Warren Buffett Quotes on greed. The following Warren Buffett quotes on being greedy will help you refine your investing acumen.
Market Climax of Greed: 1969-1972
When was it important to sell? In 1969, those who were greedy were caught. Back then, the bull market that lasted through 60s was about to climax, before it bubbled in 1971 and 1972, and collapsed in 1973 and 1974. At that time, Buffett decided to exit the market at just the right time. Stocks were trading at price to earnings ratios of more than 50 when he sold; they dropped to single-digit price to earnings ratios since.
The other important time to sell was in 1998. This was another time when the market was giddy with greed. Many people lost sight of their regular careers and businesses and spent all their time ‘playing’ the stock market because it seemed so easy to ride the rocket of the stock market to great riches.
Another Market Climax of Greed: 1998-2000
In 1998, most of Warren Buffett’s stocks had price to earnings ratios greater than 50. He realized that his portfolio was overpriced and quite ingeniously negotiated a giant acquisition with his overvalued Berkshire shares. Berkshire Hathaway paid for its acquisition of General RE through a stock swap, where both parties agreed to swap 100% of General Re for $22 billion in BRK stock. Since the stock of Berkshire was grossly overvalued then – the deal was actually a steal for Buffett. That the deal was all-stock also meant that it could be structured as a tax-free merger.
When is everyone too greedy
How do you know when everyone is too greedy? Here are some tell-tale signs:
- Analysts and media pundits begin to say that earnings no longer matter and that sales multiples should be used instead – this was rampant during the Dot Com Bubble.
- Value-oriented fund managers begin to get out of the game, as they realize that there are no longer any under-valued stocks in the market.