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Billionaire Baron: Geithner Sees Five-Year Fed Exit

Buy-and-hold billionaire Ron Baron told CNBC on Friday that former Treasury Secretary Tim Geithner said at a dinner he attended that the Federal Reserve's exit strategy would take about five years.

In a "Squawk Box" interview, the chairman and CEO of Baron Capital said that he interpreted Geithner's comments to mean the tapering of the Fed's $85 billion-a-month bond-buying program would last that long.

Baron told CNBC that a friend this past week held the dinner where Geithner was speaking and made those comments. A dozen or so other investment managers were there too, Baron reported.

Baron explained that the former Treasury secretary said "as far as the ending of quantitative easing [Geithner] thought that was going to, when it ultimately began, would take five years—a five-year process to wind down these bond purchases."

Geithner has been mentioned, among others, as a possible candidate to become the next Fed chairman should Ben Bernanke leave the post as expected at the end of his second term in January.

Baron reported that Geithner also said he thought that it "wasn't likely that the [short-term] interest rates would rise anytime soon. [Geithner] meant for years and years."

A week ago, when stocks were under serious pressure, Baron emailed CNBC that he was confident that the market turbulence would not last. The Dow Jones industrial average had just dropped 3.66 percent on the day and the day after Bernanke said policymakers could scale back the central bank's stimulus later this year if the economy continues to improve.

Baron said Friday—after the Dow's best three-day winning streak in nearly a year—that he was confident then because people were trying to time the market and trade the news when "they should be staying the course, investing for the long term."

"We see these tremendous disruptions in the market over the short term for events that don't really mean too much," he continued. People "think they're George Soros" and can time the market. "It's gives you the opportunity to buy," he added.

Baron said his buy-and-hold investment philosophy is based on the assumption that the stock market will return an average of 7 percent a year for the next decade, which he contended is a conservative estimate based on historical performance.

"If you just invest in the stock market, we think you're going to double your money in 10 years and double it again in 10 years after that," he continued. "So we're thinking about the Dow being 30,000 in 10 years and 60,000 in 20 years."

"You can do that for a 12 basis points cost with ETFs or index funds," Baron said. "And if you want to invest with an active manager, you better do better than that, because those guys, including us, are charging you 1 percent."

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

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