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Warren Buffett: Stocks Will Go 'Far Higher' Over Time

Even as U.S. stock indexes hit all-time highs, Warren Buffett predicts they'll go "far higher" in the long run.

Right now, he very much favors equities over bonds, warning some investors could lose a lot of money in long-term fixed-income assets when interest rates eventually start to rise.

In a live appearance on CNBC's Squawk Box Monday morning, Buffett told Becky Quick, "You'll see (stock) numbers a lot higher than this in your lifetime."

(Read More: CNBC Transcript: Buffett and Gates on 'Squawk Box')

Acknowledging that milestones like Dow 15,000 can draw Main Street's attention to stocks, Buffett said people should pay more attention when indexes cross those milestones on the way down because that's when stocks are "cheaper" and more attractive to buy.

While not as "cheap" as they were a few years ago, Buffett thinks stocks are now "reasonably priced" and not "ridiculously" high.

There could be a pullback for stocks at any time, Buffett said, but warned against attempts to time the market. "People pay way too much attention to the short term."

(Read more: Buffett: 'Shot Heard Around the World' Coming)

Buffett said that bonds are a "terrible" investment right now because they are "priced artificially" high due to the Federal Reserve's massive asset buying program and could lose people a lot of money when inevitably interest rates start to rise. He doesn't know when that will happen and he doesn't know how much rates will rise, but he's certain they will be going up eventually.

While he has bought bonds in the past under different circumstances, he generally prefers "productive" assets to fixed-income investments.

Buffett also warned that it's "crazy" to get enticed into a risky investment because someone promises you a higher yield. "I can take you to the waterfront and they'll promise you 15 percent," he joked.

(Read more: Wealth Effect Is Fueling Surge in Private Jet Travel)

Buffett said he sees no major changes for the U.S. economy over the past four years. It continues to show "gradual improvement ... moving forward, but at a slow pace." From his viewpoint, "Demand has come back, but slowly." He does see some "fairly strong" improvement in housing.

He called Fed Chairman Ben Bernanke a "gutsy guy" who has done "very, very well" keeping the economy on the right track. Buffett did concede he might have lifted his foot off the "accelerator pedal" earlier, but he's not sure how to do that.

Warren Buffett
Lacy O'Toole | CNBC
Warren Buffett

Buffett also endorsed JP Morgan Jamie Dimon as the bank's CEO. Asked about efforts by some shareholders to split the chairman and CEO roles, Buffett said Dimon should keep both jobs.

(Read more: Buffett & Gates: All Online Retailers Should Collect State Sales Taxes)

He also said, however, there are times when it makes sense to separate the roles. "Either system is OK." He also thinks directors should spend some time talking without the CEO present, recalling that he's been on one board where "a lot of change happened" after the CEO left the room.

Buffett said each year when the Berkshire board meets, he gives them a chance to talk without him there.

Warren Buffett speaks with Squawk Box's Becky Quick in Omaha, Nebraska.
Lacy O'Toole | CNBC
Warren Buffett speaks with Squawk Box's Becky Quick in Omaha, Nebraska.

Among other topics covered by Buffett during the interview:

  • Buffett revealed that Berkshire has been buying some stocks and companies in the past year. He said Europe "is going to be around" and its economic problems present a buying opportunity.
  • Buffett said he's still bullish on Wells Fargo. Berkshire has bought some additional shares almost every month this year.
  • He wouldn't say why Berkshire recently sold a small chunk of its Moody's stake, but noted the sale price was six times what it had paid.
  • Even though it's been buying newspapers in small and medium-sized cities, Berkshire probably won't be investing in media companies because it is hard to know which ones will be successful in 10 years.
  • He thinks JC Penney has a "very tough" road to recovery after it "alienated a significant portion" of its customers, but has "good management." While he doesn't have an investment in the retailer, he is rooting for it to recover.
  • Buffett said government isn't solely responsible for rising health care costs, "it's the whole system."
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