Is warren Buffett losing his investment touch or could he still be correct in his assessment of the markets?

One thing that is certain is that the undertone of the market has shifted in the last 10 years. I can give you three such trends. First and foremost, central banking policy is more synchronized than ever before making stocks more of a global macro game. That is reducing the stock specific value opportunities. Secondly, a lot of demand for equity is coming because nearly $15 trillion of global bonds are offering negative returns making bond holders pay. That is forcing even pension funds and retirement accounts to take the risk of equities to avoid the payout shortfall to retirees. Thirdly, consumer demand is still weak across the world and so it is the service sector that outperforms.

All this only underlines the hidden truth that Buffett may perhaps still be correct. Here is why. Investors writing off Buffett’s approach to investing would do better to remember that it is an approach that has stood the test of time. If you look back, he has missed out many such trends and fads but has ended up looking smart in the end. Buffett was criticized when he had avoided the lure of S&L companies in the 1980s and ICE stocks in the late 1990s. However, eventually Buffett did come out looking better and cleaner. It is hard to beat the wisdom of the investor whose fund has generated close to 20% annualized returns for close to 50 years. Buffett is right in his caution that valuations in the global market are ridiculously out of sync. He rightly believes that between valuations and reality lies the flood of liquidity and that makes Buffett uncomfortable. He may still emerge the smartest of the pack. We may have to wait and only time will tell us the real story.