You're probably wondering, the market seems pretty high, right? How long can the euphoria last? Warren Buffett has a few things to say about it. He explains that the markets can have booms and busts that can last for close to 20 years. The market can be depressed too, all while the real economy of the country is going up and up.

If you can detach yourself temperamentally from the crowd, you have an opportunity to become very right. Be careful not to get carried away by ridiculously high prices, and expect a return that is not crazy compared to the price you're paying.

An excerpt from his speech where he arguments the points here:

So GDP per capita in the 20th century in the US went up 610%. Actually, qualitatively it went up far more than that, because you can't really measure certain things in medicine or whatever it may be, and improvement. But just on a quantitative basis in one of every single decades including the decade of the 30's. So here you had a 100 years basically the US citizenry was improving a lot, decade by decade. The 30's was up 13%. Best decade was World War II, the 40's, up 36%. The worst decade was World War I. But in any event it was a huge period.

Interestingly enough, there were six big periods in there in the stock market in both directions. There were three big bull markets. In 1900 to 1920 the Dow went from 66 to 71, less than a 10% move in 20 years. Less than a half percent a year when you don't count dividends. It basically didn't move. From 1921 to 1929 it went from 71 to a high of 381 in September of 1929. It went up 500%. Well, obviously the well-being of the country didn't go up 500% during that period, and the well-being of the country went up a whole lot more than 10% during that first 21 years. So you've got a very uneven development.

From 1929 in September until the end of 1948 the Dow went from 381 to about 180. It was cut in half, and that was 18 long years. And yet the per capita GDP was moving right up during this whole period, so the economy was doing fine.

From 48 to '65 the Dow went again from about 180 up to close to 1000. Again five for one, which was far outstripping it.

From '65 to '81 the Dow went down, literally, while again per capita GDP went up.

And then we've had this last period where it's gone up terrifically (he's talking about up to the 2000's).

If you take the whole hundred years, it went up 180 for one. Every thousand dollars became 180,000. But 43 and a quarter year, and 43 and three quarters years were those three big bull markets. And 56 and a quarter years were periods of stagnation. All in an economy that was doing fine, year after year. 56 and a quarter years the Dow was net down a couple hundred points during that period. The other 43 and three quarters years made up the rest of the move from 66 to 11,000 some on the Dow.

So you say to yourself: How could it be that you could have a country that was doing better and better and better. Generations were living better than the one they preceded. But you had these huge changes, big gains a few times, long periods of stagnation. 20 years, that's a long time to do nothing.

The answer is that investors behave in very human ways, which is they get very excited during bull markets, and they look in the rear view mirror and they say: I made money last year. I'm going to make more money this year, so this time I'll borrow. Or the neighbor says: You know, I wasn't in last year when that neighbor dumber than I made a lot of money, so I'm going to go in this year. So they always look in the rear view mirror. And when they look in the rear view mirror and they see a lot of money having been made in the last few years they plow in and they just push and push on prices. And when they look in the rear view mirror and they see no money having been made, they just say this is a lousy place to be, so they don't care what's going on in the underlying business. And it's astounding, but that makes for a huge opportunity. Just huge opportunity!

I mean, I've lived through roughly half that period in an investing sense. And I've had that long period of stagnation, from 65 to 82. 17 years. I wrote an article for Forbes in 1979. I just said, how can this be? Pension funds in 1970 put a hundred and some percent of their new money in stock because they were wild about stocks. Then they got a lot cheaper and they put a record low in, nine percent of their net new money. And that was in 1978 when stocks were way cheaper. People behave very peculiarly in terms of the reactions because they're human beings and they get excited when others get excited, they get greedy when others get greedy, they get fearful when others get fearful. And they'll continue to do so.

You will see things you won't believe in your lifetime in securities markets. The country will do very well over time, but you will see these huge waves. If you can stay objective throughout that. If you can detach yourself temperamentally from the crowd, you'll get very rich. You won't have to be very bright. I'm sure you are, but it doesn't take brains, it takes temperament. It takes the ability to sit there and look at something. When I started out in 1950, I would go through and find things at 2x earnings, and they were perfectly decent businesses, and people wanted jobs at those companies. And everybody knew they were going to be around. And they wouldn't buy them at 2x earnings, and that's when interest rates were 2.5%.

I started selling securities when I was 21, and a Kansas city life insurance company happened to be a fairly prominent company in Omaha, and the policies they sold you, if you were buying life insurance from them, had a built-in assumption of two percent interest. The stock of Kansas City Life was selling at less than 3x earnings. You were getting 35% if you bought the stock. No question about the soundness of the company.

I went to the local agent. I thought I figured I'll be able to sell him a few shares of stock. I mean, the guy would understand, he's got his whole life invested in this company. I went to the local agent who'd been with them for 20 years, and his name was Mr. Moose. And I said, you're selling these policies with 2%. You may even have a few on members of your own family, and you can buy into this company whose paycheck you depend on every month, and you know, and whose future your beneficiaries of these life policies depend on. And who you're selling them a 2% investment on. And you can get 35% on your money in stock! Year, you know, stocks aren't any good, answered Mr. Moose.

I couldn't sell it you know. I was a lousy salesman, you have to start with that, but it just blew me away.

I used to wonder I was nuts. But the same thing happened in 1964. The Dow closed at 864. At the end of 1981, 17 years later, it closed at 865 - it moved one point in 17 years. That's not a big move. You can't believe how discouraged people were during that period. But people are living better. So things can go on a long time that don't make sense. But they do come to an end.

Like this internet thing... You had these companies selling for many billions of dollars that had practically no prospects of making any money. That's a bubble! But Herb Stein one time said: Anything that can't go on forever will end. Now that's incredible, but think about that. Particularly think about it next time you're trying to do something just because the stock's gone up a whole lot. And your neighbor's made money or something.

You've just got to think objectively and think: would I buy this whole business? It's an internet company and it's got 100 million shares outstanding, and selling at 100. That's 10 billion dollars. Is it worth 10 billion dollars? If it's worth 10 billion dollars it's got to be able to give you seven or eight hundred million next year. If it doesn't give you seven or eight hundred million next year, it has to give you maybe 10% more than that the year after and continue. There aren't a lot of business that can do that. People just go crazy, and of course it's fun. I mean, it's like that sign they put in brokerage offices that says: Avoid hangovers, stay drunk! It's just so much fun to keep playing. But you gotta do sensible things to get good results.