Is The US In A Bubble? Warren Buffett Expects American Economy To Keep Growing

Days after the release of his annual letter to shareholders with the company he took over in the mid-1960s, billionaire investor Warren Buffett offered an optimistic view of the future of the financial sector in an interview on CNBC’s “Squawk Box” early Monday morning.

“We are not in bubble territory,” he said, referring to the stock market’s tendency to overvalue certain industries or products in the form of rapidly escalating share prices, only for them to bottom out, to mass panic. “You’d be making a terrible mistake if you stay out of a game you think is going to be very over-time because you think you can pick a better time to enter.”

Read on for the highlights of Buffett’s CNBC Q&A, including his opinions on Trump, taxes and the newspaper industry.

On President Donald Trump

“I will judge President Trump, after four years, based, number one, on how safe the country has been kept. That is the number one of the chief executive of the United States. And that's not an easy job,” Buffett told CNBC, clarifying that nuclear weapons were his “number one worry.” “Secondly I’ll judge him, to a degree—although they have less control over this, they need a little luck on weapons of mass destruction too—on how the economy does overall, and then third, I’ll judge him on how, if the economy does well, which I expect it to do, how wide the participation in that—in a better economy—extends.”

On the newspapers with an ‘assured future’

Buffett said the New York Times and the Wall Street Journal—and, maybe, the Washington Post, thanks to its Amazon buyout—were the only two papers guaranteed long-term survival, as “they have developed an online presence that people will pay for.”

"If you look, there are 1,300 daily newspapers left in the United States. [Berkshire Hathaway owns] 31 of them. There were 1,700 or 1,800 not too long ago," he said. "Now, you've got the internet. Aside from the ones I mentioned, 1,400 or 1,300 of them haven't figured out a way to make the digital model complement the print model."

On Republicans’ tax proposals

The origin of the so-called “Buffett rule,” which would apply a minimum tax rate of 30 percent to individuals making $1 million or more annually, Buffett had a few words for Republicans’ tax overhaul plans.

"I think they will end up going for something not as dramatic as they might even like to do because they simply don't want to spend the time and the political capital getting it done," he said. "You've got some master legislators in [Senate Majority Leader Mitch] McConnell and [House Speaker Paul] Ryan that will be handling things so as to get as much as possible of what they would like through… I just have a feeling when the Treasury secretary says we're trying to have this by August or something, you're not going to get a really 1986-type overhaul or a 1954-type overhaul or a 1969-type overhaul in that kind of a time period.”

On long-term bonds

"It absolutely baffles me who buys a 30-year bond," Buffett said. "The idea of committing your money at roughly 3 percent for 30 years ... doesn't make any sense to me."

On Wells Fargo’s customer fraud

In a scathing critique of the bank’s recent scandal, in which its employees were pushed to create millions of fake accounts charging customers with fees they often didn’t know about, Buffett said Wells Fargo should’ve acted much sooner.

"They made a huge mistake. The huge mistake wasn't necessarily the dumb incentive system. The problem was they didn't do something about it until they learned about it," he said. “I keep preaching to our guys: If you see a problem, attack it immediately.”

On investors’ fees

"You don't get better [at investing] because you charge a lot. That does not make you a better judge of securities or anything like that," he said, adding that hedge fund managers’ compensation structure—a management fee equal to 2 percent of the total asset value and another 20 percent fee on profits earned—“borders on obscene.”