Warren Buffett Indicator hits 215%, the most expensive stock market valuation in history?

There are some folks (mostly sell-side people at brokerages) that would like to pick holes in the indicator. But, yeah.

It's one of those "better to be approximately right than precisely wrong" things. Even with quibbles, clearly US equities are in aggregate very much more expensive these days than at most other times in the past.

Technically speaking that doesn't say what valuations will be like in the future, but to the extent that things rhyme with history the likely forward returns will be poor. Starting today, ending at (say) any date that's at the average valuation level in the next 20 years, whatever that may be.

The biggest danger to valuations would be if net profit margins fall back even partway towards the historically normal range. Oddly enough, I don't think we'll see much of that, since vast corporate profits are to a large extent the macroeconomic flip side of vast budget deficits. And nobody who's looked at the numbers expects those to get smaller in the next few decades.

Jim

Berkshire Hathaway FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.