CNBC had Warren Buffett on for a long stretch today, answering questions from the anchors and questions that viewers submitted. It was a relatively free-flowing discussion, but when I read the transcript, I was especially struck by his comments on bonds:
BUFFETT: Well, I do not like—I do not like short-term bonds, and I do not like long-term bonds. And if you push me, I’m sure that I don’t like intermediate-term bonds either. I just think it’s a terrible mistake to buy into fixed dollar investments at these kind of rates, and I’ve thought so, you know, for several years now. When people ran to cash because they were afraid of everything, they were really going to the worst investment, you know, that’s possible. I don’t know what’ll happen with Treasury markets, but we have had—I don’t think people necessarily realize we’ve had monetary policy with its foot to the floor for a couple of years.
I put the good parts in bold. What I like about Warren is that he doesn’t beat around the bush. He’s made his fortune over the years investing in all kinds of assets, so he’s not picky. He just thinks bonds are crazy at low rates. Contrast that with the retail investor—who bought bonds last year at a record pace.
Maybe he will be right; maybe he will be wrong. (On the other hand, his $47 billion suggest that he has been right more often than he has been wrong.) His opinion at least is interesting. For what it’s worth, our relative-strength based Global Macro strategy doesn’t like fixed income right now either. Bonds may be useful in a portfolio to dampen volatility or provide income, but it might be asking too much to expect capital preservation at current interest rates.
Posted by Andy Hyer 
