Buffett warns on low rates of interest

Billionaire investor Warren Buffett has said stock prices would appear expensive if interest rates normalised from their ultra-low levels.

“If we get back to normal interest rates, stocks at these prices will look high,” he saidat the annual shareholders’ meeting of his conglomerate Berkshire Hathaway.

Mr Buffett, one of the world’s most famous investors, is widely followed for his advice on finance and life.

While he often emphasises the importance of not basing long-term investing decisions on short-term economic expectations, his views on the US and global economies carry significant weight well beyond the sphere of Berkshire Hathaway’s shareholders.

Regarding the Federal Reserve’s loose monetary policy, Mr Buffett said he could not have predicted rates would remain this low for this long without becoming a problem.

Cheap money

“So far, I have been wrong on interest rates. It’s so hard for me to see how, if you toss money from helicopters that eventually you don’t have inflation, but we haven’t.”

The Fed is weighing raising rates from their near-zero levels of the financial crisis era, even as questions remain about the strength of growth in the world’s biggest economy.

The current US economic environment will not influence potential acquisitions at Berkshire Hathaway, Mr Buffett says. Berkshire tends to hold companies for decades – or forever, as Buffett has said in the past – making the short-term economic outlook less valuable as a predictor of a company’s success than longer-term trends.

“Any company that has an economist certainly has one employee too many,” he added. He also said: “I think the dollar will be the world’s reserve currency 50 years from now.”

Nevertheless, Mr Buffett praised China as a rising superpower. He noted problems in the US including concerns about income inequality.– (Reuters)