Warren Buffett is the most revered and followed investor in the world, which is why his words, not only on particular companies, but also on the overall state of the economy and the stock market, are always scrutinized by the masses. Earlier today, Buffett participated in an interview on CNBC’s “Squawk Alley” (embedded on the following page), where he discussed his position regarding the US economy and provided his outlook. Among other things, Buffett said that he believes the Federal Reserve has done the right thing by keeping interest rates low until now, which continues to be somewhat of an about-face for the investor, who had previously expressed the belief that the end of the Fed’s stimulus measures would go badly. Nonetheless, Buffett did add that there will be unknown consequences down the line brought about by the measures.
“I think the Fed has done the right thing, a hundred percent the right thing, and I think the ECB (European Central Bank) is doing the right thing in terms of their situation, but they still have consequences and it’s hard to envision all the consequences,” Buffett said during the interview. He later added: “Historically, I would have thought the consequences would be significant inflation at some point, and that has not happened.”
The comments echo similar ones Buffett made during his holding company Berkshire Hathaway‘s annual meeting on May 2. Buffett remarked at the time that he had been wrong on interest rates and that he couldn’t have imagined that the extended low-interest rate environment coupled with the Fed’s stimulus measures wouldn’t lead to some serious inflation. “It is so hard for me to believe that you can drop money from a helicopter and not have inflation, but we haven’t,” he said during the meeting. In an interview on CNBC’s Squawk Box two days after Berkshire’s annual meeting, Buffett added that if interest rates normalized, stocks would no longer look cheap, although the major market correction of the past couple weeks has dragged stocks down to a ten-month collective low as it is and somewhat alleviated those concerns.
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In a rare move, Buffett also provided an update on Berkshire’s position in International Business Machines Corp. (NYSE:IBM), one of its longstanding top holdings. “We bought it in the first quarter, and normally I wouldn’t tell you this, but we bought some in the third quarter,” Buffett said during today’s interview. Berkshire’s holding of International Business Machines Corp. (NYSE:IBM) consisted of 79.57 million shares on June 30, ranking it as the firm’s third-largest position. The $12.94 billion holding also lead the stock to being ranked as one of the top mega-caps that the firms we track had amassed substantial positions in, as did Berkshire’s top two holdings, Wells Fargo & Co (NYSE:WFC), and The Coca-Cola Co (NYSE:KO). Buffett did not make changes to any of those top three positions during the second quarter.
Buffett did however make several key moves during the second quarter, including a new position in Axalta Coating Systems Ltd (NYSE:AXTA), and a greatly increased position in Phillips 66 (NYSE:PSX), which was initially reported as a sold-off position, as Buffett was allowed to confidentially report the position to the SEC initially and thus did not publicly disclose any position in the company on his 13F, which made it appear that he had sold out of it. It was revealed at the end of August that Buffett now holds 57.98 million shares of the oil refiner.
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