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Warren Buffett: Stocks reasonable, bonds awful

May. 07, 2013 @ 12:00 AM

OMAHA, Neb. -- Investor Warren Buffett said even though the stock market is soaring, prices appear reasonable, and stocks would be a better investment than bonds for most people.

Buffett conducted interviews Monday on CNBC and the Fox Business Network cable channels after a weekend full of events in Omaha for Berkshire Hathaway shareholders.

"Bonds are a terrible investment right now," Buffett said.

Buffett said bond prices are artificially inflated because the Federal Reserve continues to buy $85 billion of bonds a month, and owners of long-term bonds may see big losses when interest rates eventually rise. He said inflation is also likely when the Fed stops buying bonds.

He said the average investor should keep enough cash to be comfortable and invest the rest in equities.

"Stocks are reasonably priced now. They were very cheap a few years ago," Buffett said on CNBC.

But Buffett said most investors pay too much attention when the stock market reaches record highs. He said average investors should pay more attention when stocks hit records in falling prices because that's a sign they are getting cheaper.

The Federal Reserve's efforts to keep interest rates low have helped the stock market soar, Buffett said, but the improving economy has also played a role.

Buffett said he remains a fan of Fed Chairman Ben Bernanke. He also reiterated his support of JPMorgan Chase Chairman and CEO Jamie Dimon. He said that bank, which he has invested in for his personal portfolio, has the right CEO.

Buffett said the current low interest rates continue to make long-term borrowing like 30-year mortgages attractive, but he expects significant inflation eventually.

"Anybody who's borrowing money should borrow out for a long period of time. And if you ever want to get a mortgage, today is the day to get a mortgage," Buffett said on the Fox Business Network.

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