Buffett on asset bubble

The signs of an imminent market fall across the world came from the ‘Oracle of Omaha’ himself. World’s second richest man, Warren Buffett made it very clear early this month that a crash in the commodities and real estate market was on its way.

In a unique product offering, Buffett’s firm Berkshire Hathaway even offered an insurance product against four major indices in the world. Said Buffett on the bubble: ‘‘In metals and oil there’s been a terrific price move. It’s like most trends: At the beginning, it’s driven by fundamentals, then speculation takes over. As the old saying goes, what the wise man does in the beginning, fools do in the end. With any asset class that has a big move, first the fundamentals attract speculation, then the speculation becomes dominant’’. Buffett was speaking at his company’s annual general meeting of shareholders in Omaha in the US, attended by world’s richest man Bill Gates — who is a director on board.

Adds Buffett: ‘‘Once a price history develops, and people hear that their neighbour made a lot of money on something, that impulse takes over, and we’re seeing that in commodities and housing… Orgies tend to be wildest toward the end. It’s like being Cinderella at the ball. You know that at midnight everything’s going to turn back to pumpkins and mice”.