner in Carter Lake, Iowa, just outside Omaha, for all three hours of "Squawk Box" this morning.
Buffett says Berkshire spent about $60 million on the stocks on Friday. He tries not to buy more than 10 percent of a stock's trading volume in any one day.
His advice over the years hasn't changed: don't buy or sell stocks based on the day's headlines. Ignore your emotions and buy stocks because they represent a good long-term value.
"I think equities are very attractive for the long term," he says, but he has no idea if they'll go up or down in price in the coming weeks and months.
Is he against "high-speed trading?" Buffett says he's against "active trading of any kind."
You can't know exactly when to buy or sell stocks, he thinks. "The time to buy stocks is consistently over time."
He adds, "You should never buy your investments with the idea, 'I have to get a certain return.' You should look at the best return possible and learn to live with that. But you should not try to make your investments earn what you feel you need. It doesn't work that way. The stock doesn't know you own it."
Buffett on Gold
After repeating his regular argument that gold is an unproductive asset that will be outperformed by stocks, or even farmland, over the long run, Buffett does acknowledge that gold fans are "right" to be afraid of paper money.
They have a "correct basic premise" that paper money will be worth less in coming years.
He disagrees with them on the strategy of buying gold to avoid that decline in value. "Where they run from that, and they should run from it, is, in my view, where they make their mistake."
Buffett also notes that many gold buyers are emotional about the metal, and want other people to agree with them since more buying boosts its price.
"They want everybody to be so scared they run to a cave with gold. Caves might be a better investment than gold. At least they're not producing new caves all the time."
Buffett's Prostate Cancer
Buffett tells Becky he "feels terrific" and there's "absolutely no change" to his life since he was diagnosed with early-stage prostate cancer a few weeks ago. "I'm here with my strawberry shake and I'm enjoying life... My energy level is 100 percent. I have no symptoms of any kind. Nothing has changed."
Europe and the U.S.
Buffett says Europe will solve its problems, but not without some "pain." He's not surprised by the results of European elections over the weekend, saying they highlight how hard it is to get 17 countries to agree, especially when people are being asked to vote for austerity measures.
Still, Europe will not be going away, he says. It's a "huge" market that will grow.
Buffett thinks the U.S. is on a "different path," with its bank problems already addressed.
He sees the U.S. economy continuing to improve, but at a very slow pace. He doesn't expect major gains until residential construction comes back. That will happen, he says, eventually, but he doesn't know when.
He also doesn't know a good way to do a large-scale investment in single-family homes, although he still expects they'll be going up in value. Funds that invest in homes will do well for the fund managers, but he's not so sure investors will benefit as much.
The "Buffett Rule"
Warren Buffett is still on board with President Obama's proposed "Buffett rule" that would raise tax rates for some people earning more than $1 million a year, although he would make some small adjustments in the rates if it was up to him.
He expects a close presidential election in November given the nation's difficult economic conditions.
Buffett would like to see the U.S. reduce spending and increase revenues to start reducing its deficit, but he sees big political barriers to that in Washington.
Buffett on Wal-Mart
Buffett says Mexican bribery allegations at Wal-Mart [WMT 59.19 0.49 (+0.83%) ], a Berkshire holding, don't affect his view of the stock.
He rejects Joe Kernen's suggestion that Wal-Mart might have been justified in paying bribes if it thought the law prohibiting them was unfair or ineffective. Buffett told Joe that while you might be at a disadvantage operating in a country where other companies pay bribes and you can't, but that doesn't justify breaking the law.
Buffett tells Becky he doesn't know too much about the revelation that Yahoo [YHOO 15.35 0.20 (+1.32%) ] made an "inadvertent mistake" by including a non-existent college degree on CEO Scott Thompson's resume, but said he would "do something" if something was misrepresented to him over a period of time.
As he has in the past, Buffett admits that he made a mistake in buying shares of ConocoPhillips [COP 53.35 0.18 (+0.34%) ] for Berkshire, saying he has no special insight into the future movements of oil prices.
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