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It’s doubtful that he would be so imprecise with his language if he
actually means, “a handful of stocks that Berkshire owns” rather “the
market” when he says he thinks that stocks are fairly priced.


I wouldn't suggest he meant only the handful they own.
But he certainly looks closely at some classes of firms a lot more than others.
With only extremely rare exceptions he doesn't typically have any
material holdings in basic materials, consumer cyclical, energy, healthcare,
communications, technology, or any utilities other than MidAmerican.
Just as spending all your time in good neighbourhoods will influence your ideas of how
the typical citizen lives, I can't help but think that this colours his perceptions pretty strongly.

The main reason I believe this is that, were his comments taken to mean
the capitalization weighted broad US market, then he's flatly wrong.
The only explanation would then be that he believes that current
way-above-trend earnings, way-way-above-trend multiples of trend earnings,
and modestly-above-trend multiples current earnings are all normal.
A lot of big companies are going to have a big fall in earnings in
the current down cycle, as they always do, but Mr Buffett doesn't tend
to have a lot of holdings or focus in those areas.

In any case, I take the bulk of his recent comments to be slightly more
along the lines that current valuation levels are explicable given
the context and better than the obvious alternatives, not "fairly
valued" in the sense that one should expect average forward returns
starting from today's prices for the broad US market or random firms.
To the extent that his comments are read that way, I agree.

Jim
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