Warren Buffett: Red-Hot Market Not In A Bubble, Still Looks 'Cheap'
CNN/Stylemagazine.com Newswire | 2/27/2017, 9 a.m.
The point? Billion-dollar mistakes sound big, but it's all about the percentages. Berkshire's portfolio is fairly concentrated, with about 83% invested in the 10 largest holdings, but it's also a portfolio that gets new money on a regular basis.
NEW YORK (CNNMoney) -- Warren Buffett isn't worried that the post-election euphoria on Wall Street has gotten out of hand.
Yes, the Dow has skyrocketed 2,400 points since President Trump's victory, and the Dow is in the midst of its longest streak of records since 1987.
But Buffett hasn't lost his legendary optimism, despite warning signs about the Trump rally.
"We are not in bubble territory or anything of the sort," the billionaire told CNBC on Monday.
The key, Buffett said, is that interest rates remain extremely low. That makes stocks look like a good deal by comparison.
"Measured against interest rates, stocks are actually on the cheap side," Buffett said.
Of course, the risk is that rates finally rise, especially given the Federal Reserve's plans for several rate hikes this year and Trump's promise to stimulate the economy despite low unemployment levels.
"If interest rates were seven or eight percent, these (stock) prices would look exceptionally high," Buffett said.
Buffett is a reliable optimist when it comes to the U.S. stock market. But his latest endorsement of stocks comes at a time of growing concern that the Trump rally has gone too far, too fast.
Not only has the Dow closed at a record in each of the last 11 trading days, but all three major indexes ended last week at all-time highs. Another sign of the upbeat mood on Wall Street: CNNMoney's Fear & Greed Index was recently flashing "extreme greed," though it's since cooled off to simply "greed."
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