×

Buffett on Fed rates, IBM stock, Mondelez & Trump

The Federal Reserve seems ready to increase interest rates for the first time in nine years, billionaire Warren Buffett said Monday. But he added it's "not an easy decision."

"It's very tough to push rates higher in the United States, when Europe needs to keep them low. And you got this situation existing around the world," he said in a wide-ranging interview on CNBC. "But I keep hearing the [Fed] governors saying it's going to happen soon."

"It may very well happen. But I don't think it's an easy decision when … you may be affecting exports and imports very significantly, if you push rates here to be considerably higher than in Europe," Buffett said in the "Squawk Box" interview.

As for the U.S. economy, the Berkshire Hathaway chairman and CEO said he expects more of the same that's been seen in the past five years, about 2 percent growth.

Talk of a double-dip recession or a rapid acceleration appear equally unlikely, he said: "I don't see [the economy] accelerating or decelerating."

Buffett, who looks to buy stocks or business for their long-term prospects, said recent weakness in the market does not concern him.

"Stocks are going to be higher, and perhaps a lot higher 10 years from now, 20 years from now," he said, adding that's why he does not try to time the market.

Using housing as an analogy, he said people won't sell their homes if property values dipped 5 percent in the hopes of buying their homes back cheaper.

Buffett also touched on a number of other issues, from his possible intentions concerning IBM stock and Mondelez as an acquisition prospect, to the 2016 presidential race, to Berkshire's big acquisition of an aircraft parts maker.

Read more from Buffett's interview
Did Warren Buffett signal new IBM stock buy?
Warren Buffett: Precision deal 'very high multiple'
Warren Buffett: Trump won't be a flash in the pan

In perhaps a signal on IBM, he said the recent drop in the stock would allow Berkshire to buy cheaper. "You can look at our 13F in a few days." But he did not say either way if he's purchased additional IBM shares—something he did in the first quarter.

On Mondelez, Buffett said it's unlikely that Kraft Heinz, backed by Berkshire and private equity firm 3G Capital, would be interested in buying Mondelez International.

"At Kraft Heinz, we have our work cut out for us for a couple of years," he said.

Last week's disclosure from Bill Ackman's Pershing Square Capital about a $5.5 billion stake in Mondelez raised speculation that the global food giant behind such brands as Ritz and Cadbury could be put in play.

Berkshire's $37.2 billion offer to buy aircraft equipment maker Precision Castparts, announced Monday, is "a very high multiple for us to pay," Buffett said.

"We'll be left with over $40 billion probably of cash" after this deal, he said

As for as Berkshire going forward, Buffett said, "This takes us out of the market for an elephant," referring to a big deal of this size, as the company reloads.

Berkshire is paying $235 per share for Precision, which represents a 21.2 percent premium over Friday's closing price, and 18 times projected profit over a 12-month period.

The purchase eclipses Berkshire's $26.5 billion takeover in 2010 of the 77.4 percent of the Burlington Northern Santa Fe railroad that it did not already own. Including assumed debt, Precision Castparts is valued at $37.2 billion.

Adding Precision would boost Berkshire's overall profit by only about 8 percent.

The company generates 70 percent of sales by making nuts, bolts and other fittings for the aerospace industry, where booming commercial aircraft demand has led Airbus Group SE and Boeing to boost production.

The merger is expected to close in the first quarter of 2016.

Looking at the presidential race, Buffett, a Democratic supporter of Hillary Clinton, said fellow billionaire Donald Trump seems to have a base that's going to last.

Buffett also said there was a small chance that any one Republican in the crowded field might not have a majority heading into the party's convention next year.

—Reuters contributed to this report.

Morning Squawk: CNBC's before the bell news roundup

Sign up to get Morning Squawk each weekday

Get this delivered to your inbox, and more info about about our products and service. Privacy Policy.
Please enter a valid email address