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24-04-2014, 05:32 PM
BECKY: Okay. Also I'd like to talk to you a little bit about that David Einhorn. He was just out talking about how he sees a potential tech bubble building once again. He talked about the cool-kid stocks. And I guess you can—(infer) from that he means companies like a Facebook.
Or some of these big— internet companies that have soared very rapidly. He's shorting a basket of these stocks now because he thinks it looks like it did— back before 2001. You were somebody who didn't understand valuations with the technology companies back then. Do you see similar characteristics to the technology stocks today?
BUFFETT: I don't think it's like two-thousand — (THROAT CLEAR) the— the period prior to 2001. I don't— there are a lotta s— companies whose valuations I don't understand. But that's always been true. And— and then you get into a period like right before 2001 where you could almost sell anything and capitalize eyeballs and all of that. I— I— I don't think it's reached that point, and certainly I don't think the general market level is going to bubble up.
BECKY: Well, that— that's an interesting point. We're not far off of all-time highs. It's probably less than a percent for both the Dow and the S&P 500. You don't feel like things are getting too frothy here?
BUFFETT: No, no. I think we're— in a range— and it's— it's a big zone, it's a big zone always of reasonableness. But— but stocks ought to be higher every ten years. I mean, there's a plow back of earnings that goes back year after years. Stocks will become worth more decade after decade, not in any precise manner, not in an even manner or anything of the sort. But ten years, 20 years, 30 years from now, stocks will be worth more than they are today.
BECKY: You've gotten concerned about valuations in the past, though. What— what would be a warning signal to you? What would be something that would— would really start to make you think twice about buying more stocks?
BUFFETT: It would be valuation. I mean, the— the— the— if the numbers got— if prices got to nosebleed levels compared to earnings for many stocks generally, then I would say we— you know, we're in one of those periods when stocks got ahead of themselves.
BECKY: Is that—
BUFFETT: But stocks— stocks do get worth more over time because companies retained a lot of what they earned.
BECKY: But is that just P/E ratios for forward earnings? Is that the best way of measuring it?
BUFFETT: Yeah, and it— in the end, a stock today is worth all of the cash you can distribute between now and Judgment Day. And the higher the price goes, it— if the distribution doesn't change (LAUGH) at some point it gets ahead of itself.
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from http://www.cnbc.com/id/101608436
PDF:fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2014/04/23/2014-04-23%20Warren%20Buffett%20live%20interview%20transcript.pdf
Or some of these big— internet companies that have soared very rapidly. He's shorting a basket of these stocks now because he thinks it looks like it did— back before 2001. You were somebody who didn't understand valuations with the technology companies back then. Do you see similar characteristics to the technology stocks today?
BUFFETT: I don't think it's like two-thousand — (THROAT CLEAR) the— the period prior to 2001. I don't— there are a lotta s— companies whose valuations I don't understand. But that's always been true. And— and then you get into a period like right before 2001 where you could almost sell anything and capitalize eyeballs and all of that. I— I— I don't think it's reached that point, and certainly I don't think the general market level is going to bubble up.
BECKY: Well, that— that's an interesting point. We're not far off of all-time highs. It's probably less than a percent for both the Dow and the S&P 500. You don't feel like things are getting too frothy here?
BUFFETT: No, no. I think we're— in a range— and it's— it's a big zone, it's a big zone always of reasonableness. But— but stocks ought to be higher every ten years. I mean, there's a plow back of earnings that goes back year after years. Stocks will become worth more decade after decade, not in any precise manner, not in an even manner or anything of the sort. But ten years, 20 years, 30 years from now, stocks will be worth more than they are today.
BECKY: You've gotten concerned about valuations in the past, though. What— what would be a warning signal to you? What would be something that would— would really start to make you think twice about buying more stocks?
BUFFETT: It would be valuation. I mean, the— the— the— if the numbers got— if prices got to nosebleed levels compared to earnings for many stocks generally, then I would say we— you know, we're in one of those periods when stocks got ahead of themselves.
BECKY: Is that—
BUFFETT: But stocks— stocks do get worth more over time because companies retained a lot of what they earned.
BECKY: But is that just P/E ratios for forward earnings? Is that the best way of measuring it?
BUFFETT: Yeah, and it— in the end, a stock today is worth all of the cash you can distribute between now and Judgment Day. And the higher the price goes, it— if the distribution doesn't change (LAUGH) at some point it gets ahead of itself.
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from http://www.cnbc.com/id/101608436
PDF:fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2014/04/23/2014-04-23%20Warren%20Buffett%20live%20interview%20transcript.pdf