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(Reuters) - Warren Buffett said the U.S. economy is gradually improving, but low interest rates have made bonds "terrible investments" while stocks remain "reasonably priced."
Speaking on CNBC television on Monday, the chairman and chief executive of Berkshire Hathaway Inc (BRKa.N) (BRKb.N) said the economy is benefiting from an upturn in areas that had not previously performed well, particularly homebuilding.
He also said the rebound is helping create increased traffic for Berkshire's private plane unit NetJets, and could result in a record profit this year for Berkshire's railroad unit Burlington Northern Santa Fe.
"The economy is moving forward, but at a slow pace," he said. "Demand has come back, but slowly."
Buffett spoke on CNBC after Berkshire's annual shareholders meeting over the weekend in Omaha, Nebraska.
The world's fourth-richest person said low benchmark interest rates, including overnight rates that Federal Reserve Chairman Ben Bernanke has kept at effectively zero since late 2008, can help stimulate demand.
But many investors have also been drawn to bonds because their prices rise as rates fall, and Buffett said they could get their comeuppance when that process reverses.
"Bonds, they're terrible investments now," Buffett said. "That will change at some point, and when it changes, people could lose a lot of money if they're in long-term bonds."
He said stocks, in contrast, are "reasonably priced," though he continues to shy away from sectors such as media, where he cannot reasonably predict who will thrive in the long run.
"It's a lot easier for me to predict that ketchup will be doing well or Coca-Cola will be doing well in 10 years," Buffett said, referring to Berkshire's pending takeover with Brazilian investment firm 3G Capital of H.J. Heinz Co HNZ.N, and Berkshire's large investment in Coca-Cola Co (KO.N) stock.
Berkshire ended March with $95.9 billion of equities and $31.4 billion of fixed-income securities on its balance sheet.
At the annual meeting, Buffett and Berkshire Vice Chairman Charlie Munger agreed that the economic stimulus provided by Washington during the 2008 financial crisis was needed to address what Buffett called "the greatest panic in my lifetime."
Speaking on Monday, Buffett called Bernanke "a gutsy guy" who has "done very, very well in terms of what he has done for the United States."
Last week, the Fed said it would continue to buy $85 billion of bonds per month to spur growth, and it will step up purchases if needed. The economy grew at a 2.5 percent annualized rate in the first quarter.
Buffett also said Jamie Dimon should remain chairman and chief executive of JPMorgan Chase & Co (JPM.N), after ISS Proxy Advisory Services urged that the roles be split and that three directors not be re-elected because of poor oversight.
Dimon and the bank have been faulted for a lack of oversight that last year led to more than $6 billion of trading losses. Buffett personally invests in JPMorgan but Berkshire does not.
"I think it's fine if he does" retain both roles, Buffett said, referring to Dimon. "If you're the director of a company like JPMorgan, you cannot know the details of what's going on with trading ... They've got the right CEO."
Berkshire does plan after Buffett leaves to split the roles, with his son Howard becoming non-executive chairman. Buffett said splitting or not splitting the roles are both acceptable.
Many investors believe three top Berkshire managers - insurance chief Ajit Jain, Burlington Northern's Matthew Rose and MidAmerican Energy's Greg Abel - are the men to whom Buffett has alluded as being candidates to become Berkshire's CEO.
Asked if it was a coincidence that they sat near the stage on Saturday, Buffett said: "Certainly could be," before adding that he asked them to sit there in case there were questions for them to answer.
Buffett also said it will be "very tough" for J.C. Penney & Co (JCP.N) to lure back many of the customers it lost in 2012 and early 2013 as the now-ousted Chief Executive Ron Johnson overhauled the retailer's stores and sales strategies.
"They obviously alienated a significant part of their customer base," Buffett said. While Berkshire does not invest in J.C. Penney, Buffett said he had a "rooting interest for them."
Reporting by Jonathan Stempel in New York; Editing by Jeffrey Benkoe and Maureen Bavdek