Dollar Bear Buffett Thinks Stocks Are ‘Overpriced’

by Phillip Morton, Investors Offshore.com

04 May 2005

Legendary investor Warren Buffett told shareholders in his Berkshire Hathaway company that the vast majority of stocks he examines are, in his opinion, overpriced.

As a result, Buffett, who has made himself the world's second most wealthy man by practicing his philosophy of 'value investing', is sitting on more than $40 billion in cash, quipping that at present, the firm has "got more money than brains."

"If the market gets cheaper, we'll have a lot more things we can do with our money," he told the gathering.

However, Buffett cautioned that the world's markets may not be very far from volatility, noting that vast reserves of wealth are currently being accumulated by "hair trigger" investors, perhaps in reference to the surging popularity of hedge funds, which now account for over $1 trillion in assets.

At last year's shareholder meeting, Buffett remarked that the popularity of hedge fund investing is nothing more than a “fad” and is storing up a “huge problem” for the next ten years.

“People that are now investing in hedge funds in aggregate are going to be disappointed,” commented the plain-speaking Nebraskan at the time.

Nonetheless, the 'Sage of Omaha' is not entirely on the fence at the moment. Convinced that America's twin trade and federal deficits will herald further declines in the value of the US dollar, Buffett has made a $21 billion bet that the currency will continue to weaken.

With the dollar having firmed on the world currency markets since the turn of the year, it is said that this position has already lost $310 million.

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