Buffett Talks Wall Street Record Highs & Future Stock Prices

Warren Buffett, billionaire investor and Chief Executive Officer and chairman of Berkshire Hathaway Inc., mentions on the fifth anniversary of the Dow Jones industrial average dropping below 8000 that the country has come back quite a long way to record highs, and then made a prediction that stocks will be “a lot higher” from where they are currently “if you live long enough.”

Appearing at his former grade school in Omaha, Nebraska, the 83-year-old mentioned on “CBS This Morning” in honor of American Education Week, “I don’t know what stocks will do next week or next month or next year. Or five or 10 years from now, I would say that they’re very likely to be higher.”

This past Monday, the Dow Jones industrial average hit 16,000 for the very first time. In the last year alone, the index has actually gained more than 3000 points. There are some analysts that currently believe investors might be riding the bull market into the next bubble.

When asked if Buffett believed stocks are overpriced (Carl Icahn, another billionaire investor, says that they are a “mirage”), Buffett mentions, “I would say that they’re in a zone of reasonableness. Five years ago, I wrote an article for The New York Times that said they were very cheap. And every now and then, you can see that they’re very overpriced or very underpriced. Most of the time, they’re in an area where maybe they’re a little high, a little low, and nobody really knows exactly. They’re definitely not way overpriced. They’re definitely not underpriced.”

Buffett also mentions that he is not concerned about the market, because he takes the long view.

“We look at owning stocks as owning parts of business, just like owning a farm or an apartment house,” Buffett clearly states. “And if you buy the right farm or apartment house or the right business through a stock, and you don’t try and guess whether it’s going to go up next week or next month, but you hold it for five or 10 or 20 years, you’re going to do very well.”

Turning the conversation toward Mr. Buffett’s most recent investment in Exxon Mobil, plus the news that the United States is in the process of becoming an oil production world leader, Buffett also says this is very important for America “because we’ve had a huge deficit in our balance of payments.”

He then added, “a good bit of that is because of oil and now, we’re reducing our dependence dramatically on foreign oil. And that means we’ve reduced the number of dollars that flow out of this country to buy oil from the rest of the world. So it’s a very important event.”

In addition to Buffett being a businessman, he is also a strong proponent of financial education. He’s taken the lead on the initiative, Grow Your Own Business Challenge, for children in the age range of 7 to 14 years old. The kids have a chance to meet with Warren Buffett and pitch ideas to him in an effort to win a monetary prize. He mentions that children need to learn about working habits, money and saving “very, very early on.”

“It is the habits that you develop when you’re young, you live with when you’re older,” said Buffett. “Someone once said that chains of habits are too light to be felt until they’re too heavy to be broken. And you want to have the right habits. And the time to get them is very young.”