The world’s greatest and most well-known investor, Warren Buffett says he is struggling to find things to buy.
“The extent that QEIII is keeping interest rates lower than they would otherwise probably keeps asset prices higher,” Buffett said in an interview on CNBC. “We don’t find bargains around but we don’t think that things are way overvalued either.”
Buffett said share prices were ridiculously cheap in recent years, until the recent quantitative easing program by the US Federal Reserve helped push stocks up to record levels. While the US economy is improving, the QE stimulus had done more for the stock market than economic growth. That suggests that markets are overdue to fall, and likely will when the Fed begins its tapering program, unless the US economy improves dramatically before then.
Billionaire Carl Icahn agreed with Buffett, saying his portfolio was up 30% “for all the wrong reasons.” “I think right now the market is giving you a false picture,” Icahn said. “I don’t think a lot of companies are doing that well. They’re taking advantage of low interest rates.”
Despite the record high levels, Buffett says while he can’t find any bargains, he doesn’t think that things are way overvalued either.
The US Dow Jones Industrial Average has risen more than 24% since November 2012, while the S&P 500 Index has soared more than 27%. Closer to home, the S&P/ ASX 200 Index (Index: ^AXJO) (ASX: XJO) is up a leisurely 17% over the same time period, mainly driven by the big four banks. National Australia Bank (ASX: NAB) is up an astounding 45% since November, while ANZ Bank (ASX:ANZ) and Westpac Banking Corporation (ASX: WBC) are up around 28%.
Uncle Warren (Buffett) may be hoping for a stock market fall, so he can pick up some bargains. And that’s exactly the mentality that Foolish investors need to consider adopting. Be brave when others are fearful, and take a positive view of a market fall as an opportunity to pick up stocks on sale.
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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.