Now is a good time to buy a home and finance it with a 30-year mortgage, says Warren Buffett, Berkshire Hathaway chairman/CEO. Buffett discusses why he wants to invest in more businesses, explains why he bought eight European stocks at the end of 2011 and also shares why he decided to invest in the Omaha World-Herald.
let’s start off our conversation with warren buffett. we do have some important topics to get to. first of all, we want to thank you very much for joining us. thank you for coming. we’re here at berkshire’s most recent acquisition. last year you went ahead and stepped in and i guess one of the key questions i have is why did you do that? why don’t we start off talking about that right at the top. william jennings brian was the editor of the world herald so if you go back to 1894 to ’96 and then of course he started running for president and he didn’t have too much luck until he lost three times. the world herald — newspapers face three major problems and two of them they can’t do much about but the third they can. the first problem they have is that the only reason you buy a newspaper is to find out something you want to know that you don’t know. and if you go back many years, if you wanted to know the box score on your favorite baseball team, if you wanted to know the closing prices on stocks, if you wanted to find an amount, the thup was primary. it’s lost its primariness in certain major areas of news but still remains in a number of items that are extremely important to people. and it’s vital they continue to be so. as long as they are of interest to you, that you can’t find some place else. classified, obituaries? yeah, obituaries are a good thing. you are not going to find out whether your friends are alive or debt anywhere else. take high school basketball or nebraska football, you will learn more from reading the newspaper than from any other source. the world herald will always be primary. you will know ten times as much about nebraska football than if you try to get your news from any or source. the same is true in local politics and people, when there’s a sense of community, people care with about that. now where there isn’t that sense of community, the second problem i have — but they still are — you start with trees up in canada and it’s very expensive. that doesn’t go away. electronic is not expensive. but the third thing is newspapers have been giving away their product at the same time they are selling it and that is not a great model. you’re competing with yourself and that you are seeing throughout the industry a reaction to that problem and an answer to it and that’s important. the answer is charging people online? yeah. in other words, you shouldn’t — you shouldn’t be giving away a product you’re trying to sell. rupert murdoch got there a long time ago and said this is something we should be doing and do you agree? the dow jones was doing it before rupert, too. and it’s being instituted in other ways. that’s key to the future of the newspaper. newspapers tell you a lot of things you can’t find out other places and most citizens are going to find them useful. you can’t give them away for nothing. we can talk more about this later. i want to start off while we’re here at this point the market, the dow and the s&p are sitting at about the highest levels in four years. we have seen an incredible run over the last several months and you are somebody who had stepped in four years ago or i’m sorry, back in 2008, when you wrote that op-ed piece for the new york times, the headline was buy american stocks. i am. we’ve come a long way in the market since is then. the dow was below 9,000. i want to know what you think about stocks at these prices. do you still think that this is a great time to be buying stocks? stocks are businesses. you have to invest in something. if you have your money in your wallet, it’s invested in something. it’s just zero. if you have your money in the bank these days it’s at zero or in treasury bills it’s invested at zero. i have a section in the report where i say that if held over a long period of time there’s no question in my mind that equities is going to outperform in my view dramatically paper money or nonproductive assets such as gold. no forecast for the next three months, six months, or a year. i think it’s obvious that owning really first rate productive businesses, and there’s hundreds of them, you have to compound over time. pay the money out, reinvest it, share in shares so your ownership goes up. equities are still cheap relative to any other asset class. but they’re not — i would say single family homes are cheap, too. you would? single family homes. if i had a way of buying a couple thousand single family homes and had a way of managing them, the management is a problem because they’re one by one not like apartment houses. but i would load up on them and i would take mortgages out at very low rates. if anybody is thinking about buying homes, five years ago they couldn’t buy them fast enough. interest rates are far lower. it’s a way, in effect, to shorten the dollar. you can take a 30-year mortgage. you can refinance lower. if it’s too low the other guy is stuck with it for 30 years. it’s an attractive asset class now. if you are a young individual investor at home and have your choice between buying your first home or investing in stocks, where would you tell someone is the better bet? if i thought i was going to live — if i knew where i wanted to live the next five or ten years, i would buy a home and i would finance it with a 30-year mortgage. it’s a terrific deal. and if i, literally, was an investor that was a handy type, which i’m not, and i could buy a couple of them at the stressed prices and find renters, i think that’s — and, again, take a 30-year mortgage, it’s a leveraged way of owning a very cheap asset now. i think that’s probably as an attractive investment as you can make. equities are very attractive compared to anything else.