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Debt limit threat 'political weapon of mass destruction': Buffett

Berkshire Hathaway chairman Warren Buffett holds his hand over his heart during the singing of the national anthem, at the start of a 5km ra
Berkshire Hathaway chairman Warren Buffett holds his hand over his heart during the singing of the national anthem, at the start of a 5km ra

NEW YORK (Reuters) - Warren Buffett, chairman and chief executive of Berkshire Hathaway, said Wednesday that the threat of not raising the U.S. debt ceiling is a "political weapon of mass destruction".

"It would be a colossal readjustment of the world if people lost faith in the United States government," Buffett said in an interview with cable television network CNBC as negotiations continued in Washington over raising the $16.7 trillion U.S. borrowing limit.

Buffett said a deal between Republican and Democratic lawmakers to raise the debt limit would likely be reached this week. If the debt ceiling is not raised, it could lead to the United States missing debt payments.

Berkshire Hathaway owns short-term Treasury bills but Buffett said he was "not worried" about the bills being paid. U.S. Treasury Secretary Jack Lew has said the United States will exhaust its borrowing authority no later than October 17.

Berkshire owns more than 80 businesses in such areas as insurance, chemicals, railroads and clothing, and has more than $130 billion of equity and fixed income investments.

Buffett said that his firm's spending rate this year, particularly in reference to acquisitions, is as "high as ever," and that it recently missed an "elephant"-sized buying opportunity worth more than $12 billion. He gave no further details.

Berkshire Hathaway currently had about $40 billion in cash on hand, he said.

Overall, stocks were still a better investment than long-term bonds but were not "selling at bubble levels", Buffett said. The Standard & Poor's 500 stock index has risen 19.1 percent this year.

One of the stocks that Berkshire has an interest in is Bank of America Corp, after a $5 billion purchase of preferred shares in 2011. Buffett said Bank of America and JPMorgan Chase & Co were both "in the best shape I can remember."

Berkshire had increased its investment this year in International Business Machines Corp, which has been trimming costs to ensure stable profits amid slowing demand for hardware, and felt "fine" with its current stake, Buffett said. The investment was valued at $13 billion as of June 30.

Berkshire Hathaway is a supplier to struggling retailer J.C. Penney Co Inc, but Buffett told CNBC he was "not worried about them surviving." The department store chain's shares are down more than 63 percent this year.

When asked about activist investor Carl Icahn's push to have Apple Inc do a larger share buyback, Buffett said he supported Apple management and directors.

"I do not think that companies should be run primarily to please Wall Street and largely shareholders who are going to sell," Buffett said. Icahn has been pushing Apple to enact a $150 billion share buyback.

Berkshire has said an investment in Apple would not be in line with its strategy and did not list Apple among its investments in the second quarter.

(Reporting by Sam Forgione; Editing by W Simon and Krista Hughes)

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