Buffett says bonds are terrible investments

The billionaire says he has owned them in the past but stocks are a much better place for your money.

By Kim Peterson May 6, 2013 1:28PM
Warren Buffett disagrees with investment advisors that counsel people to put a large chunk of their money in bonds. Right now, he says, bonds are terrible investments.

"I like owning stocks," he said in an interview on CNBC. "I do not like owning bonds. Now, there could be conditions under which we would own bonds. But they're conditions far different than what exist now." Buffett said that he tells friends and family members to have enough cash on hand to make them feel comfortable. Anything beyond that, he says, should go into stocks.
"Stocks are reasonably priced," said Buffett, the CEO of Berkshire Hathaway (BRK.A). "They were very cheap a few years ago, they're reasonably priced now."

People should also have the proper attitude about stocks, Buffett said, and not panic if they take a 20% drop in value in market volatility.File photo of Warren Buffett on the NBC News' 'Today' show on November 27, 2012 (© Peter Kramer/NBC/NBC NewsWire via Getty Images)

Buffett said that bonds are priced artificially, partly because the Federal Reserve is buying $85 billion in bonds a month.

If you're jumping into bonds now, you could see some losses when interest rates rise -- and they will rise at some point.

"I would have productive assets," Buffett said about his investing strategy. "I would pay for those enormously over fixed-dollar investments." Buffett has owned bonds in the past, but he said he wouldn't do it now.

Buffett was making the media rounds Monday, appearing in interviews on CNBC and the Fox Business Network after spending the weekend with shareholders at Berkshire Hathaway's annual meeting.

More on moneyNOW



30Comments
May 6, 2013 2:25PM
avatar
Feds buying 85 billion bonds per month....wow...that's alot of debt being created.  The Federal Reserve is a private banking cartel for the past 100 years.  Congress made a bad mistake giving The Federal Reserve the power to control and print money.....now they can print money to keep the american people and US government in perpetual debt.  It will be the downfall of our nation.
May 6, 2013 2:16PM
avatar
I'd love to hear a conversation between Anthony Miraynai and Buffett. Stocks are going to fall someday. And your point Tony?
May 6, 2013 2:40PM
avatar
Does Buffet want everyone in the market so when it implodes he will be able to buy everything up for pennies on the dollar? Sure sounds like it to me.
May 6, 2013 2:24PM
May 6, 2013 2:28PM
avatar
Wow Warren thanks for the great advice!  Advice that any average investor could give!
May 6, 2013 2:34PM
avatar
Depends. Treasuries are bad. Junk is good. It's a crazy mixed up world, but there is money to be made.
May 6, 2013 4:44PM
avatar

Isn't this the same Warren Buffett who years ago said that "95% of all people in the stock market probably shouldn't be there."? What changed his mind? Surely not the dot.com bubble, the collapse from the mortgage crisis, or the HFT flash crash.

 

I think Warren might need a buyer for some stocks he would like to sell. 

May 6, 2013 6:35PM
avatar
Buffett is correct if you are talking about bond FUNDS.  An upward move in interest rates and down goes the value.  But if you own the actual bond and are willing to hold to maturity, you get exactly what you paid for.
May 6, 2013 2:50PM
avatar

Everyone recognizes that rates are artificially low. But this is not only because of Bernanke's policy of Quantitative Easing.  What receives little attention is that large institutional pension managers are forced by their plan directive to purchase Treasuries.  This aides and abets Bernanke's program.  Any attempt to alter their purchasing requirement would be met by stiff government opposition.

May 6, 2013 4:14PM
avatar
Everything is inflated by the Fed's QE printing right now. Stocks, Bonds, Oil, even Real Estate in some areas is overpriced. There is no place to invest your money to protect yourself from the bubble that will burst if and when Benevolent Ben stops printing. The investment environment hasn't been this risky in 50 years, and that's eactly how Wall Street wants it. They love it this way.  
May 6, 2013 8:40PM
avatar
I find this article from Warren Buffett to be a very poor choice of words. Does he realize that a lot of retired people have an asset allocation that has bonds to defer major swings in equities. Does he expect all of us to totally  revise our portfolios?
A better choice would be to say the facts. Yes bond prices will fall as rates rise. However, your fund will be buying bonds at higher rates and if you are in short duration 2-4 year funds, the fund will recover in 2-3 years . The best part it won't take a 50% hit like equities in 2009.


May 6, 2013 2:26PM
avatar
I don't think we need Mr. Buffett's official take on Bonds to figure that out. The rest of us have known this for quite some time. Now that Mr. Buffett says watch out for bonds, the financial world is supposed to listen and tremble at his words with an aspiring awe, Oh, Ah, Ooo. Fact is Peter Schiff, Jim Rogers, Marc Faber, and Kyle Bass have been preaching the same thing for years with little attention or enthusiasm from the financial community way before Mr. 'Dinner' Buffett's response on the bond market. It's the same lame pro-corporatism media minions at work.
May 6, 2013 4:51PM
avatar
I would buy some myself but they won't allow me to print money..... The money I print is worth almost as much as the bill they print...... $0.06 per bill.
May 6, 2013 8:06PM
avatar
OK, I sell my bonds now and buy stock.  Then the stock crashes as Warren swoops in and buys the bonds as they go up?
May 6, 2013 5:46PM
avatar
Tax free munis are good for retirees.  You get a check 2x a year from each muni.  You don't care about price-just income.  when you are retired you need income-esp. tax -free.  Buffet is FOS.  If the market gets beat he will buy everything.
May 6, 2013 6:46PM
avatar
I have a goodly amount of monies in bond funds in my 401K plan. I am 67, retired what should I do?? I was doing well until mid last year and then the funds started going down.  Should I Get rid of all my bond funds??  
May 6, 2013 11:35PM
avatar

Fatty Cakes, err Mr. Fat Cat; A couple of things you actually said make some sense...

Including the forum's morons part...yukety,yuk...

 

Believe Warren isn't just waking up to this part, he's just saying what he feels..

The others might have been more forward about it recently..

But then others(many) were touting Bonds until recently...So..

So like a couple commentors  have mentioned, for different reasons like and have Bonds.

What Buffet did mention was having a "comfortable amount" of cash and put other monies into investments..That can make you a return and you are satisfied with..The choices are yours to make. 

We have "no" Bonds, Mutual Funds or ETFs..Those are our choices.

But do have Cash,CDs,Stocks,Real Estate,Leases and Collectibiles...Our choices.  

May 6, 2013 11:49PM
avatar

Strange DonQ, that you would mention Equities taking a 50% hit in 2009...??

Guess maybe you weren't around in 2008 when the hit was actually worse..Are we conveniently forgetting or am I missing something here..??

 

If by chance, you were attempting to make a feeble political remark....So be it..

We were luckier then most taking a 20-22% hit in 2008...And I had made many mistakes..

When 2009 came along, it was somewhat less in the Spring..

And I was too busy re-arranging and re-allocating to notice...

By July 22-24th 2009, we were fully recovered and it's been pretty good most years since.

I guess I could give Obama credit, but that would just be foolish words..I am the one that made it happen......NO ONE ELSE.

May 6, 2013 3:00PM
avatar

The oracle has spoken!

Let's all be slobbering sheep and gather 'round to listen!

Give me a break, people can be such tools!

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The headlines generally favored Tuesday being another good day for the stock market.  Instead, it was just a mixed day with modest point changes on either side of the unchanged mark for the major indices.

For the most part, the stock market was a sideshow.  The main trading events were seen in the commodity and Treasury markets, both of which saw some decent-sized losses within their respective complex.

Dollar strength was at the heart of the weakness in ... More

MSN MONEY'S