2023 PSE Stock Market Accounts Hit a Record 1.9 million as Active Accounts Fall to All-Time Lows, BSP Chief on Foreign Money "I Do Not Know Why They Do Not Like Us"

 

Statistical analysis without establishing the meaning of a particular economic activity cannot tell us what is going on in the world of human beings. All the statistical analysis can do is to describe things; it cannot explain, however, why people are doing what they are doing. Without the knowledge that human actions are purposeful, it is not possible to make sense out of historical data—Dr Frank Shostak 

In this issue

2023 PSE Stock Market Accounts Hit a Record 1.9 million as Active Accounts Fall to All-Time Lows, BSP Chief on Foreign Money "I Do Not Know Why They Do Not Like Us"

I. PSE’s Stock Market Accounts Hit a Record 1.9 million

II. Differentiating Growth Rate from a Growth Trend, The Digitalization of the Philippine Stock Market 

III. It is the Active Accounts that Matter: Reaching an All-Time Low!

IV. PSEi 30’s Bear Market: Reduced Participation Rate, and Diminishing Volume; Age Distribution of Participants Suggests a Worrisome Trend!

V. Stock Market Doldrums Brought About by Savings Drought Manifested in Banking Data and Market Manipulation

VI. 2024 5-Month Volume and Market Breadth Exhibits Oversold Conditions

VII. Symptoms of Market Distortions and Inefficiencies: An Examination of Market Dominance by the Top 10 Brokers and PSEi 30's Top 5 Issues

VIII. BSP Chief Remolona on Foreign Money: "I Do Not Know Why They Do Not Like Us"

2023 PSE Stock Market Accounts Hit a Record 1.9 million as Active Accounts Fall to All-Time Lows, BSP Chief on Foreign Money "I Do Not Know Why They Do Not Like Us" 

The PSE registered an 11.3% growth in stock market accounts in 2023, but active accounts fell to an all-time low, supported by a dearth in volume. The BSP Chief questions why foreign money continues to elude the Philippines, highlighting the challenge facing local investors. 

I. PSE’s Stock Market Accounts Hit a Record 1.9 million 

Inquirer.net, May 29, 2024: Stock market accounts rose 11.3 percent to 1.906 million in 2023  from 1.7 million in the previous year, according to the Philippine Stock Exchange’s (PSE) annual Stock Market Investor Profile report. The growth was mainly due to new accounts opened through the GStocksPH platform, which also pushed the share of online accounts to 80 percent of total stock market accounts. Online accounts stood at 1,525,768 as of end-2023, up 21.2 percent or 266,861 accounts.

Figure 1

The headlines provide the good news: a surge in new stock market accounts. This surge was highlighted by PSE's infographics, which emphasized "growth." (Figure 1, topmost table) 

We'll take it further.

In the context of peso nominal gains, the 193,285 increase in 2023 marked the largest after 2021 and 2018. (Figure 1, middle chart)

The upsurge in new accounts has increased the stock market's penetration level to a record 1.7% of the population (using GDP calculations). (Figure 1, lowest graph)

Or, this represents an unprecedented 2.44% of the population over 15 years old and 3.7% of the labor force (PSA labor survey).

However, there's a catch. If so, why has the PSE's volume been falling?

II. Differentiating Growth Rate from a Growth Trend, The Digitalization of the Philippine Stock Market

Let's dig deeper to understand the underlying factors.

The reason is that new accounts are only one part of the equation.

Figure 2 

First, the headlines only reveal the growth rate, but they don't reveal the growth trend. The fact is that since peaking in 2018, the growth trend has been on a decline. (Figure 2, topmost chart) 

2023 could be seen as a countercyclical bounce, possibly driven by a shift to a mobile application trading platform similar to the US Robinhood Markets. 

As evidence of the marked transition towards a digital economy, the share of online trading hit an unmatched 80% of the total. This growth was accompanied by a 21.2% YoY increase. (Figure 2, middle image)

In contrast, traditional brick-and-mortar accounts saw a significant decline in 2023. This decline was marked by a contraction of -16.2% YoY and a share drop from 26.5% to 19.95%. (Figure 2, lowest graph)

This shift towards online trading is reflective of the industry's broader trend towards digitalization, which has been driving the growth of new accounts.

As we explore this trend further, we will delve into its implications for the sell-side industry's future.

III. It is the Active Accounts that Matter: Reaching an All-Time Low!

Returning to the paradox of the record new accounts amidst declining volume, a more pertinent metric is "active accounts."

Figure 3

Consider this: while the total number of active accounts represents 17.6%, online accounts make up 19.3%. This means that in total, there are only 335,459 active accounts—a historic low! (Figure 3, topmost table and middle window)

Interestingly, the retail segment experienced a lesser decline compared to institutional accounts. Retail active accounts dropped from 20.1% to 17.6% of the total, while institutional accounts plummeted from 23.7% to 20.5%.  (Figure 3, lowest graph)

In nominal figures, retail accounts decreased by 2.2%, while institutional accounts saw a significant dive of 22.53% 

The PSE numbers didn’t specify whether the new accounts were included in this year’s active accounts or if the active accounts represented last year’s total numbers.

However, if it's the former case, then nearly 58% of the new accounts are part of the active ones! If this holds true, will they, like their predecessors, fade soon?

IV. PSEi 30’s Bear Market: Reduced Participation Rate, and Diminishing Volume; Age Distribution of Participants Suggests a Worrisome Trend!

Figure 4

Like day follows night, the declining participation rate has characterized the PSEi 30’s bear market in disguise. 

Since its climax in 2017, the PSEi 30's (end of year) downtrend has resonated with the corrosion of the growth of total accounts. 2023’s 11.3% marked the second-lowest YoY growth rate since 2017.  Notably, this growth rate was achieved from a very low base. (Figure 4, topmost chart) 

The decline in participation rates can also be attributed to the poor returns from investing in the PSE, as many investors became "long only," and wary of taking risks after experiencing prolonged losses. (Figure 4, middle pane) 

Moreover, diminishing volume has accompanied the PSEi’s 30 bear market. (Figure 4, lowest diagram)

Figure 5

Interestingly, among age groups, while millennials suffered the most decline in participation, followed by Gen X, it was the seniors who provided the most growth in total accounts. Senior accounts soared from 10.8% to 14.8%!  (Figure 5, topmost table)

That online accounts dominated the total was also manifested in the age distribution. The boomers, who in the past years (except 2021) have shied away from online accounts, became the largest growth sector, surging from 5% to 10.9%. (Figure 5, second to the highest table)

On the other hand, millennials, who composed the bulk of the age grouping, endured a substantial contraction, from 55.7% to 49%! Part of Gen Z helped in the increase from 20.8% to 21.5%.

This reveals a lot about income and savings conditions. It likely exposes that the 30-44 age grouping must have endured most from the decaying conditions in real income and savings, hence their participation pullback in the PSE.

It also manifests that under the current high inflation environment, the age group with the most savings, the seniors or boomers, were driven to scour for yields in the stock market. They braved the challenges of learning to use digital platforms for trading to gamble.

The thing is, a savings drought, which brought about the PSEi 30’s bear market, has been manifested by the decaying gross volume or turnover, which reverberated with the decrease in the participation rate. 

Needless to say, a restoration of savings should anchor a comeback of a healthy bull market—similar to the pre-2013 era. Without it, everything else represents a juvenile belief in unicorns, the tooth fairy, or castles in the sky or false optimism and unsustainable trends.

V. Stock Market Doldrums Brought About by Savings Drought Manifested in Banking Data and Market Manipulation

Symptoms of the deterioration of savings have similarly been manifested in the banking system. The 10-year decay of the bank’s deposit liabilities or cash-to-deposit ratio reveals a lot about inflation and malinvestments via asset bubbles ravaging savings. (Figure 5, second to the lowest and lowest charts)

Figure 6

The Warren Buffett Indicator—market cap divided by the GDP—also exhibits this deviation. The PSEi 30’s declining ratio demonstrates the bear market in motion. (Figure 6, topmost graph) 

Additionally, since debt has anchored private and public activities, it bloats the GDP. Therefore, the overstated GDP performance inflates this market cap-to-GDP ratio.   Furthermore, the rising Consumer Price Index (CPI) has coincided with the decline of the ratio, indicating that inflation has been a major hindrance (a menace) to the financial economy. 

That’s not all.

Massive "marking the close" pumps and dumps have contributed to the intensifying mispricing of the local stock market. Basic economics tell us that price controls lead to either shortages or gluts. The same holds true for the stock market. 

Friday’s massive 1% "mark the close" pump came about from the top 10 brokers who were responsible for 80% of the transactions. End session pumps and dumps have become a common feature in the PSEi 30. (Figure 6, second to the highest charts)

The essence of the stock market is its pricing mechanism in the titles to capital. 

The gaming of the index, thereby, percolates or radiates to the economy via misallocations of capital brought about by these pricing distortions. It exacerbates malinvestments from monetary policies and other forms of interventions—which of course, would be revealed over time. 

At the very least, all these contribute to the erosion of savings. 

VI. 2024 5-Month Volume and Market Breadth Exhibits Oversold Conditions 

Many have come to the conclusion that the PSE’s turnover has been improving. 

That may be partially true. While May’s volume jumped 25.6% YoY—helped by the Month-end marking the close pump—following April’s 71.12% surge, the 5-month aggregate turnover declined 6.2% from last year. (Figure 6, second to the lowest image) 

The two-month surge has barely offset the declines of the early months. 

Sure, market breadth has exhibited signs of improvement. The 2024 5-month advance-decline spread marks the lowest since 2019. (Figure 6, lowest diagram)

In a nutshell, despite the PSE’s cheerleading via the headline numbers, the depressed turnover, and low participation rates backed by improving partial market internals exhibit oversold conditions. 

VII. Symptoms of Market Distortions and Inefficiencies: An Examination of Market Dominance by the Top 10 Brokers and PSEi 30's Top 5 Issues"

Still, the current environment has been a product of loose financial conditions, which means more pressure on the PSE should conditions tighten. 

However, the ever-dithering BSP would likely tolerate or gamble with "higher for longer" inflation than tighten monetary conditions due to unsustainable debt conditions. 

Furthermore, the sluggish turnover also implies increasing stress on the sell-side (brokerage) industry. According to the PSE, there are 122 trading participants, 37 of which have online platforms. 

But here's the rub: the top 10 brokers capture a vast majority of daily transactions. Most of them represent institutional brokers—possibly accounts of banks and other financial institutions.

Figure 7

Last week, the average soared to 63.4%, mainly due to Friday’s mark-the-close pump, where the top 10 brokers accounted for a staggering 80% of the Php 22 billion trade! (Figure 7, topmost visual) 

The limited distribution of transactions to a select number of brokers highlights the extent of concentration of activities or "market dominance" in the stock market, which is equally reflected in the dispersion of weightings in the PSEI 30’s free-float market capitalization. 

The aggregate free-float cap of the top 5 issues hit a record 51.92% last April 19th! (Figure 7, second to the highest image) 

These phenomena are all manifestations of distortions: market inefficiencies, imbalances and irregularities. 

As an aside, financial services accounted for 15% share of the retail accounts in 2023. This suggests that a substantial share of direct retail transactions involves those who sell "financial services" (buy and sell side), potentially leading to many principal-agent problems. 

By inference, our guess is that many traditional retail brokers are on the threshold of survival. 

Ironically, the PSE brags about the headline numbers of stock market accounts, while there appear to be ZERO takers of its short-selling program since its inception. 

Also, since the start of its Volume Weighted Average Price (VWAP) trading program last March 1, total transactions amounted to only Php 415.435 million. 

These new programs have had little or no impact on the sell-side industry. 

Yet, the BSP and PSE’s policies will continue to haunt savers while applying pressure to the sell-side industry. 

In my humble opinion, the PSE aims to consolidate the brokerage industry by reducing the number of brokers (or competition) and favoring a few larger players—to increase its control. 

VIII. BSP Chief Remolona on Foreign Money: "I Do Not Know Why They Do Not Like Us" 

In a surprising twist, the BSP chief expressed concerns about the lack of depth in the PSE, citing the limited foreign participation as a key factor contributing to its lack of international recognition. (bold mine) 

And finally, we have our missing portfolio flows. We used to fear portfolio flows because we saw them as hot money. They come in and leave at the first sign of trouble.

But these days, they are not so scary. In the first place, they are so negligible these days; they can come in and out, and it will not matter. 

But the big thing is the game has changed; the intent is not into active investment anymore; it is in passive investment. Passive means you buy the index. At least at the core of your portfolio, you need an index. Maybe you can play around on the sides of your portfolio, but the core has to be an index. 

Huge trillions of dollars are now flowing into the major equity indices, global equity indices, and the major primary bond indices. I think we are in a few indices. We talked to Vanguard, and they said we are about 0.1 percent of their bond index. 

But we are not in any major equity indices, BlackRock or State Street. We do not know why; people say it is our withholding taxes, but we are not sure what is going on. 

Bakit hindi tayo kasali? The smaller markets are in these indices. Colombia is in that index. Etsepuwera tayo, hindi tayo kasali. I do not know why they do not like us.​ (Remolina, 2024) 

This lack of understanding (incredible cluelessness) and the tendency to blame foreign investors for the country's financial issues is striking. 

Yet, as an old Wall Street Maxim goes, "Money goes where it is treated best." 

The Philippine authorities and private regulators should reflect or self-examine on whether they have been creating an attractive environment for investors or if they have been providing money with a red-carpet treatment or not.  The Philippine Stock Exchange is a monopoly with self-regulatory powers. 

The questions to ask: has the BSP’s inflation targeting regime, a "trickle-down policy, " successfully diffused to build up savings for the average Pedro and Maria? 

Or has it supported the debt-financed Keynesian "build and they will come" policy framework benefiting the elites and the government while consuming the savings of the general populace through the economic maladjustments as evidenced by the record savings-investment gapsavings-investment gap? 

In essence, have their policies been supportive of local savers and conducive to the industry? 

The crux: If they can’t draw local savers into the capital markets (bonds and stocks), why would foreigners follow? 

Foreign portfolio flows into the Philippines have declined significantly since 2013. (Figure 7, second to the lowest graph) 

The Philippine bond market is one of the smallest in Asia, which is likely why foreign flows have been limited. (Figure 7, lowest chart) 

Then why blame foreigners for "not liking" the Philippines?

____

References

Dr Frank Shostak, Can Data by Itself Inform Us about the Real World? May 27, 2024, Mises.org

Philippine Stock Exchange, STOCK MARKET INVESTOR PROFILE 2023, May 2024, PSE.com.ph

Eli M Remolona: The challenges we face at Bangko Sentral ng Pilipinas, Speech by Mr Eli M Remolona, Jr, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the General Membership Meeting of the Financial Executives Institute of the Philippines, Makati City, 6 March 2024. April 16, 2024, Bank for the International Settlements

 

 

Wow, Warren Buffett’s (Berkshire Hathaway) Cash Position Rockets by an Astounding 34%! Bullish in Words, Bearish in Action

Wow, Warren Buffett’s (Berkshire Hathaway) Cash Position Rockets by an Astounding 34%! Bullish in Words, Bearish in Action

The world’s most successful and revered stock market investor Warren Buffett has been an inveterate bull. In his 2015 letter to his flagship’s Berkshire Hathaway, Mr. Buffett asserted betting against America would be a losing proposition, “For 240 years it's been a terrible mistake to bet against America, and now is no time to start.”

In September of 2017, he made a bold and controversial claim that the Dow Jones Industrials, which was then at 22,400, would hit 1,000,000 in 100 years. However, even the mainstream media smelled the dissimulation from the Sage of Omaha’s prediction. The CAGR for the 100 year period would tally to only 3.87% compared to the CAGR of 10.7% since 2008! Mr. Buffett essentially framed the public to believe in his optimism while concealing his dampened expectations on returns!

Yet, because of his popularity, a countless number of followers has turned every Berkshire Hathaway’s shareholders meeting into the “Woodstock for capitalists”.

Mentored by the great value investing guru Benjamin Graham, the folksy Mr. Buffett has been renowned for his value investing approach

However, Mr. Buffet’s investing approach has long evolved. It has metastasized from value investing towards taking advantage of the political environment, through insider privilege and as a “champion of bailouts”, the establishment “investment moats” from politically bestowed monopolies and from the Federal Reserve’s insidious transfer policies to generate outsized profits. These practice defined in two words, political entrepreneurship.

And cronyism has reverberated on Mr. Buffett’s brand of politics. Mr. Buffet has repeatedly called on fellow billionaires to pay higher taxes. Paradoxically, Mr. Buffett’s companies have not only squared off with the IRS, they have used loopholes and accounting tricks to skirt tax payments.

Now to the heart of the story.

Striking self-contradicting insights seem to encompass Mr. Buffett’s latest bonfire for investors.

As Mr. Buffett has harped on higher taxes for the rich, he attributed the significant jump in the company’s book-value growth to Mr. Trump’s tax reform, “The $65 billion gain is nonetheless real – rest assured of that. But only $36 billion came from Berkshire’s operations. The remaining $29 billion was delivered to us in December when Congress rewrote the U.S. Tax Code” Berkshire Hathaway 2017 Annual Report p.7 

And instead of putting his words into action, Berkshire Hathaway amassed the biggest cash and cash equivalent position ever! (bold mine)

Charlie and I never will operate Berkshire in a manner that depends on the kindness of strangers – or even that of friends who may be facing liquidity problems of their own. During the 2008-2009 crisis, we liked having Treasury Bills – loads of Treasury Bills – that protected us from having to rely on funding sources such as bank lines or commercial paper. We have intentionally constructed Berkshire in a manner that will allow it to comfortably withstand economic discontinuities, including such extremes as extended market closures. (P.7)

Berkshire’s goal is to substantially increase the earnings of its non-insurance group. For that to happen, we will need to make one or more huge acquisitions. We certainly have the resources to do so. At yearend Berkshire held $116.0 billion in cash and U.S. Treasury Bills (whose average maturity was 88 days), up from $86.4 billion at yearend 2016. This extraordinary liquidity earns only a pittance and is far beyond the level Charlie and I wish Berkshire to have. Our smiles will broaden when we have redeployed Berkshire’s excess funds into more productive assets (p.9)

Wow, that’s a whopping 34% surge in liquidity that “earns only a pittance”!!!

Why? Because “economic discontinuities” may be an obstacle to Dow Jones 1 Million????

For every USD invested in stocks, Berkshire has .68 cents in cash. Or, the ratio of stocks-cash is 60-40. Total equity position as of 2017 was USD 170 billion. That’s hardly a staunchly bullish position!

And if you should notice, this hasn’t been an anomaly. Berkshire’s cash hoard has vaulted in the past 3 years, growing by 20.4% and 13.4% in 2016 and 2015, respectively.

Note from the above data, I tabulated only the cash and cash equivalent segment of the insurance business sans the rail and financials.

Given the way the market has behaved, lack of opportunities can hardly explain Berkshire’s swelling cash pile.

Shouldn’t this hoarding of cash, coming at the expense of stocks, be discerned as “betting against America”?

Or has the lessons of the Great Recession sank into Mr. Buffett? Berkshire has had little elbow room to use during the ensuing fire sale triggered by the Lehman collapse. (see above)

And interestingly, while Mr. Buffett told the public that the Dow would hit 1M, he was silently amassing cash!

Warren Buffett’s saying one thing and doing another serves as a noteworthy example of DEMONSTRATED PREFERENCE.

Warren Buffett: Do as I say, Not as I Do: No Bubble, but Berkshire Hathaway’s Cash Hoard Soars

At a CNN interview, US President Obama crony Warren Buffett denies a bubble in US stocks: Buffett said stocks "might be a little on the high side now, but they've not gone into bubble territory."

Yet he further stated that:  "I don't find cheap stocks to buy either," he said, adding after follow-up questions that there were "very little" and "very few" bargains out there right now.

For Mr. Buffett, the framing of bubble in the context of portfolio management matters. 

In Berkshire’s 2014 annual report, Mr. Buffett wrote: (bold mine)

There is an important message for investors in that disparate performance between stocks and dollars. Think back to our 2011 annual report, in which we defined investing as “the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power – after taxes have been paid on nominal gains – in the future.”

The unconventional, but inescapable, conclusion to be drawn from the past fifty years is that it has been far safer to invest in a diversified collection of American businesses than to invest in securities – Treasuries, for example – whose values have been tied to American currency. That was also true in the preceding half-century, a period including the Great Depression and two world wars. Investors should heed this history. To one degree or another it is almost certain to be repeated during the next century. 

Stock prices will always be far more volatile than cash-equivalent holdings. Over the long term, however, currency-denominated instruments are riskier investments – far riskier investments – than widely-diversified stock portfolios that are bought over time and that are owned in a manner invoking only token fees and commissions. That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk. Though this pedagogic assumption makes for easy teaching, it is dead wrong: Volatility is far from synonymous with risk. Popular formulas that equate the two terms lead students, investors and CEOs astray. 

It is true, of course, that owning equities for a day or a week or a year is far riskier (in both nominal and purchasing-power terms) than leaving funds in cash-equivalents. That is relevant to certain investors – say, investment banks – whose viability can be threatened by declines in asset prices and which might be forced to sell securities during depressed markets. Additionally, any party that might have meaningful near-term needs for funds should keep appropriate sums in Treasuries or insured bank deposits. 

For the great majority of investors, however, who can – and should – invest with a multi-decade horizon, quotational declines are unimportant. Their focus should remain fixed on attaining significant gains in purchasing power over their investing lifetime. For them, a diversified equity portfolio, bought over time, will prove far less risky than dollar-based securities

Yet action speak louder than words.

Berkshire Cash and Cash Equivalents since 1995

Berkshire cash at US$ 60.98 billion or 17% of market cap as of yesterday (based on Yahoo Finance).

The cash holdings of Mr. Buffett’s flagship Berkshire Hathaway has been skyrocketing.

From an annualized basis, Berkshire’s biggest gain in cash equivalent has been in 2014. Yet since 2008, Berkshire has been stockpiling cash reserves.

And the crux has been, Berkshire has done little to use those cash hoard!

While it may be true that “a multi-decade horizon, quotational declines are unimportant”, buying at a elevated prices will have an impact on portfolio returns even at the long run. 

And what Mr. Buffett didn’t say has been that most of Berkshire’s holdings has been from long term positions, rather than from current investments.

It’s true that Berkshire Hathaway recently bought $560 million in the automotive sector through Axalta Coating System, a 145-year old seller of coatings for cars, SUV’s and commercial vehicles, but this hardly signifies a dent on the $60 billion stash.

At least Mr. Buffett has been candid to admit that he is just human and has been subject to miscalculations and losses.

In the same annual report he shares the sad experience of Berkshire’s position with Tesco.

Attentive readers will notice that Tesco, which last year appeared in the list of our largest common stock investments, is now absent. An attentive investor, I’m embarrassed to report, would have sold Tesco shares earlier. I made a big mistake with this investment by dawdling.

At the end of 2012 we owned 415 million shares of Tesco, then and now the leading food retailer in the U.K. and an important grocer in other countries as well. Our cost for this investment was $2.3 billion, and the market value was a similar amount.

In 2013, I soured somewhat on the company’s then-management and sold 114 million shares, realizing a profit of $43 million. My leisurely pace in making sales would prove expensive. Charlie calls this sort of behavior “thumb-sucking.” (Considering what my delay cost us, he is being kind.)

During 2014, Tesco’s problems worsened by the month. The company’s market share fell, its margins contracted and accounting problems surfaced. In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives.

We sold Tesco shares throughout the year and are now out of the position. (The company, we should mention, has hired new management, and we wish them well.) Our after-tax loss from this investment was $444 million, about 1/5 of 1% of Berkshire’s net worth. In the past 50 years, we have only once realized an investment loss that at the time of sale cost us 2% of our net worth. Twice, we experienced 1% losses. All three of these losses occurred in the 1974-1975 period, when we sold stocks that were very cheap in order to buy others we believed to be even cheaper

Finally, yet some very useful advise from the annual report (bold italics mine)

If the investor, instead, fears price volatility, erroneously viewing it as a measure of risk, he may, ironically, end up doing some very risky things. Recall, if you will, the pundits who six years ago bemoaned falling stock prices and advised investing in “safe” Treasury bills or bank certificates of deposit. People who heeded this sermon are now earning a pittance on sums they had previously expected would finance a pleasant retirement. (The S&P 500 was then below 700; now it is about 2,100.) If not for their fear of meaningless price volatility, these investors could have assured themselves of a good income for life by simply buying a very low-cost index fund whose dividends would trend upward over the years and whose principal would grow as well (with many ups and downs, to be sure).

Investors, of course, can, by their own behavior, make stock ownership highly risky. And many do. Active trading, attempts to “time” market movements, inadequate diversification, the payment of high and unnecessary fees to managers and advisors, and the use of borrowed money can destroy the decent returns that a life-long owner of equities would otherwise enjoy. Indeed, borrowed money has no place in the investor’s tool kit: Anything can happen anytime in markets. And no advisor, economist, or TV commentator – and definitely not Charlie nor I – can tell you when chaos will occur. Market forecasters will fill your ear but will never fill your wallet.

The commission of the investment sins listed above is not limited to “the little guy.” Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades. A major reason has been fees: Many institutions pay substantial sums to consultants who, in turn, recommend high-fee managers. And that is a fool’s game

Well, the above insight brings us back to Mr. Buffett’s old adage: 'You want to be greedy when others are fearful. You want to be fearful when others are greedy. It's that simple.'

So there you have it, for Mr. Buffett the term "bubble" seems as a political sensitive word. So he fudges this by framing the market over the long term versus the short term. 

Updated to add: Of course uttering the word 'bubble' may just deflate Mr. Buffett's glory, prestige and esteem, as the investing public would refrain from pushing up Berkshire Hathaway or assets held by Berkshire.

Yet in his 2014 annual report Mr. Buffett made lots of caveats in citing "borrowing has no place in the investor's tool kit" when US non-financial companies has been in a borrowing splurge, that makes markets susceptible to "anything can happen anytime in the markets".

And if one looks at Mr. Buffett's Berkshire’s Hathaway cash stash, they seemed positioned for a coming fat pitch…

So do as I say, not as I do.