Longtime capitalist Leon Cooperman believes we are successful the precocious innings of a bull marketplace wherever bubbles tin signifier and risks rise, a signifier of the rhythm that Warren Buffett had warned about.
The seat and CEO of the Omega Family Office work a punctuation from the "Oracle of Omaha" connected CNBC's "Money Movers" Wednesday, which helium said fits neatly with what he's seeing close now.
"Once a bull marketplace gets nether way, and erstwhile you scope the constituent wherever everybody has made wealth nary substance what strategy helium oregon she followed, a assemblage is attracted into the crippled that is responding not to involvement rates and profits but simply to the information that it seems a mistake to beryllium retired of stocks," Buffett said successful 1999, according to a Fortune Magazine article.
Buffett believes bull markets often extremity not lone erstwhile valuations are stretched, but besides erstwhile determination is irrational exuberance and erstwhile the rally is fueled by momentum.
"It's what's going connected now," Cooperman said, adding that investors' temper is precise akin and valuation connected artificial quality companies is "ridiculously high."
The S&P 500 has surged astir 40% since its April lows, returning to all-time highs. The rally has been led by mega-cap tech giants, which person invested billions successful artificial quality and are being valued richly connected the imaginable of this emerging era.
The celebrated Buffett Indicator — the ratio of full U.S. banal marketplace worth to GDP — is besides flashing 1 of the clearest signs of marketplace exuberance. The gauge is sitting astatine grounds highs good supra the peaks reached during the Dotcom Bubble arsenic good arsenic the pandemic-era rally successful 2021, suggesting equity prices are moving acold up of the underlying economy. At 217%, it's besides beyond the level Buffett erstwhile said is "playing with fire."
While Cooperman thinks stocks could beryllium risky with the late-cycle assemblage behavior, helium dislikes authorities bonds adjacent much owed to elevated inflation. Bonds wage fixed nominal interest, truthful higher ostentation erodes their existent returns.
"Stocks are little risky than bonds astatine these levels," helium said.
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