« Be Fearful When Others Are Greedy » – Buffett Most Important Quote

Picked up in a BofAML’s note. The figures in the following quote should have investors reflect on Buffett’s mantra: « Be fearful when others are greedy. Be greedy when others are fearful. »

« The Fed’s bull market: March 9th 2009…VIX 50, HY spread 1873, SPX 676, BKX 20; March 8th 2017…VIX 11, HY spread 373bps, SPX 2363, BKX 97; the bull market catalyst…extraordinary, unprecedented central bank policies. »

Facts make Buffett’s mantra right to the point.

8 years in ZIRP/NIRP policies have spurred the most impressive and widest bull market in a long time. Of course, it started from such a low point (or high point in despair) that it’s probably not that impressive, given the amount of money central banks had to create to get investors less worried.

Actually, financial markets have been acting like drug addicts for quite some time. Every time central banks hint at reducing their support to the financial system, there’s an epidemic reaction.

May be the top will be reached when financial markets stop overreacting to such hints.

If you consider the following chart, the reversal into prolonged bear market is not there yet. Well the reason for the end of bull market is related to the end of ZIRP/NIRP, which has not even begun.

Buffett’s always been an optimist, but people tend to forget that is long time partner, the amazing Charlie Munger, is probably much more cautious.

Source: Bank of America Merrill Lynch