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Ketchup is forever, Buffett says, but beware of US long bonds

Warren Buffett says that in 50 years of investing, he has never taken long-term economic worries into account.

Nati Harnik/Associated Press/File 2012

Warren Buffett says that in 50 years of investing, he has never taken long-term economic worries into account.

Warren Buffet says stocks are a good investment, long-term government bonds are a dumb one, and ketchup is forever. The billionaire investor covered a range of topics in a CNBC interview on Monday, including his purchase of Heinz, the ‘‘meat ax’’ of automatic US budget cuts, and what’s going to happen when the Federal Reserve stops pumping money into the economy.

Cheap money boosts stocks

Buffett has long been bullish on stocks, and still is. But they’re likely to be hurt when interest rates rise, he said. Cheap loans make it easy to get money to invest. And low returns on bank savings make stocks more attractive. Buffett predicted that those low interest rates won’t go on forever.

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‘‘If interest rates go up dramatically, all assets will go down in value,’’ he said.

The dumbest investment

Buffet says he’d still rather own stocks than farmland, junk bonds, real estate trusts, or long-term government bonds.

‘‘They’re not as cheap as they were four years ago’’ during the financial crisis and stock market sell-off, he said. ‘‘But you get more for your money,’’ compared to other investments.

He called long-term government bonds ‘‘the dumbest investment.’’ Interest rates are much lower than usual. If they rise, bond investors could see the price of their bonds drop. That’s because bond prices fall when interest rates rise.

Big shift ahead

Buffett said money managers will be selling some investments when the Fed stops pumping extra money into the economy. He said it will be a ‘‘very interesting day’’ when it becomes clear the Fed has reversed direction.

Buffett said that in 50 years of deciding whether to buy companies, he has never taken long-term economic worries into account. That includes his recent deal to buy H.J. Heinz Co. Last month, he agreed to work with 3G Capital to buy Heinz for $23.3 billion.

‘‘Charlie and I will talk about the business, we will not get into discussions about the Fed or whatever,’’ he said, referring to Charles Munger, Berkshire’s vice chairman. Buffett noted that he bought his first stock in 1942 during World War II, when the United States was losing the war in the Pacific.

Buying a company cheaply enough means that future economic shocks won’t wreck a deal. He predicted that Berkshire Hathaway will own Heinz 100 years from now. ‘‘Heinz is forever, as far as we’re concerned,’’ he said.

Automatic spending cuts

Buffett said cuts that went into effect over the weekend are a ‘‘meat-ax way’’ to cut spending. But considering all the government spending and Federal Reserve cash infusions, spending probably has to be cut one way or another. ‘‘You may have to use the meat ax first,’’ he said, ‘‘and then people kind of look at their handiwork and say, ‘We have to do better than this.’ ’’

Newspapers

Buffett’s company has been buying papers. Berkshire Hathaway will own 28 daily newspapers in small and mid-size cities once its acquisition of the Tulsa World is complete.

Last month, Tribune Co. said it had hired investment bankers to help it sell its newspapers, which include the Chicago Tribune and the Los Angeles Times.

‘‘No thanks,’’ Buffett said when asked about buying those two papers.

He said papers that are going to make money will be those doing business in tight-knit communities that want local news.

He said the newspapers have smaller profit margins than most other companies that Berkshire Hathaway invests in.

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