September 20, 2017

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Why Warren Buffett Is So Reluctant To Call Stocks A ‘Bubble’



wallstreetexaminer.com / by Jesse Felder via The Felder Report / March 1, 2017

I can only imagine what it might be like to be Warren Buffett. When your every word moves the global financial markets you carry tremendous responsibility. Few carry greater weight in this regard than the Oracle of Omaha.

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This must be why he has mellowed in recent years. As his popularity has grown (witness the rise in attendance at the Woodstock for Capitalists) along with his influence on investors and markets, his rhetoric has softened.

For example, in 2001 he wrote for Fortune:

On a macro basis, quantification doesn’t have to be complicated at all. Below is a chart, starting almost 80 years ago and really quite fundamental in what it says. The chart shows the market value of all publicly traded securities as a percentage of the country’s business–that is, as a percentage of GNP. The ratio has certain limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment. And as you can see, nearly two years ago the ratio rose to an unprecedented level. That should have been a very strong warning signal.

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