Warren Buffett said the US economy is gradually improving, but low interest rates have made bonds "terrible investments" while stocks remain "reasonably priced." Speaking on CNBC television on Monday, the chairman and chief executive of Berkshire Hathaway Inc said the economy is benefiting from an upturn in areas that had not previously performed well, particularly homebuilding.
He also said the rebound is helping create increased traffic for Berkshire's private plane unit NetJets, and could result in a record profit this year for Berkshire's railroad unit Burlington Northern Santa Fe. "The economy is moving forward, but at a slow pace," he said. "Demand has come back, but slowly." Buffett spoke on CNBC after Berkshire's annual shareholders meeting over the weekend in Omaha, Nebraska.
The world's fourth-richest person said low benchmark interest rates, including overnight rates that Federal Reserve Chairman Ben Bernanke has kept at effectively zero since late 2008, can help stimulate demand. "It's a lot easier for me to predict that ketchup will be doing well or Coca-Cola will be doing well in 10 years," Buffett said, referring to Berkshire's pending take-over with Brazilian investment firm 3G Capital of H.J. Heinz Co, and Berkshire's large investment in Coca-Cola Co stock.
Berkshire ended March with $95.9 billion of equities and $31.4 billion of fixed-income securities on its balance sheet. At the annual meeting, Buffett and Berkshire Vice Chairman Charlie Munger agreed that the economic stimulus provided by Washington during the 2008 financial crisis was needed to address what Buffett called "the greatest panic in my lifetime."
Speaking on Monday, Buffett called Bernanke "a gutsy guy" who has "done very, very well in terms of what he has done for the United States." Last week, the Fed said it would continue to buy $85 billion of bonds per month to spur growth, and it will step up purchases if needed. The economy grew at a 2.5 percent annualised rate in the first quarter.
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