Do You Think Buffett's Right?

Warren Buffet today joined many other economist and investors when he said it's time to buy US Stocks. He think US stocks drop too much since last year and it's a bargain to buy now.

DO YOU THINK HE IS RIGHT?

Let me give you some facts and numbers and you decide:

---Since the Great Depression 1929, every economy crisis started by a huge drop in stock market around the world. However, when a crisis headed towards the end, stock market tends to rebound to a level higher than before the crisis actually started.

---Stock market always climb and that's because inflation exist. Inflationary pressure will push the stock market higher. That's why when look at stock market, inflation rate must take into account.

---Here are world stock market friday close and its drop percentage off the high of last year:

Market Friday Close Off from high

Dow Jones 8852.22 37.11%

Nasdaq 1711.29 40.19%

S/P 500 940.55 39.43%

Russell 526.43 36.6%

FTSE 100 4063.01 39.6%

DAX 4781.33 41.1%

CAC 40 3329.92 43.13%

Nikkei 8693.82 48.75%

Hang Seng 14554.21 54.46%

FSSTI 1878.51 51.12%

All Ordinaries 3944.80 42.61%

Shanghai 1930.651 67.85%

NZX 50 2808.765 35.12%

SMSI (Madrid) 1035.09 40.29%

SMI (SWISS) 6099.62 32.54%

As you all can see, US stock market drop are relatively small compared to other stock market around the world such as Hang Seng, Singapore FSSTI and Shanghai. So if look at this data alone, US stock market are still relatively expensive.

Of course I admit that in every market, there are good and cheap stocks but in general, i still think US stock market are relatively expensive as average PE ratio of stocks are still very high (>10x) compared to other stock  market.

So choose wisely and study the company well first before buy the stock of a company. Don't start by looking at the chart of a company but look at its balance sheet first. Find a profitable sound company may be a difficult one but that's the thing you gonna do.

So I don't think Buffett is absolutely right on that. Some US stocks may be cheap but others are really expensive and should be avoid at all cost. You don't wanna end up owning share of Bear Stearns