Warren Buffett, the legendary investor, understands that stock market prices often disconnect from underlying fundamentals. This creates both risks and opportunities for disciplined investors.
At the 1997 Berkshire Hathaway Annual Meeting, Buffett warned about the dangers of speculative enthusiasm. “People get captivated simply by the notion of rising prices without going back to the underlying rationale. That’s when you get very dangerous conditions in terms of possible bubbles,” he explained.
Buffett emphasized that this behavior isn’t limited to market highs. Extreme reactions—whether euphoric or fearful—can lead to mispriced assets. “It’s just people behave in extreme ways in markets,” he noted. “And over time, that’s very good for people that keep their heads.”
For Buffett, staying rational amid market volatility is key to long-term success.
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© 2025 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.