On Wednesday, Warren Buffett said the threat involved with not raising the nation’s debt limit “after you’ve already spent the money” is a “political weapon of mass destruction” that can be compared to a poison gas. It should never be used by either political party.
“I know it’s been used in the past, but we used the atomic bomb back in 1945 but we decided we weren’t going to do something like that again,” said Buffett mere hours prior to the midnight deadline of possibly defaulting or raising the nation’s debt limit.
Buffett called upon both political parties to make a pledge not to use the nation’s debt limit as a weapon. “There are plenty of weapons that can be used,” he said, and filibusters are an example.
During a live interview on Squawk Box on CNBC, the chairman of Berkshire Hathaway mentions that he does not believe the United States will do anything that will damage its 237 year reputation of paying its bills in a timely manner, and if it does it would be completely “asinine” and a “pure act of idiocy.”
“Credit worthiness is like virginity, it can be preserved but not restored very easily, so it is crazy to play around with it,” said Buffett.
Buffett also mentions that Berkshire Hathaway owns short-term treasury securities, but he is not at all worried about getting paid.
He also mentions that Washington’s ongoing crisis in regards to the debt limit and spending is no reason to stop buying securities. He points out that Marmon Group, a Berkshire Hathaway subsidiary, just recently paid $1.1 billion for a British drinks dispensing business. “We did not buy it with a condition that we could call off the deal” if there wasn’t a vote in place to raise the debt limit, said Buffett.
He also mentions that throughout his entire career, Buffett never put off a deal by even a few weeks in order to find out what would happen in Washington.
It was then pointed out to him that he may be “unique” because he invests for the long-term, Buffett replied that “most people are.”
“If you take the people I meet in Omaha, you take the people who own farms, you take the people who own apartment houses, most people are long-term investors, thank heavens,” said Buffett.
Buffett specifically rejects the idea that investors should start to worry about a bull market stock “bubble.” He said, “We could at some point, but no, stocks are not selling at bubble levels. What do we diversify in? You want to diversify into cash? I think it’s a terrible investment compared to equities. You want to diversify into long-term bonds? I think it’s a terrible investment compared to equities.”
Buffett also brought up the fact that Berkshire Hathaway’s acquisition spending rate during 2013 is as “high as ever.”
He also mentioned to Becky Quick that he was in the process of working on a big acquisition, a $12 billion “elephant,” but the deal never came to fruition.
Just moments prior to Bank of America announcing their better-than-expected earnings, Warren Buffett said that “the banks are in the best shape I can remember.”
He also chose to defend Jamie Dimon, J.P. Morgan Chase CEO, and many of the legal problems facing the bank directly resulting from the acquisition of Washington Mutual during the highest point in the 2008 financial crisis. “If a cop follows you for 500 miles, you’re going to get a ticket. And believe me, you had a lot of cops” following J.P. Morgan Chase, Buffett said.
In response to Carl Icahn’s public calls for a large Apple stock buyback, he said, “I think Apple’s management has done a pretty good job of running the company… And my vote would be with them.” He then joked, “I just wish I’d bought the stock many years ago.”
“I do not think companies should be run primarily to please Wall Street and largely shareholders who are going to sell. I believe in running Berkshire for the shareholders who are going to stay and not for the ones who are going to leave,” added Buffett.
Buffett also mentioned that he had a “rooting interest” for troubled retailer JCPenney because of the fact that he worked in one of their stores when he was much younger, but he also acknowledged that it’s “very, very tough” to compete against competition that is always on the move. “Coming from behind in retailing is just plain tough,” he said.
He also mentioned that Berkshire Hathaway is still selling a “significant” amount of goods to JCPenney under “normal terms,” and that he isn’t worried about the survival of the retailer.
As a response to the Obamacare health exchange rollout, Buffett mentions with a chuckle that he is glad that he wasn’t in charge, but he also argued that something needs to be done in order to control the medical costs. He mentions that they are the “tapeworm” of the American economy.
Moving on to the economy, Warren Buffett tells us that he continues seeing slow improvement, and he also pointed out that “2% a year growth with less than 1% population gains means 1% real growth per capita. In 20 years that’s 20%. If every generation lives 20% better than the generation before them, that’s not terrible.”
Buffett refused to comment on the reports that the Benjamin Moore CEO was fired due to sexual harassment. “Recently we had to make a change for reasons I can’t get into,” said Buffett, but he also pointed out that the paint company still makes plenty of money.
The Buffett interview was in Washington where he is currently attending the Fortune’s Most Powerful Women Summit.