Warren Buffett: This Is Not Bubble Territory

Although U.S. stocks are trading at record levels, there are still some inherent problems in the economy like wage and almost 2.7 million people facing long-term unemployment.

Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) chairman Warren Buffett interviewed by CNN Money recently. In the interview, Buffett discussed whether the markets are overpriced or not.

Could Have Overpriced Markets

Earlier this year Buffett commented that "periodically financial markets will become divorced from reality, you can count on that". He was asked if he thinks we are in times currently where markets are divorced from reality. He replied, "Not yet, but they have moved a long way up and they could get, I mean we could have overpriced stock markets."

"We have got them various times in the last 150-plus years and will have them again and it's always easier to identify them in retrospect, but that'll happen. And you will have underpriced markets too, which now it gets more interesting to talk about because that will happen the same way."

Are We Close To Overpriced Levels?

"Well, we are closer than we were before, obviously, when the market goes on the S&P from 666 or so to 2,100," Buffett said. "I mean, that is a big move, but stocks were very cheap then at that time and they went into a range of modest undervaluation, fair valuation. They might be a little on the high side now, but they have not gone into the bubble territory, anything of that sort."

NASDAQ At 5,000

On Nasdaq fiddling with the 5,000 mark again as it did in 1999, Buffett said, "But that's a different composition to some extent now[…] very different companies, they were eyeballs then and profits now in many cases. I can't speak to any given industry that well, but I do not regard this as being in bubble territory, but I don't find cheap stocks to buy either."