Warren Buffett on the Fed: Bernanke Was a Hero

Warren Buffett and Charlie Munger candidly weigh in on monetary policy and the Federal Reserve.

May 10, 2014 at 4:00PM


Photo: Matt Koppenhoffer, The Motley Fool.

Every year, thousands of investors flock to Omaha to hear the wisdom of Warren Buffett and Charlie Munger. For as long as six hours, with only one break for lunch, the two business legends take questions from investors, the press, and analysts. Appropriately for a shareholders meeting, the focus is the business of Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), but it's not the only topic they discuss. This year, Buffett and Munger discussed Federal Reserve policy in response to a shareholder question.

Following are my notes on the shareholder's question, along with responses from Buffett and Munger.

Shareholder: In recent times, prolonged periods of low rates have caused problems. If you were running the Fed, what would be your policy on rates?

Buffett: Who would have guessed five years ago you'd have rates this low, this long? I am surprised how well it's going, I wouldn't do much differently, and I would like to say I'd have done the same since it's going so well. This is an interesting movie; we haven't seen it before, and don't know how it ends. I think [Ben] Bernanke was a hero at the time of the crash and panic, and subsequently. A very smart man, and handles things very well. When the Fed minutes came out then, it was interesting to me how the members of the Fed weren't getting it; some didn't understand just how serious things were. So I give particular credit to Bernanke, since he wasn't getting a unanimous view and went ahead with necessary moves. I feel the same about [Janet] Yellen, but do not know the answers to what happens if you keep rates close to zero for so long. I'll be interested to hear Charlie's thoughts.

Munger: Well, nobody, for instance in Japan, would ever have anticipated interest rates would go way down, and stay low for 20 years. And no one would have anticipated that stocks can go way down, and stay low for 20 years. And if you think you understand, you're not paying attention.

Buffett: In 2008, I wrote an article saying cash is king if you use it, but dumb if you weren't. People cling to cash at the wrong time. Zero rates have had a huge effect on rejuvenating the economy and asset prices. We are not in a bubble situation at all right now, but it is an unusual situation.

I really liked this comment from Munger: "If you think you understand, you're not paying attention." It's a succinct critique of the macroeconomic forecasters and Wall Street strategists that claim to know the future of interest rates.

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour. (That's almost as much as the average American makes in a year!) And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click here to discover more about this industry-leading stock, and join Buffett in his quest for a veritable landslide of profits!

Brendan Mathews owns shares of Berkshire Hathaway. The Motley Fool recommends and owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information