Originally Posted by kap17
But why do you think that proven investors like Warren Buffet are now buying a ton of stocks??? Because today those prices are lower than they've been in a long time and they plan on holding those stocks long term.

Kap...
Some people say stocks are still headed for the toilet.
Some people say that this is ... or is near the bottom and that we can expect a traditional bull market rebound.
Some people expect stocks to wallow around the current valuations for a an extended period of anemic consumer demand and belt tightening.

Everyone has an opinion... and taken together... those opinions constitute the market price.

I thinking Warren Buffet a great guy and tremendous investor, If your statements about him are correct... then it would seem that he feels that the current market is not fairly priced.... which is the post I was responding to.

Further, Buffet put about 5 Billion into GE when it was trading at $20 per share. It is now trading at $16... which is a 20% discount off the price he bought in at. No doubt he will get his money in the long term.... and dividend payments in the mean time.

I personally interpreted the end of world posting on this board as an indication that it was time to buy stocks... and did so. So, ultimately I agree with Buffet's opinion. But it is no more or less than an opinion about the future.

But, returning to the central point I was making, the price of a stock is determined by a lot of factors. If Buffet was really a flawless pricing genius, he would have sold his entire portfolio 12 months ago... because as NWP indicated, stocks were hugely over valued. But he did not do that... why? It is not because he lacks genius. It tuns out that there is no simple pricing equation. All we can say for sure is that stocks today appear to be somewhat below typical price to earnings ratios. So, they may be a bargain. Or, on the other hand, we may face a total economic collapse... in which case stocks are still over priced.

In general, a Key factor in pricing stocks is the market expectation of what the future holds. And that turns out to be a largely speculative calculation... which leaves stock prices highly vulnerable to bubbles and crashes. But, in any case, since we do not know the future, we do not know the correct price for a stock. And so all we really have is our op[inion about the future and the actual market price today.



"It's not a lie if you believe it." -- George Costanza
The whole problem with the world is that fools and fanatics are always so certain of themselves. --Bertrand Russel