BUFFETT: Stocks won't look cheap if interest rates go up

Stocks are definitely on the “high side of valuation,” according to Berkshire Hathaway CEO Warren Buffett.

Buffett is on CNBC’s Squawk Box Monday morning with Becky Quick in Omaha. Berkshire Hathaway held its annual investors conference this past weekend.

Quick asked him what he thinks of stocks and whether they are overvalued, something many investors like to hear about from Buffett specifically.

If low rates persist, Buffett says stocks will look cheap.

If interest rates normalize, we’ll look back and say stocks weren’t so cheap.

The Federal Reserve has kept short-term interest rates near zero for about seven years, and investors have pointed to this low rate environment as being responsible for pushing stocks to record highs, and to lofty valuations.

Buffett said the Fed and the European Central Bank have done the “right thing” with how they have handled monetary policy.

And he added that even though rates may rise soon, they will not rise significantly; definitely not near 4%, like it was before the Fed started slashing rates in 2007.

That’s because with negative rates in Europe, “this is a very unusual situation and I don’t know how it plays out.”

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