“Do stocks look expensive?” Here’s Warren Buffett’s response today, his birthday

“We’re buying stocks this morning.” — Warren Buffett — “I don’t know WHEN to buy stocks, but I know WHETHER to buy stocks,” on CNBC, 8/30/2018.

The Oracle of Omaha was on CNBC this morning.

Happy 88th Birthday, Warren! 🎂

Below are some of his responses to Becky Quick’s questions in the 22-minute interview

Quick: Do stocks look expensive to you at these prices?

“If you had your choice between buying and holding a 30-year bond for thirty years or holding a basket of American stocks, there’s just no question you’re going to do better holding stocks.

“…considerably more attractive than fixed income securities”

“Over time a bunch of businesses that are earning high returns on capital are going to beat a bond that’s fixed at roughly 3% for thirty years.”

[vs. real estate]

“It’s not my field of specialty but…stocks generally — they’re businesses; they’re American businesses: $30 trillion worth of ’em — and they look cheaper than…generally, real estate”

Quick: Is that the only thing that makes stocks look attractive right now is the comparison with fixed income?

“Well that what you have to do in investing, I mean, you’re sitting with some cash in your pocket. You’ve had savings and the question is what do you do with it?”

“…stocks; if you look at American equities, American businesses are earning a lot of money relative to the capital put in.”

“…with stocks you get maybe a 3% dividend but they’re plowing money back or they’re repurchasing shares, or doing something, and over time that just makes a huge difference.”

Quick: Some of those retail investors who have been sitting on the sidelines think ‘oh my gosh I missed my opportunity again’…

…the last time we talked to you, you said you were buying stocks. Are you still right now?

“We’re buying stocks this morning.”

“And I’d rather buy ’em cheaper…”

“I bought ’em under every president — seven are Republicans, seven Democrats — I’ve bought ’em quarter after quarter. Some of the buys were terrific. Some of ’em weren’t at such good times.

“and I don’t know WHEN to buy stocks but I know WHETHER to buy stocks.”

“Assuming you’re going to hold them (over time), wouldn’t you rather own an interest in a variety of great businesses, than have a piece of paper that’s going to pay you 3% in thirty years or a short-term deposit that pays you maybe 2% or something of the sort.”

Berkshire Hathaway’s biggest holding is Apple — 5% of the shares outstanding. re: the iPhone:

“if you look at that little piece of whatever it is, that is some of the most valuable real estate in the world.

“…you’ve got hundreds and hundreds of millions of people with loads of buying power and able to do business or learn information or whatever it may be, and it’s part of their habit of living.… that real estate is worth a fortune”

“…an indispensable part of their lives. It’s an extraordinary product”

By the way, here is last year’s birthday interview and responses to similar questions: 17 minute Bloomberg interview, 8/30/2017.

About the Author:

Jason R. Escamilla, CFA is CEO of ImpactAdvisor LLC, a Registered Investment Advisor based in San Francisco, serving individuals and corporate clients with advanced wealth management needs: high tax-bracket, custom-tailored portfolios, alternative investments, etc.

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