Buffett Watch

Buffett says don't put too much stock in Icahn's market 'reckoning' warning

Buffett: Don't put too much stock in Icahn's market warning
Buffett on the economy
Buffett on rates

The dire prognostication from Carl Icahn about a "day of reckoning" in the markets should not be taken as gospel, fellow billionaire investor Warren Buffett said from Omaha, Nebraska, site of Saturday's annual meeting of Berkshire Hathaway shareholders.

"There are probably, this is the most wildest of guesses, there were probably 50,000 people or more today that bought stocks … and 50,000 people who sold," Buffett told CNBC in an interview that first aired on "Squawk Box" on Friday. "So I don't know that I would pick out any one of them and put too much weight in what they did."

Carl Icahn
Icahn: Markets will have 'a day of reckoning'
Carl Icahn
Icahn: Republicans don’t understand economics and it’s killing the country
Carl Icahn
Icahn: We're out of Apple, and it's China's fault

Icahn also said Thursday on CNBC the Federal Reserve's prolonged low interest rates could create "tremendous bubbles."

Responding to Icahn, Buffett. the chairman and CEO of Berkshire Hathaway, took a more philosophical approach.

"Interest rates act on asset values like gravity works on physical matter," he said. "If you had zero interest rates and you knew you were going to have them forever, stocks should sell at, you know, 100 times earnings or 200 times earnings."

Buffett acknowledged rates have been lower for longer than most people had expected and that's pushed investors into the stock market because of the lack of yield elsewhere.

"When interest rates were 15 percent with [Paul] Volcker, you know, it was an enormous gravitational pull on all assets, not just stocks," Buffett said — referring to a period of time during Volcker's time as Fed chairman, a post he held from 1979 to 1987. "If you can get 15 percent, it makes the choices way different than if you get zero."

As far as negative rates, seen in Europe and Japan, Buffett does not believe they signal the end of the world. But he readily admits the idea is "uncharted territory," saying he hopes to "live to find out" how the story ends.

Warren Buffett one-on-one

Sharing a view with Icahn, Buffett believes the obsession among Republicans on Capitol Hill about the national debt is misplaced. "The national debt as a percentage of GDP is a little higher than I would like it, but the main thing is not to have it galloping upward."

"There are countries around with much greater debt-to-GDP ratio than what we have. What we have is not dangerous," he continued. "Debt can only be evaluated in relation to future income-producing capabilities, and the countries with income-producing capabilities have never been larger and they keep growing."

On the economy, Buffett said growth "is not booming; on the other hand it's not falling apart in any way shape or form either."

He believes the consumer is doing pretty well and expects that to continue, even with depressed oil prices on a somewhat of a recent upswing.

"If [crude] goes back to $100 a barrel that's a difference. But not only are gas prices low but interest rates are low, so people borrowing money on cars have a lower payment," he said. "Mortgage payments have [also] dropped dramatically, so people have money to spend on other things."

Against that backdrop, he added the labor market is "not bad."

Ever the cup-is-half-full type of investor, Buffett feels like a "10 on long-term optimism," and that's why he said he does not worry in the short run.

— Programming note: Warren Buffett appears on CNBC's "Squawk Box" for three hours on Monday, starting at 6 a.m. ET. From 8 a.m. ET to 9 a.m. ET, Microsoft co-founder Bill Gates, a Berkshire Hathaway director, and Charlie Munger, vice chairman of Berkshire, join the conversation.