Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 18
So I have not read this before and thought I would pass it along, mostly because it jibes with my view that the market is pretty close to toppy, even as others opine that “a new high usually means another new high is coming…” or words to that effect.
https://finance.yahoo.com/news/warren-buffett-favo... Warren Buffett’s favorite market indicator is flashing red The “Buffett Indicator” is flashing red.
In 2001, Warren Buffett came up with what he called in Fortune Magazine
“probably the best single measure of where [stock] valuations stand at
any given moment.” Today that barometer has soared to a two-year high,
signaling that a market retreat could be coming.
What’s happening: Widely known as the “Buffett Indicator,” it measures
the size of the US stock market against the size of the economy by taking
the total value of all publicly traded companies (measured using the
Wilshire 5000 index) and dividing that by the last quarterly estimate
for gross domestic product.
The resulting ratio is supposed to tell us how fairly priced stocks are
by providing a simple gauge of whether the market is overvalued or
undervalued relative to economic output. If the stock market is growing
a lot faster than the economy, that could be a sign of a bubble.
Buffett’s Berkshire Hathaway says that a reading of 100% is fair,
if it’s closer to 70% stocks are at a bargain price, and if it’s
anywhere near the 200% mark, investors are “playing with fire.”
The indicator is currently sitting near a two-year high, at nearly 190%.
No. of Recommendations: 3
I've been thinking I should be reducing my stock % due to rather lofty prices/valuations and that I'm retired. Maybe cut back to about 30% stocks for a while. I know my Facebook/META holdings seem to be getting pretty high.
Usually when I think I should, I get lazy and do nothing, and then I see a 20% or so loss and get annoyed with not doing anything.
No. of Recommendations: 8
No. of Recommendations: 1
Thanks for that post ! gave me the little kick I needed. was sorry to let my BAC (amongst others trimmed ) go tho, but out on a 52 week high, so not all bad...it was never a LT hold for me. (see prior posts)
No. of Recommendations: 8
In 2001, the Buffett indicator was the ratio of the size of the US market to the against the US economy, Since that time, US companies earnings from foreign sources has soared. Even BRK is now in the Japanese market. Perhaps a better indicator would be to track earnings from foreign sources and add a percentage of the world GDP less US GDP to the denominator.
(US market capitalization)/((1-x)*us GDP + x * World GDP ex US GDP)
"x" would be the percentage of earnings received from foreign sources.
Craig
Revenues from foreign sources - about 40%
https://www.globalxetfs.com/sector-views-sp-500-se....
No. of Recommendations: 16
In 2001, the Buffett indicator was the ratio of the size of the US market to the against the US economy, Since that time, US companies earnings from foreign sources has soared. ...Revenues from foreign sources - about 40%
The number is very large, but it's not really right to say that it has soared lately. It has been a big number for a very long time. Working from memory, ex-US revenues of large US firms were on the order of 1/3 even 50 years ago.
Jim
No. of Recommendations: 19
Jim,
How are you and Covid getting along by now? I hope you are besting that rascal and are headed due North!!
Best Wishes,
Philmordun
No. of Recommendations: 19
“My impression is that investors are presently enjoying the double-top of the most extreme speculative bubble in US financial history,” legendary investor John Hussman wrote in a recent note. Hussman predicted the 2000 and 2008 market crashes.
Always puzzle me why permabear Hussman is still relevant.
Hussman Growth Fund average annual total return: 10y -3.87%, since inception from 7/2000 0.57%
John Hussman est net worth 500 mil+. That's the legendary part.
No. of Recommendations: 2
n 2001, the Buffett indicator was the ratio of the size of the US market to the against the US economy, Since that time, US companies earnings from foreign sources has soared. ...Revenues from foreign sources - about 40%
The number is very large, but it's not really right to say that it has soared lately. It has been a big number for a very long time. Working from memory, ex-US revenues of large US firms were on the order of 1/3 even 50 years ago.
Exact numbers are hard to come by. Approximately in the last 20 years, world GDP has tripled, US gdp had doubled and foreign revenue for SP 500 has doubled (from various internet sources but none consistent with each other). Seems reasonable considering 2002, the US was importing 4M barrels of oil a day at $50/bbl and is now exporting 3.8M B/day at $70/bbl, Apple etc.
Craig
No. of Recommendations: 17
“My impression is that investors are presently enjoying the double-top of the most extreme speculative bubble in US financial history,” legendary investor John Hussman wrote in a recent note. Hussman predicted the 2000 and 2008 market crashes.
He also predicted the 2001, 2002, 2003, 2004, 2005, 2006, 2007, and 2009-2020 market crashes.
No. of Recommendations: 6
“My impression is that investors are presently enjoying the double-top of the most extreme speculative bubble in US financial history,” legendary investor John Hussman wrote in a recent note. Hussman predicted the 2000 and 2008 market crashes.
He also predicted the 2001, 2002, 2003, 2004, 2005, 2006, 2007, and 2009-2020 market crashes.
Hussman's market commentary has always been a model of seriousness and erudition. It has made a strong impression on me because it has been so unflinchingly wrong for so long. It is shocking for me to consider that my career as an investor has coincided with a period without a single buying opportunity!
To me Hussman represents an inverted version of the "value trap," in which "fair value" becomes an ever-receding mirage that ultimately exists only in your head.
Baltassar
No. of Recommendations: 3
“We have long felt that the only value of stock forecasters is to make fortune-tellers look good” is among many memorable Buffett quotes
Preach
No. of Recommendations: 1
There is perhaps a good reason why he never mentioned or used this metric again. It is a terrible metric on so many levels.
