Billionaire Ron Baron, Baron Capital founder and Baron Funds CEO, speaks to CNBC’s Andrew Ross Sorkin about his market outlook and investment strategy.

Ron Baron: The Stock Market And GDP Is Going To Double In 10 Years

[REITs]

Q3 hedge fund letters, conference, scoops etc

Transcript

Prices of oil were some panel penalising profitability a little bit. Interest rates higher penalizing profitability a little bit. Housing not doing essentially well.

Cars topping so slow growth in the economy. And whenever some companies are missing a little bit you have big declines. But the big picture I think. Should be considered is that we’re long term investors. And before we were discussing about how the stock market reflects the economy. And in 1968. Robert Kennedy was running for president. And the GDP of the country there was 800 billion dollars. It’s now 21 trillion. So it’s gone up 23 and a half times stock market. The GDP and the stock market was in 2000. It’s now twenty six thousand twenty five tons and that’s in 50 years. And that’s it. That’s a compound rate of growth of 6 percent a year 6 percent a year. So if you go six and a half percent a year from now to the next 50 years and I think it’s moving faster that’s nominal than what that means is that the Dow Jones and 50 years will be 500000.

So let’s stipulate that you’re right. But let me ask you for though for those that don’t have a 50 year time horizon I hope we I hope we all have a five year time horizon. But there are people here by the way retirees were thinking about the next 10 or 15 years. And. You know. Getting in at a certain price does matter to some degree. I understand if you take the you know 50 100 year long view but if you’re thinking about where we are now is this an attractive market you do you think that we’re at the end of a cycle the beginning.

I think that the stock market is going to reflect the economy and I think in 10 years of going to bring it tighter I think in ten years the stock market is going to double the GDP is going to double. Stock market bubble you know double in 10 or 12 years. That’s that’s what the stock market’s going to do. So make 70 percent a year at this point which is the best value and real estate to make 3 or 4 percent a year. Gold you make 4 or 5 percent a year.

So basically the stock market is the best vehicle for most people to invest and don’t have to do better than that there is no distinction in terms of of how you think about investing or certain companies that you would invest in based on whether our relationship with China breaks down or not whether interest rates go up in a material way and you predict it. I think it’s very I think it’s very difficult. As a result though there are investors who say actually you know what I’m not because I can’t predict it I’m not going to touch your company you know touch a company that’s manufacturing all the property you know or anyone who has ever predicted those events and got it correct and if they got them correct.

Whether they whether that can translate into knowing where their stock prices were cheaper expensive. Do you know anyone who’s ever been able to do that. One person. Who’s the person. None. You’re asking me there’s none. And so you’re saying you can’t do that. So why bother. And so it’s very interesting to watch. But I think you have to if you take a longer term view and you say OK the value of my money is going to fall continuously. How am I going to protect myself and you protect yourself by investing business and by the way if you’re investing in an index which is going to reflect the economy that’s doubling 10 or 12 years that index has incorporated in it all these companies that will fail. So it has companies that 90 percent of the S&P in 1955 are gone 40 percent of the S&P that exists now in the next 10 years 15 years are going to be gone 40 percent. Of the S&P. So basically when you’re investing in index that’s what you get and you get all these companies are going to fail.