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Billionaire investing success Warren Buffett does not like owning bonds at this point, and he thinks the average investor should avoid them as well.

The chairman and CEO of Berkshire Hathaway, major investment conglomerate, believes that individual investors should have plenty of cash on hand so they are comfortable just in case something unexpected happens.

He also believes that they should invest the rest of their money in stocks, even though the price of stocks has risen quite higher than they were years ago when the Great Recession first hit.

On Monday while giving an interview on CNBC, Buffett told the world that bonds are a terrible investment at the current time, and he also mentioned that long-term bond owners may see large losses once interest rates eventually rise again.

The Oracle of Omaha also said that stocks are selling for very reasonable prices generally even though the Dow Jones Industrial average is seeing record high levels, along with the S&P 500 index.

Buffett, 82 years old, also mentioned that he doesn’t have any plans to retire in the near future, and he also believes the efforts of the Federal Reserve, with keeping interest rates low, have helped the stock market. Income improvements continue to play a role for stocks as well.

Buffett is a continued fan of Federal Reserve Chairman Ben Bernanke, and he mentions that he believes bond prices are artificially inflated because of the stimulus that is ongoing from the Federal Reserve. The stimulus is $85 billion worth of bonds being bought every month, which keeps the interest rates at a low level. At this time, bond yields are near historic lows, and they move inversely to prices.

On Monday, Buffett gave interviews to Fox Business News and CNBC after Berkshire Hathaway’s annual shareholders meeting this past weekend. It was a star-studded event.

At the time of this writing, Berkshire Hathaway owns more than 80 companies and has large investments in IBM, Coca-Cola and Wells Fargo, as well as other iconic brands.

Buffett also reiterated his support of Jamie Dimon, J.P. Morgan Chase chairman and CEO. He said that Chase has the right person running the show, and he also owns the stock as part of his personal portfolio.

Buffett also believes that Berkshire Hathaway will own a stake in H.J. Heinz – the ketchup maker – forever, and he said that he didn’t have any problem taking on 3G Capital as a partner. They are the Brazilian investment firm that split the bill for H.J. Heinz. He also hopes that the Berkshire Hathaway stake in Heinz will grow as time goes by.

He was also questioned about the way the Heinz deal was structured. People wonder if the 50% split is a change in the way Berkshire Hathaway will invest and do business from now on. Berkshire Hathaway typically buys a company outright, and they let the company run without any intervention whatsoever.

3G Capital is not your typical private equity firm, said Buffett, since they put a large amount of their own money in deals, and they also run businesses.

Buffett even mentioned that Burlington Northern Santa Fe railroad’s traffic is picking up, but it’s probably going to haul fewer carloads than it did before the recent recession.

Burlington Northern Santa Fe “has been a terrific acquisition for Berkshire,” said Buffett.

BNSF contributed $798 million to Berkshire Hathaway’s $4.9 billion profit for the first quarter, which the company reported on Friday. Berkshire Hathaway’s profits rose by over 51%, beating last year’s net income of $3.3 billion by a wide margin.

It’s always very popular to check in on Warren Buffett during the new year for whatever reason. One of the reasons is that many people potentially want to invest like Warren Buffett, and they make it a New Year’s resolution. That’s at least one potential reason why this happens. So how’s Buffett doing anyway?

Warren Buffett’s big bet on Bank of America, as well as a very generous buyback plan put into place, helps Berkshire Hathaway beat the S&P 500 index during 2012. He didn’t even make a major acquisition during this time.

Berkshire’s class a shares rose by 17% during 2012, and this beat out the 13% gain that the Standard & Poor’s 500 made. As well, an estimate made on December 31, 2012, says that book value rose to $113,579 per share. This estimate comes from Meyer Shields, who is an analyst at Stifel Nicolaus and Co. Based on this estimate, Berkshire Hathaway has earned a seven-point percent annual growth rate over the last five years ending in 2012. This is compared to the 1.7% growth rate of the S&P 500, and this includes dividends.

It’s also worth paying attention to that the Warren Buffett buyback was controversial when it was first announced just three weeks ago. But, the stock rose 6.5% since that time, earning Mister Buffett and company a $80 million profit in just three weeks.

Berkshire Hathaway also made a very large sum of money in their Bank of America investment in preferred shares and warrants during the year 2011. If you take a look at this passage from “Heard on the Street” where they go on about whether or not Bank of America should buyback the preferred stock from Buffett, you might learn some clues. Here’s why:

“Granted, retiring Mr. Buffett’s preferred shares might cause BofA to cut back on plans to ask for capital returns. That could cause unease for common shareholders, especially since Mr. Buffett’s preferred stock is also equity.

Yet the particular structure of the preferred shares means it doesn’t qualify toward the bank’s Tier 1 ratio under the new Basel rules. So it is akin to debt for capital purposes.

On that basis, 6% is expensive. The average yield on BofA’s long-term debt as of the third quarter was 3.07%. And the bank, awash with deposits, has been aggressively reducing long-term debt as it seeks to bolster its net interest margin.

So it wouldn’t be tough for BofA to replace Mr. Buffett’s preferred stock with cheaper, long-term debt. The catch: Any additional debt issuance chips away at the bank’s net interest margin, while the preferred payment doesn’t because it is deducted from net income.”

There is a very funny video on the Internet where Bill Ackman is talking about how he is going to open up a lemonade stand, and he mentions a fun exercise where he will try to explain exactly what it is that Bank of America is thinking about. But you really have to have financial knowledge in order to understand some of the terms that he’s talking about within the video. Some of the things being mentioned are: is Bank of America trying to bolster its net interest margin, or its tier 1 capital, or is it just looking to buy low and sell high?

If you have an a B Warren Buffett, you might wonder something like this: is buying the preferred shares a very good deal economically, when you compare to other things that Bank of America might choose to do with its money instead?

When reading the journal, you can’t get the sense that that isn’t a question they are going to be asking themselves anytime soon. But that doesn’t mean Bank of America is any less smarter than Warren Buffett. They just happen to be in the middle of many different accounting knots and regulatory tangles, and they can only unravel these issues one or two at a time. Mister Buffett on the other hand is a regulatory regime unto himself.

When looking at this from the perspective of Warren Buffett, the motives of Bank of America by trading their preferred shares to him are pleasantly uneconomic for the bank. The initial trade was actually conceived in a bathtub, and looking at it from an economic standpoint, this is a pretty big gift to Buffett. They give off the vibe of they are not going to vanish anytime soon.

So all in all, it looks like Warren Buffett really made out like a bandit on this deal. That doesn’t surprise me at all, since he was able to make hundreds of billions of dollars for himself and his clients over the years. This is nothing new, so why would anybody think otherwise?