The 10-year is at 5%. Buffett already warned that changes the math.

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WARREN BUFFETT ON WHY INTEREST RATES ARE THE MOST IMPORTANT NUMBER IN INVESTING

The 10-year Treasury hit 5% today for only the second time since 2007. When Buffett said this in 2017, it was at 2.15%, and he explained why that made stocks look cheap.

“If you look at the 10-year government at 2.15, that means you’re paying 45 times earnings when you buy that bond. And the earnings aren’t going to go up.”

“Interest rates are to stock prices what gravity is to matter. If interest rates were nothing and they’re going to be nothing forever, you’d be buying stuff that would yield you one percent or two percent.”

“If interest rates on the short rate are 21%, like they were in 1982 under Volcker, you can look at a stock at six times earnings and say, well, that really isn’t that attractive. That’s what drives valuations.”

At 5%, the 10-year is 20 times earnings. The gravity just got a lot stronger.

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