Pat Dorsey, the director of equity research at Morningstar, and author of two books on investing: The Five Rules for Successful Stock Investing and The Little Book That Builds Wealth talked recently about Warren Buffett and his comments on why stocks are more attractive then bonds. Dorsey agrees that stocks offer better yields than bonds and “it is first grade math”.
Below is the part of the t transcript:
The ACAP Strategic Fund's managers see a "significant scarcity of attractive asset allocation choices globally," but also a strong environment for fundamental stock picking. Q2 2021 hedge fund letters, conferences and more According to a copy of the fund's second-quarter investor update, which ValueWalk has been able to review, its managers currently hold a balanced Read More
Pat Dorsey: Hi. I’m Pat Dorsey, director of equity research at Morningstar.
Earlier this week, John Rekenthaler, who is joining me today, the vice president of research at Morningstar, e-mailed me an interesting little quote from an interview that Warren Buffett did on CNBC, and that’s sparked kind of fascinating e-mail chain that we had. Why don’t you tell me what the quote was, John?
John Rekenthaler: Well, Warren was speaking at Fortune’s Most Powerful Women group or gathering.
Dorsey: Has Warren had an operation recently that I am not aware of?
Rekenthaler: Apparently, he is not one of the most powerful women, but he is definitely one of the most powerful men. He said that it’s become quite clear to him that stocks are cheaper than bonds, which of course there was then a headline that tied in Warren to pronouncing on the bond bubble. I mean, there has been a lot of talk about a bond bubble.
Now, I didn’t think he went that far when you look through there. He just said, he felt stocks were cheaper than bonds, and he couldn’t see really any reason to add to a bond portfolio at this stage.
Dorsey: Right. That’s the point that I think I’ve been making and you’ve been making as well a lot in communications we’ve had with investors, and certainly in videos I’ve done on the site–that why would you be settling for a 4% coupon that’s fixed, for say, investment-grade debt right now when you could be getting a 7%, 8%, 10% coupon that grows over time on equities. It just seems like, as you put it to me, first grade math.
The rest of the transcript is at the following link-http://www.morningstar.com/cover/videoCenter.aspx?id=354781&SR=EVZ128