Warren Buffett appeared on CNBC this morning (with another market legend: former Vanguard CEO John Bogle) to discuss his offer to re-insure bonds from troubled bond insurance companies such as MBIA and Ambac. His offer would cover around $800 billion of municipal bonds but would not include any portfolios of exotic instruments such as CDOs, etc.
Buffett on Stocks
Buffett was also asked about his opinion on current stock valuations. While he did mention that he believes stocks are priced in the general range of fair value, another comment he made concerned me. Buffett stated that corporate profits have been strong for some time, and both he and Bogle agreed that this could not last - bottom line: both believe a reversion to the mean in corporate profits is imminent. If the market has not already factored this into stock prices, the stock market could have further to fall moving forward.