Buffett on the Markets

Even though the United States stock market is once again trading at record levels, there are still some serious problems in the US economy like wages and long-term unemployment for 2.7 million people.

Warren Buffett, CEO and chairman of Berkshire Hathaway, was interviewed by CNN Money recently, and in this interview Buffett talked about whether or not he felt the markets were overpriced.

Overpriced Markets

Not long ago this year Buffett made a comment that “periodically financial markets will become divorced from reality, you can count on that.” He was then asked if he believes that the markets are currently divorced from reality at this time. Buffett’s reply was, “Not yet, but they have moved a long way up and they could get, I mean we could have overpriced stock markets.”

“We have got them various times in the past 150+ years and will have them again and it’s always easier to identify them in retrospect, but that’ll happen. And you will have underpriced markets too, which now it gets more interesting to talk about because that will happen the same way.”

Are We Finally Close to Overpriced Levels?

“Well, we are closer than we were before, obviously, when the market goes on the S&P from 666 or so to 2100,” said Buffett. “I mean, that is a big move, but stocks were very cheap then at the time and they went into a range of modest undervaluation, fair valuation. They might be a little on the high side now, but they have not gone into the bubble territory, anything of that sort.”

The NASDAQ at 5000

With the NASDAQ once again approaching the 5000 mark like it did in 1999, Warren Buffett said, “but that’s a different composition to some extent now […] Very different companies, they were eyeballs then and profits now in many cases. I can’t speak to any given industry that well, but I do not regard this as being in bubble territory, but I don’t find cheap stocks to buy either.”

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