5 Rumors and Myths Warren Buffett Just Put to Bed

In a recent CNBC interview Buffett was asked about several rumors surrounding his investing and his view of the economy. Here are five of the most interesting.

Mar 15, 2014 at 10:00AM

Buffett

Photo:  DonkeyHotey

Chairman of Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), Warren Buffett, recently sat down with CNBC for an amazing three hour interview. The interview discussed everything from politics to basketball. In particular, Buffett was asked to address speculation surrounding investing and the economy.

With his unique brand of "Warren Wisdom" here's how Buffett responded to five of the most interesting questions.

1. Is real estate a better investment than stocks?
In Buffett's annual letter he told an anecdotal story about a farm he'd bought. While many of us saw this for what it was, others believed it was a cryptic message that Buffett is bearish on stocks, and we should all go out and buy a farm. 

To which, Buffett said, "No... they're speculating wrong." He went on to explain that the story was merely an "illustration" that it's possible to be a successful investor even without being an industry expert.

For instance, Buffett acknowledged that he understands the future of Wells Fargo and Coca-Cola much better than IBM. That fact, however, hasn't stopped him from amassing an enormous position in the tech titan.

Nyse Pic From Matt Kopp

2. Is the stock market rigged?
Watch your portfolio get cut and half and you'll start to wonder if you just playing a role in a big Wall Street scam. So I understand this one.

Luckily, though, Buffett calmed my worries when he said, "Well it isn't rigged at all." Moreover, he said that we should, "forget about calling it the stock market... it's American business." And when you think about it that way, it starts to make a lot more sense. Then all you need to ask yourself is, "Do I think American business will do better or worse over the next 10, 20, or 50 years?" 

3. Is Buffett bearish on the future of Berkshire Hathaway?
In Buffett's letter to shareholders he mentioned that the money he plans to leave to his widow will be put into a low-cost S&P 500 index fund. And he believes this fantastically simple approach to investing will work for anyone.

The speculating machine, however, started wondering why Buffett would put his money in the S&P rather than Berkshire Hathaway?

Geico Insurance Motumbo

Source: GEICO Insurance.

Buffett explained that he could have done that, but he's selling all of his shares for philanthropic reasons. Plus, Buffett understands that people will follow the financial decisions he makes and he didn't want to be, "touting Berkshire to people." This isn't a bullet proof answer, but it's good enough for me. 

4. Is the weather really pulling down the economy?
The economy has slowed in the past few months and the consensus view is that the frightful winter weather is the chief culprit. At first hearing this sounded like a pretty lame excuse, but Buffett explained otherwise.

He said, "It's a factor. I mean – our railroad does not work as well when there's a lot of snow and extreme cold. NetJet doesn't work as well... So there's no question it's been [a] factor."

5. Is holding a stock "forever" just a saying?
Buffett's approach to investing has become famous. And one of his go-to lines is that his favorite holding period, for a stock, is forever. Well, as it turns out Buffett uses the term as more of a guideline.

In fact, when asked about his "big four" (Wells Fargo, Coca-Cola, American Express, and IBM) he stated, "So none of the stocks are forever. But they're generally for very long terms." 

The reason for this is because, when given the choice, Buffett favors owning businesses outright, rather than owning just a piece. There are a number of reasons for this, including tax reasons, but Buffett noted that if there's a big opportunity he would lower or eliminate a position in a stock to buy a business.

Warren Buffett's Greatest Wisdom
Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Dave Koppenheffer has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers