Buffett Says It Is No Longer Investing or Speculating, but Gambling; Warns of Overheated U.S. Stocks

[Financial News] Warren Buffett, chairman of Berkshire Hathaway, warned that short-term speculation in an overheated U.S. stock market is akin to a casino.
The Motley Fool, a U.S. investment media outlet, reported on the 5th local time that Buffett voiced concern over the overheating of financial markets at Berkshire Hathaway's annual shareholders meeting this year. He said he had never seen a time when people were so caught up in a gambling mindset.

Buffett compared long-term value investing to a church and short-term speculation to a casino. He said, "Long-term value investing is like a church, while short-term trading for quick gains is like a casino." He added, "The casino has become too attractive to people. Right now, it is neither investing nor speculation, but gambling."
He also said many assets are "far more expensive than their actual value."

Buffett's warning is also reflected in U.S. stock market valuation indicators. The Buffett Indicator, which divides the total market capitalization of the stock market by gross domestic product (GDP), recently rose to 232 percent. That is an all-time high and is interpreted as meaning that the stock market's value has grown too large relative to the real economy.
Buffett previously warned that when the indicator approaches 200 percent, it is "like playing with fire."
The Shiller cyclically adjusted price-to-earnings ratio, another measure used to assess whether stocks are overvalued, has also remained above 40 since May. The last time this indicator stayed at 40 or higher was just before the dot-com bubble in 2000.
The Motley Fool said that even if indicators point to overheating, investors should not immediately assume a market decline. The outlet noted, "It cannot be concluded that signs of overheating will directly lead to a broad market downturn."

As for investment strategy, it emphasized that it is important to hold companies with fair value and solid fundamentals over the long term rather than focus on short-term price fluctuations.


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