Billionaire Warren Buffett says he’s not rattled by the stock market’s recent volatility and is in fact bullish on U.S. equity prices.
“Stocks are going to be higher,” the legendary investor told CNBC’s Becky Quick on Monday. He also discussed a wide range of issues from an interest rate hike to his latest offer to Berkshire’s big acquisition of the aircraft equipment maker. (Source: CNBC, August 10, 2015.)
When he was asked about the possible rate hike by the Federal Reserve he said, “It’s very tough to push rates higher in the United States, when Europe needs to keep them low. And you got this situation existing around the world.”
He emphasized that the ongoing crisis in the eurozone would add to the difficulties of policymaker’s decision in the Fed to raise the interest rate. This crisis pushed the region’s central bank to lower the interest rate to help the troubled economy grow.
The rate hasn’t gone up; the U.S. dollar surged significantly over the past few months. On the other hand, the European Central Bank (ECB) has accelerated the money printing program in the eurozone. This sent the euro to its lowest level against its counterpart.
“You may be affecting exports and imports very significantly, if you push rates here to be considerably higher than in Europe,” he warned.
Meanwhile, the wobbly earnings season has indeed surprised many investors whereas many of them suggest that the market is weak. Buffett, however, remains optimistic.
“Stocks are going to be higher, and perhaps a lot higher 10 years from now, 20 years from now,” he explained.
Buffett is still searching for new investment opportunities. One of Berkshire Hathaway’s major holdings, International Business Machines Corporation (NYSE:IBM), was hit hard due to weak earnings. However, the Oracle thinks that the latest drop in IBM’s shares would allow his company to buy the stock at a cheaper price.
He also discussed his company’s latest intention to buy Precision Castparts Corp. (NYSE:PCP). Berkshire issued an offer to buy the aircraft equipment maker for $37.5 billion. Regarding the offer, Buffett described the deal as “a very high multiple for us to pay,” adding, “We’ll be left with over $40 billion probably of cash” after this deal.