As markets scale record highs, Warren Buffett warned investors against turning ‘investing into gambling’. He says excessive greed and risk-taking are pushing asset prices into “very silly” territory.
At the sidelines of Berkshire’s annual shareholder meeting, Buffett said “We’ve never had people in a more gambling mood than now.”
Despite ongoing geopolitical and economic uncertainty, investors have pushed several stocks to record highs. The S&P 500 has risen for six straight weeks and is hovering near an all-time high.
This provides context to his 1986 letter to shareholders where he described fear and greed as “super-contagious diseases” – both cause markets to misprice securities. Stocks often become overvalued when investor greed runs high, and undervalued when fear dominates the market.
Buffett Flags One-Day Options, Prediction Markets
Buffett also point at two recent developments to show his concerns.
First is rise in one-day options trading. These contracts expire within the same trading session and hence allow traders to take highly leveraged bets on short-term market moves.
“That’s not investing. It’s not speculating. It’s gambling, just totally,” he told CNBC.
The second is the rise of prediction markets.
Speaking about the trend, Buffett pointed to the case of US Army soldier Gannon Ken Van Dyke, who allegedly made over $400,000 on Polymarket using classified information tied to the capture of Venezuelan leader Nicolás Maduro. The Justice Department later charged him with insider trading and fraud.
“And the quantity of those things is just incredible,” Buffett said to CNBC. “So we’ve never had people in a more gambling mood than now. But that doesn’t mean that investing is terrible. It does mean that prices for an awful lot of things will look very silly.”
‘Berkshire shareholders like Greg Abel, but following Warren Buffett is tough’
Greg Abel earns wide praise from shareholders for his leadership and management abilities at Berkshire Hathaway, but the aura created by his predecessor and mentor Warren Buffett has begun to fade.
Empty seats and diminished crowds were noticeable throughout Berkshire’s annual shareholder weekend in Omaha, Nebraska, the first since Abel succeeded Buffett as chief executive officer in January, according to Reuters’ observations.
Abel presided at Berkshire’s annual meeting in a downtown arena, without Buffett on stage, though the 95-year-old billionaire watched from the audience and spoke briefly there.
Shareholders came away impressed with Abel’s knowledge of Berkshire’s operations, which sprawl across many industries including insurance, railroads, energy, manufacturing and retail.
But he’s not the same draw as the Oracle of Omaha or late Vice Chairman Charlie Munger, who died in 2023, who viewed themselves more as teachers when regaling shareholders in decades of prior meetings.
“I was a little bit disappointed,” said Xiao Zhang, a private investor from Boston. “In previous years, Warren Buffett and Charlie Munger sat on the stage, sharing their investing experiences and also life experiences and philosophies. This year, I didn’t hear something like that.”
