Revisiting Buffett’s 1999 Warning: Interest Rates, Orgies, and Value

Value investor Bill Smead (of Smead Capital Management) recently pulled out Warren Buffett's famous 1999 letter, and compared Buffett's comments to today's market environment.

Smead Capital: Revisiting Buffett’s 1999 Warning: Interest Rates, Orgies, and Value

 

"We thought it would be very helpful to review Warren Buffett’s argument in 1999, the last time there was very high expectations attached to technology stocks and to the overall level of common stock prices."

"even Buffett makes mistakes occasionally. Buffett called Coke and Gillette the “Inevitables” in the late 1990’s when he should have sold his holdings. [...] Now, he has entered the FANG-stock orgy, a lot closer to midnight than to 4 o’clock pm, while the S&P 500 Index is at a juncture with lower interest rates and higher profit margins than his warning speech in 1999.

We have already “rounded up the wagons” concerning the rabid mania in glamour tech stocks. As contrarians, we relish expecting higher interest rates and a better economy, which moves the economic spoils away from technology stocks toward household formation, child bearing and more useful endeavors which come with them! Someday in the future, when the great tech companies have stumbled and the crowd is long gone, we will go shopping among those which survive and prosper."

 

And Buffett's original 1999 letter in Fortune:

Mr. Buffett on the Stock Market(Fortune, 1999)