While that may be great news for the mortgage belt, for savers like you and I, it's yet another kick in the teeth.

And the worst part about it? Those leading brokers who reckon interest rates could be headed as low as 2% could be right…and perhaps sooner than we all might think.

The "great rotation" just became a freight train

In the minutes after the announcement, the ASX surged… capping the bullish trend that's seen the S&P/ASX 200 (Index: AXJO) (ASX: XJO) rise some 11% so far this year.

Overnight the Dow closed above 15,000 for the first ever time.

Here in Australia, our market has again taken flight, jumping higher in early trade. Not surprising really, especially when respected commentator Michael Pascoe said today in The Age…

"And right now, even after the market has rallied to start the year, equity yields slaughter the best term deposit rates you could have grabbed last year."

The "great rotation" and "flight to equities" we've been hearing about for the last several months just became a freight train.

Which brings me to some key advice dispensed by Warren Buffett as he addressed shareholders at the Berkshire Hathaway (NYSE: BRK-A, BRK-B) annual general meeting this past weekend.

Simply read on for two important ideas from the 'Oracle' himself.

Of course Buffett, in addition to being a billionaire and one of the world's richest men, is probably the greatest living investor. So ignore this advice at your own peril…

Woolies $40? Telstra $6?

As you may have noticed, Woolworths (ASX: WOW) dropped nearly 2% yesterday — on no news at all!

Telstra (ASX: TLS) shares also dropped, though more modestly.

Still, with the freight train roaring into gear, it may be full speed ahead for the share price of these giants. At least in the near term.

Two pieces of advice from Warren Buffett to YOU

Of course, even Warren Buffett has made a few missteps over the years.

For one, he's famously admitted to being an "air-oholic", with an investment in US Air figuring as one of his less successful – though still profitable — ideas.

(It's a lesson many of Australia's most powerful have taken to heart, clearly. Wesfarmers (ASX: WES) CFO Terry Bowen has said that an airline is most definitely "off the table" in terms of that conglomerate's acquisitions!)

For those of you who followed The Motley Fool's live blog of Buffett's Berkshire Hathaway AGM, our own Joe Magyer posted this concise summary of Buffett's (admitted!) mistakes:

Joe Magyer:  Buffett is fond of pointing out four big mistakes. The first is not getting religion on the value of buying great businesses at good prices sooner. Prior to that, he was still anchoring on buying more Benjamin Graham-type holdings.

Second was that Berkshire Hathaway itself, a mediocre textile company when Buffett commandeered it, was a capital drain.

Then there are mistakes of omission, the ones that Buffett knows he didn't make but that others didn't see. He refers to those as having been sucking on this thumb.

The last biggie has been using Berkshire shares as a currency for acquisitions. It has cost Berkshire dearly over the years. To his credit, he's very up front about these mistakes. Just one of the reasons we love Uncle Warren.

That Warren Buffett has been right more often than he's been wrong is indisputable. And successful investing isn't about being infallible, but about being right more often than you're wrong. Buffett's $50b plus fortune is testament to that.

So it's only natural to want to know what Buffett seems to be advising you do with your cash now.

Let's see what Buffett has to say about the mistakes we mere mortals have been making…

The problem of cash… and selling too soon

To decipher this, consider two quotes from this year's annual meeting. The first, I mentioned in yesterday's Take Stock (our free investing email newsletter) and I believe it's so important it bears repeating…

Buffett said, "The problem faced by people who have stayed in cash or cash equivalents… it is brutal. I don't know what I would do if I were in that position."

As I pointed out yesterday, investors who've opted for "safe" cash and term deposits have also sat out the incredible bull market on both sides of the Pacific (which looks to have some steam left in it!).

Looking out to the years and months ahead — and making no attempt to time the market, but instead thinking of 'time in the market', the takeaway is clear:

Sitting in cash can be dangerous. Investing for the long term in shares of the best companies can help you to preserve your purchasing power and build your wealth over the long term.

Even Warren Buffett wishes he'd got at 'great businesses for good prices' sooner!

The second piece of advice I gleaned from the Berkshire Hathaway annual meeting is  similar.

"Don't be so stupid as to sell these shares"

It comes from Buffett's righthand man, Charlie Munger, who had this to say about Berkshire once he and Warren were no longer around: "My thoughts are simple. To the many Mungers in the audience — don't be so stupid as to sell these shares."

Munger was speaking of Berkshire Hathaway shares, of course!

With its legendary, fully franked 28 cent dividend, Telstra is the darling of Aussie investors. But with its share price skyrocketing over the past year, is Telstra past its prime? Click here for our brand-new report: "Is It Time to Sell Telstra?"

The post The interest rate cut and Warren Buffett's advice for your cash appeared first on The Motley Fool Australia.

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It's all true – well, most of it – when other countries are growing more quickly that you are, your relative importance starts to wane. Of course, the headline is never the full story.

Ignore the US at your peril

The US economy is still the bellwether, largely because it remains the largest consumer market on earth. While others are growing more quickly, the sheer size of the US means it continues to carry weight. After all, while China may be demanding ever more of our iron ore (and much of that iron is being made into Chinese infrastructure) it is still the American (and to a lesser extent, European) consumer that keeps China's factories humming.

Of course, the US domestic economy is one part of the story, but for investors, the United States is home to the largest equity market in the world, split between the New York Stock Exchange and the tech-heavy Nasdaq .

What makes that market important is not just that it allows investors to access the US domestic economy, but that a vast proportion of the sales and profits reported by companies listed in the US are now coming from overseas. The NYSE and Nasdaq might be American markets, but they are increasingly the home of the world's biggest and best companies.

Invest globally in just one market

Impressively, the latest data available from Standard & Poors suggests that 46% of sales made by companies in the S&P500 index were outside the US.

The Australian market is completely dominated by a handful of companies and even fewer industries. Indeed, the performance of the ASX 200 is essentially dictated by our major banks, the two large miners (BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO)) and Telstra (ASX: TLS). Throw in our supermarket giants and NewsCorp (ASX: NWS) and there's not much room left for everyone else.

A wonderful collection of businesses

By contrast, the US bourses are home to industrial giants including General Electric (NYSE: GE), the two large US auto-makers, Oil behemoth Exxon Mobil (NYSE: XOM) and technology powerhouses Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT), Google (Nasdaq: GOOG) and Amazon.com (Nasdaq: AMZN). Throw in ubiquitous consumer brands Coca-Cola (NYSE: KO), Nike (NYSE: NKE), American Express (NYSE: AXP), McDonalds (NYSE: MCD) and Walt Disney (NYSE: DIS) and you've almost covered the waterfront.

One of the most frequent arguments you'll hear from some commentators for overseas investing is that with only 2% of the world's stockmarket value here in Australia, there's 98% that Australian investors aren't participating in. That's true, and it is a shame that Australian investors don't look further afield – especially given the similar regulatory regime in the US, and the familiarity we have with US-listed companies.

The biggest and best

There's a simpler, more direct reason to invest in the US, though – many of the companies there are quite simply the best in the world in their category, and offer growth potential unmatched by a large swathe of the ASX-listed cohort… and at attractive prices.

To ignore those companies simply because they don't appear on a local broker's website is a shame – and can be an expensive oversight, especially when most investors don't invest overseas simply due to a lack of awareness and understanding.

Here's a quartet of companies all Australian investors should at least consider.

Apple (Nasdaq: AAPL)

Steve Jobs' baby <has taken something of a hammering> (https://www.fool.com.au/2013/01/investing/has-the-shine-come-off-apple/) in terms of share price since the US$700 levels of only a few months ago, but the company turned in another stellar quarter, selling almost 30% more iPhones and 50% more iPads than the previous year.

It may be facing some tough competition from Samsung and competitive hopefuls Microsoft and Blackberry-maker Research in Motion (Nasdaq: RIMM), but the company's shares are cheap at these prices and it's a brave person who'd bet against the power of the Apple brand.

Amazon.com (Nasdaq: AMZN)

The company that has almost single-handedly revolutionised retail has gone from a small online bookstore with high hopes to a market-leading and fast growing megastore offering everything from books to jewellery, home furnishings and digital media like apps, games, movies and, yes, books.

Amazon is still only a very small proportion of retail sales in the US, UK and Germany where it has an official presence, and is only scratching the surface in countries like Australia. The inherent benefits of online retail, and its immense scale will make Amazon very hard for others to match – or catch.

Berkshire Hathaway (NYSE: BRK-A, BRK-B)

The company run by the world's most successful investor, Warren Buffett is a conglomerate of insurance companies, consumer brands and partial stakes in listed businesses like Coca-Cola and American Express.

Berkshire has a tremendous multi-decade track record of growth behind it, some wonderful businesses inside it, and at current prices, you're getting Buffett's brilliance for free. He won't be running the shop forever, but with a board-authorised buyback program putting an effective floor under the price, the odds are keenly in favour of today's buyer.

eBay (Nasdaq: EBAY)

Many of us will have bought something from eBay at some stage over the past decade. If your last purchase was years ago, it will likely have been a second hand item you bought through an eBay auction, but the business has branched out significantly since then.

Now more an online marketplace for small retailers (and single-person businesses) to quickly and easily sell new products, eBay sells a broad variety of items across many, many categories (I recently replaced some broken headphones by looking for the brand I wanted on eBay and had them in two days. The jewel in the crown isn't eBay's marketplace, though, but its own payment system, PayPal, which can be found on websites right across the internet.

Foolish takeaway

In this rapidly globalising world, there are few better opportunities afforded by the internet than to invest in some of the best companies, no matter upon which exchanges they are listed.

You can get cheap brokerage rates (cheaper than trading in Australia if you look around) and can take a stake in some of the most wonderful and promising companies in the world. When you put it that way, we hope you'll agree it's an opportunity too good to pass up.

In the market for high-yielding ASX shares? Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool investment analyst Scott Phillips owns shares in Woolworths and Mircrosoft.

The post Top US stocks for 2013… and beyond appeared first on The Motley Fool Australia.

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Not content just to have a US tax policy known as the 'Buffett rule', the Berkshire Hathaway (NYSE: BRK-A, BRK-B) CEO has again called for higher taxes.

This time he has taken direct aim at one of the favourite defences used by those who don't want to see taxes raised – that higher tax acts as a disincentive to work harder or to risk your investment capital.

The case for lower taxes

The argument goes that lower tax rates mean you get to keep more of the overtime or the profits you make, thereby acting as an incentive to work harder and invest more. The opposite – that higher taxes mean you're less likely to do those things – is held also to be true.

Taken to its conclusion, a policy of lower taxation is argued to lead to more economic activity, more wages paid and profits earned, and therefore a more robust economy and society.

Buffett disagrees

It's safe to say Buffett doesn't agree. In a recent op-ed for the New York Times, Buffett took direct aim at that line of reasoning. On the subject of capital gains tax, he <wrote> (https://www.nytimes.com/2012/11/26/opinion/buffett-a-minimum-tax-for-the-wealthy.html):

"Suppose that an investor you admire and trust comes to you with an investment idea. "This is a good one," he says enthusiastically. "I'm in it, and I think you should be, too."

Would your reply possibly be this? "Well, it all depends on what my tax rate will be on the gain you're saying we're going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 per cent." Only in [conservative activist] Grover Norquist's imagination does such a response exist."

Obviously bank interest is higher here in Australia, but the concept holds – particularly given bank interest is taxed at a higher rate than long-term capital gains, and carries no franking credits.

Little evidence to support lower taxes

US capital gains tax rates have fluctuated considerably over the past half-century – from as high as 40% in the late 1970s to as low as 15% today.

Referring to the higher past rates, Buffett says:

"I was managing funds for investors then. Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered."

He also points out that economic growth was strong when those rates were high. It's also hard to escape the reality that the immediate past has been poor for the stock market, just as CGT rates were at their lowest.

Of course, correlation isn't the same thing as causation, but it must at least call into question the view that lower rates are better for the economy. The evidence is shaky at best, and indicates the opposite at worst.

Turning his attention to personal taxes for the wealthy, Buffett again highlights the lack of evidence that lower taxes drive economic growth, specifically that during the periods of high marginal tax rates on very high income earners, the economy did very nicely. No evidence here to support the 'lower tax leads to prosperity' argument.

Of course, Buffett's comments have a real and immediate impact in the US, where Congress is debating how they close a big gap between taxes and government spending. There is a stark choice – reduce services or increase taxes. The answer is likely to be a combination of both.

Foolish takeaway

While it doesn't have the same immediacy here in Australia, the issue deserves consideration. None of us like to pay higher taxes, but as a society, we demand a certain level of services from our governments.

There are only so many cuts that can be made, and some of our infrastructure needs are significant – both economically and for the positive social impact they can have.

"In the meantime, maybe you'll run into someone with a terrific investment idea, who won't go forward with it because of the tax he would owe when it succeeds," Buffett writes. "Send him my way. Let me unburden him."

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Tough sector
Investing in banks ain't easy. That's just the truth. They aren't manufacturing companies that we can forecast out 10 years from now with predictable revenue models. Banks are convoluted, multi-faceted organisations that should only be in your portfolio if you are knowledgeable in the banking industry, or have it on good, and I mean real good, authority. For the latter, you can look to occasionally-mentioned super investor Warren Buffett.

Shortly after the financial crisis, Buffett's Berkshire Hathaway (NYSE: BRK-A, BRK-B) took positions in a couple of the super banks. His investment in Bank of America was more of a necessity for the beat-up bank, but Buffett also ramped up his position in Wells Fargo (NYSE: WFC), which is now widely considered to be the top bank around. Wells Fargo, in addition to being more conservative than its whale-employing competitors, like JP Morgan (NYSE: JPM) and Citigroup, holds an enormous amount of home mortgages on its books, ready for the coming housing rebound (that many believe has already begun). The Wells Fargo investment has already paid off handsomely for Buffett and Berkshire, but there is another bank that still has room to pop, and Buffett is making sure his company will benefit.

What a melon
In Berkshire's latest 13-F, we see that Buffett has tripled his position in Bank of New York Mellon (NYSE: BK). BNY fits Buffett's bank investment style because of its conservative practices, cash-printing tendencies, and sound management. The company has many appealing factors for those who find bank stocks cheap, and want exposure while maintaining a conservative approach.

BNY doesn't make the bulk of its money from fly-by-night traders and morally bankrupt I-banking practices. Three quarters of the company's revenue comes from recurring servicing fees, which is an ideal situation for a bank, or any company. BNY is the custodian of over US$27 trillion globally, and has over US$1 trillion directly under management. I don't think I need to point out that servicing fees for US$27 trillion is a hefty chuck of recurring change.

'merica
Another interesting part about BNY is that more than 60% of its business still takes place in the United States. The company has an expanding global presence, and is eyeing more and more of its future revenue to be sourced from other regions of the world. This presents BNY with a unique opportunity to grow very quickly in its untapped markets around the world. It's a rare case of a value-looking stock with strong growth potential.

And, speaking of value, BNY trades…well, like most bank stocks trade these days. An investor in BNY is currently paying 0.78 times book value – basically, like going to an estate sale. At less than 10 times forward earnings, it is priced only slightly higher than JP Morgan and Citigroup, and carries considerably less risk.

With interest rates absurdly low and seemingly staying that way for the foreseeable future, it makes sense to look at a financial stock that isn't heavily reliant on those rates. By focusing its attention on servicing customer's investments, BNY has drastically reduced its interest rate and credit risk, offering investors as close to a long-term forecast for revenues as possible in the banking industry.

Bank buffet
Like I said, banks are not easy to invest in. There is a tremendous amount of due diligence that needs to go in to evaluating a financial institution, with the exception of local S&Ls. Following Buffett's lead on this stock is a great move, given the transparency of BNY's revenue streams and the conservative nature of its business.

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