Insight on what high-frequency trading and volatility does to markets, with Ron Baron, Baron Capital who says the volatility makes stocks cheaper. and stated that “I assume that Greece is going to be fixed and re-organized and restructured,” Ron Baron also feels stocks are cheap right now. Ron Baron also talked about the recent success of the railroad sector.
Videos and full transcript below:
On Europe and the equity market:
squawk is on the road this morning and we have a very special show lined up for you. would he we’re live from the metropolitan opera house, the location of the 20th annual baron investor krconference. and joining us for the next two hours, ron baron, talking about going long term long term long. we thank you for being here this morning. and shy probably give a littledisclosure because we are pals. my brother-in-law is a baronman. one of our superstar analysts. married to my sister. you can give him a hard time if you want. we talked about europe.jobs are on the horizon. we’ll find out at 8:30 the number. i know that you are not a market timer, but when you look at theeconomy and where with we are today and you think about thesituation and our economy here, you think what? i think that a very small country the size of delaware we’re talking about is making the stock market go up and down when people talk about it and it’s enabled by the computer trading. i think it’s had very little impact on the businesses in which we invest in our country. it has a big impact on stock prices, more volatile stocks means people perceive this greater risk means the stock prices sell lower than they would ordinarily. but you don’t have a broad thesis about where we’re going? i assume degrees will be fix some had way or another and werestructured just like east germany was restructured by westgermany for the next ten years, they totally restructured. now germany is the most prosperous nation in europe. you might be surprised to know which is the lowest labor costs. in west germany now is the lowest labor cost for all europe. cheaper than spain, cheaper than portugal. and how do they do that?they’re doing the same thing now with degrees. the state can’t afford to pay for this, so the leaders have said we’re not going to let our banks go bankrupt, we’ll restructure, we’ll recapitalizethem. and so you think it gets fixed and if you look at where the market is today then, you think it is fairly priced, underpriced, still you have a percentage of no recession, resection? i think the stock market is the cheapest in my lifetime. so the only other time that interest rates have been 2% or less in the whole history of the united states is in the 1940s. so the 1940s, this is after the depression, in the middle of world war ii, interest rateswith your below 2%. afterwards they were below 2% because people were afraid that the soldiers that were going to come back would be unemployed. couldn’t get jobs. so you had all these programs in the united states in the late 40s and 50s, you had a gi bill and all the houses, places where i lived, to give jobs and give shelter and give something to do and educate people. well that’s going happen again. but what’s going to happen to the country, the jobless claims number — it’s all short term. what you have to keep in mind is the business is all doing fine, balance sheets are great. so you’re buying. yeah.interest rates are 2%. that means they’re 50 times. so credit is very expensive. this the past five year, $800 billion has gone into credit because people are afraid. in the past five year, peoplehave taken stock. that’s why they’re so cheap. two months ago there was a survey that said that 34% of americans believe that gold is the cheapest — is the best lonk time investment. so people are afraid of investing in stocks and they’re investing in gold. and because of that, socks which are 2% interest rates, 11, 12 times earnings. and everywhere you look — we’ll be meeting a number of companies that you’re investing in. right now in terms of metrics, right now in terms of metrics, what is the one thing that you are looking for. you’re trying to findbusinesses that have great growth opportunities. we’ve been investing in companies is that are small and mid-sized and made have become large. the biggest mistakes i’ve made in my life have been investing in companies when i started inbusiness all through my career that have become really largeand i invested in mcdonald’s and disney and federal express when i started. very beginning. early 1970s. they all became giant stocks. i sold after i doubled and tripled my money and they went up 40 and 50 times. so the mistakes that i’ve madehave been mistakes of not staying with investments. so you you don’t become a lonk term investor because you start in business and say i’m going to be a lock term investor. that’s not how it happened. you make a whole bunch of mistakes and they inform the way you invest in the future. so you have opportunities because there are so many problems that haven’t been dealt with for so lonk that now you’re getting the chance to solve problems for america and when they do so, make higher returns and you can have great returns for our investments.before i send it back, groupon, ipo launching this morning. is it the next nxt nike, walt disney? i thought the guy who runs it was pretty neat, the people with him were the same. i haven’t done enough work on it. are you investing in that ipo? i don’t know.in a small cap funds, i’m not. because you can’t. because i have a $2.5 billion market cap and i think this is $8 billion or $10 billion coming out. they were offered to be acquired by $6 billion by i think it was facebook. and — google. so they had an offer to be acquired at $6 billion and maybe they’re going public at $9billion or $10 billion. there’s not much down side and they describe to us the process where they can become a muchbigger property and there’s all these synergies and how they can make businesses operate better. but again, i’m not the expert in this. we have three, four, five people in my office who are. and as i said, you can ask mike about that. do and you have mondyou have? we cannot see your pretty face. so i’m going bring up a six month generac chart. i’m looking at it from october. that must have been irene. it was at $15. it’s at $24.when did you start buying this? our costs is $13. and we bought it when it came out and we bought as much as we could when — after it came out. there were very few people who were interested in it when it did come out. it comes on immediately ifyour power goes out. exactly. we have a generator that’s muchbigger than that, than the regular ones that they sell, but as soon as — it tests regularly. it tests every week. every week the generator comes on, workses for a while, and then shuts off.and your generate, to i think that’s the same hinge thathappens. it comes on regularly. takesit is a $1.6 billion co. see, andrew, there’s he these things called trees. like in new york city, you have museums — we don’t have trees in new york city.i know. all you have — and we have all our wires under the ground. we need to put wires under the ground. infrastructure, that would be a great project. it would. by the way, small cap to us means $2.5 billion or less. and you said it’s 1.6 build n$1now. so well within our definition of what a small company is.jersey power and light earlier this week, 95%, we’ll be done thursday. see, they know that if it’s 70% still don’t have power, nobody knows whether