The stock market is flirting with highs and euphoria is omnipresent: pundits on TV tell us that its insane to miss

the boat. While battle between bulls and bears is raging, I thought of seeking wisdom of the legend one and only Warren Buffett.

Most analysts hate him because he wont give them guidance. And media ignores him because he wont predict stock prices. Nonetheless, Oracle of Omaha has uncanny ability to learn from history and to consistently beat major indices while most Ivy League educated fund managers fail to beat the market.

In pursuit of seeking true wisdom from the greatest investor, I found a pearl of wisdom from his speech at Allen & Company back in 1999 when market was irrationally exuberant.

Interest Rates

In economics, interest rates act as gravity behaves in physical world Warren Buffett

Any minute changes in interest rates impact all financial assets. His hypothesis is simple: we tend to forget what an investment is. Its a process of laying current dollar with expectation of receiving higher future value of the same dollar. Having said that, a dollar invested when interest rates are at 10% will yield lower return than the same dollar invested when interest rates are at 5%.

While interest rates are low since Fed Chairman has pledged to keep rates lower till our economy runs on all engines, I can only think of rates going higher in the future. Even if rates remain low, it wont go much lower than the current rate.

Corporate Profits

Another vital factor is the corporate profitability. For most of last century, corporate profits range was in 4-6% range. Corporate profits accounted for more than 11% of GDP in the last four quarters. Thats a staggering number even for Warren Buffett who predicted that its difficult for corporate profitability to remain much higher than 6% consistently.

While higher corporate profitability dictates higher returns, any financial turmoil can ruin the party.

Relationship between the total value of U.S. stocks to GNP

This is the single most touchstone to gauge future market direction.

Historically, total stock market value has ranged from 35% to almost 200% of GNP. Oracle of Omaha considers 75% and below as an indicator that market is largely undervalued to over 100% as largely overvalued. While market has not soared to 190% of GNP as it did back in March of 2000 before the collapse, it has briskly moved up to 110% of GNP.

Both interest rates and corporate profitability indicate that all is well, Oracle of Omaha has the ultimate advice for us mere mortals: People are habitually guided by rear view mirror, and for most part, vistas immediately behind them.

This wisdom speaks volume about the marvelous mix of simplicity and financial genius of the master investor.

Often most of us sell when market is too low and buy when market is too high as we are indeed guided by the rear view mirror.

History largely backs this hypothesis. In early 1900s, in the midst of the greatest industrial revolution, while GDP was growing rapidly, market barely moved higher. On the other hand, in the last few decades of the century, GNP grew at the half of what it did in the previous 20 years, yet markets zoomed to a new high.

Markets can march higher as long as interest rates remain low and corporate profits remain high, but both of those have hit the plateau. If you like simplicity of Warren Buffett, start thinking twice before adding more dollars to your investments as stock prices go way ahead of US GDP.

This is one reason I dont have cable. It allows me to seek true wisdom while most people mortgage their mind to CNBC. Do you agree?