Warren Buffett isn’t running Berkshire Hathaway anymore. He handed the keys to Greg Abel on New Year’s Day. But the lesson he’s been teaching for five decades is the one I keep coming back to in this market.
Be fearful when others are greedy. Be greedy when others are fearful.
He said it in 1974, when inflation was crushing the economy and the Dow fell below 600. He told Forbes at the time: “This is the time to start investing.” He was right.
He said it again in 2008, when the banking system was on the edge of collapse. He wrote a New York Times op-ed with one of the great headlines in financial history: “Buy American. I am.” Then he put $5 billion into Goldman Sachs. In 2011, he did the same thing with Bank of America. Both deals made Berkshire billions.
As recently as this year, he told CNBC: “The most likely time to buy things is when nobody else will answer their phones.”
He’s never been wrong on this. Not once in 50 years.
Where We Are Right Now
The S&P 500 peaked on May 29 at 7,580. Today it’s trading around 7,521. Up 9.65% on the year. That’s a strong run by any measure.
But here’s what has me thinking about Buffett’s advice. The market is more concentrated than it’s been in decades. A handful of AI stocks are carrying the index. Some of them trade at 70, 80, even 100 times forward earnings. Inflation is still running at 3.8%. The Fed isn’t cutting rates. And the last time the S&P hit a peak like this, it took a few weeks for the air to come out.
Buffett’s lesson has two halves, and most people only remember one. Everyone knows “be greedy when others are fearful.” That’s the fun part. That’s when you buy.
The harder half is the first part: “be fearful when others are greedy.” That doesn’t mean sell everything. It means pay attention. It means when valuations get heroic, you should understand exactly what assumptions you’re buying.
The Question I’d Ask
If you own a stock trading at 80 times forward earnings, do you know what has to go right for that price to make sense? How much revenue growth? How much margin expansion? How many years of perfect execution?
If you can’t answer that, you’re not investing. You’re hoping.
Buffett understood the difference. That’s why he sat on $300 billion in cash for years while the market ran. People criticized him for it. He didn’t care. He was waiting for the phone to ring.
What I’d Do
I’m not calling a top. The S&P is only 0.8% off its all-time high. That’s barely a pullback. But Buffett’s advice isn’t about timing the exact top. It’s about preparation.
If you have 10 or 20 years ahead of you, stay invested. The long-term math still works. But take a hard look at what you own. If a stock needs everything to go perfectly to justify its price, that’s a position worth reconsidering.
And if the market does pull back, that’s when you want your list ready. Not the names everyone’s chasing at 80 times earnings. The ones you’d actually want to own for the next decade at a price that makes sense.
Buffett built his fortune by waiting for those moments. You don’t have to be Warren Buffett to do the same thing. You just have to be willing to pick up the phone when nobody else will.
