Steve Forbes Interview: Ron Baron, Billionaire Investor? ~ MAKE MONEY BLOG$

9/17/11

Steve Forbes Interview: Ron Baron, Billionaire Investor?

10:43 PM

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Last week, Steve Forbes sat down with Ron Baron, founder of Baron Capital Group and member of the FORBES 400. They spoke about the economy, small-cap companies in which Baron is investing and Baron’s time-tested investment approach. Video and transcript of their discussion follows.

Steve Forbes: Ron, it’s good to have you back. A year ago you’d said stocks are cheap. Obviously, they’re cheaper now. So you just know at some point it’s going to kick in and you’re not going to sleep over the exact timing?

Ron Baron: Well, I didn’t say I wasn’t going to lose sleep.

Forbes: You look rested.

Baron: I feel fine. Feel healthy. And when do I think it’s going to happen? I don’t know. But I do think, you know – we started off the year, we were up about two months ago. I think we were up about 10%. And then we went to be down 10%. And now we’re probably down about, I don’t know, 3% or 4%.

So it’s been pretty uncomfortable. And all you read about and hear about and watch television about is our market’s in turmoil and how it’s the end of the world and how Europe is going to collapse and the banks don’t have enough equity compared to the investments they have in sovereign debt. I mean, banks in Europe are 2% equity, in America they’re 6%.

And they got 3% invested in sovereign debt. And one of those pieces of sovereign debt they have is Greek debt which is now 50 cents on the dollar. All the other debt they have is fine. And so you’re waiting for the Euro to collapse, which I don’t think is going to happen, or you’re waiting for them to print money, which I do think is the easiest solution.

And Germany is just going to dictate the terms, I presume. Just like they recapitalized and restructured East Germany and brought it in and for ten years struggled. Now Germany has the best technology. And that’s why they’re the strongest country in Europe.

When they took over Eastern Germany, when they had all these people unemployed and low wages, people said, “Well, that’s going to really impact the living standard of people who live in West Germany.” And what they did for years is they merged and restructured and reorganized and cut entitlements.

Franklin Roosevelt, he must have been one of the smartest presidents we’ve ever had – although I’ve read the opposite – in that when he implemented social security, the retirement age was 65. And people’s life expectancy was around 63. So he was giving them a good promise that he didn’t have to fulfill. But now people live much longer. And people, I think one-third of Americans, are going to live to over 100. And you can’t give promises to people that you can’t fulfill.