In 1989, the economist Paul Samuelson rated Warren Buffett the greatest stock picker in the country. Yet Samuelson warned against buying Berkshire Hathaway stock. He wrote that “knowledge of Buffett’s skills may be already fully discounted in the market-place. Now that B-H has gone up more than a hundredfold, it is at a premium."
a. Explain Samuelson’s reasoning in your own words.
b. People who followed Samuelson’s advice have regretted it, because the returns on B-H stock since 1989 have been similar to earlier returns. What does this tell us about Buffett and/or the efficient markets hypothesis?