Buffett says economy on mend, bonds 'terrible' investment

Mon May 6, 2013 11:00am EDT
 
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By Jonathan Stempel

(Reuters) - Warren Buffett said the U.S. economy is gradually improving, but low interest rates have made bonds "terrible investments" while stocks remain "reasonably priced."

Speaking on CNBC television on Monday, the chairman and chief executive of Berkshire Hathaway Inc (BRKa.N: Quote) BRKb.N said the economy is benefiting from an upturn in areas that had not previously performed well, particularly homebuilding.

He also said the rebound is helping create increased traffic for Berkshire's private plane unit NetJets, and could result in a record profit this year for Berkshire's railroad unit Burlington Northern Santa Fe.

"The economy is moving forward, but at a slow pace," he said. "Demand has come back, but slowly."

Buffett spoke on CNBC after Berkshire's annual shareholders meeting over the weekend in Omaha, Nebraska.

BONDS AND BERNANKE

The world's fourth-richest person said low benchmark interest rates, including overnight rates that Federal Reserve Chairman Ben Bernanke has kept at effectively zero since late 2008, can help stimulate demand.

But many investors have also been drawn to bonds because their prices rise as rates fall, and Buffett said they could get their comeuppance when that process reverses.   Continued...

 
Investor Warren Buffet arrives for the premiere of the film "Wall Street: Money Never Sleeps" in New York September 20, 2010. REUTERS/Lucas Jackson