Invite ye felawes and frendes desirous in gold to enter the gates of Shrewd'm, for they will thanke ye later.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 3
I've followed the DShort pages for years. Corporate Equities to GDP had recently exceeded 200%. Last quarter was down to 140%. Still high in my estimation. Its lowest point in the past 30 years was in 2009 at 65%.(Numbers from the first graph)
Link summarizes what The Buffett Indicator is and different ways it can be calculated.
https://www.advisorperspectives.com/dshort/updates...
No. of Recommendations: 6
It's not a perfect indicator, in that the numerator and denominator don't use the same set of companies.
I prefer to compare Wilshire to metrics of the value of Wilshire, or S&P to metrics of the value of S&P 500, etc.
But still, it's not so bad. The fraction of US companies that are publicly listed doesn't change THAT much though time.
The most interesting thing I found from that article is how close relatively recent valuation levels were to their crazy 1999/2000 peak.
Those are levels I never expected to see again.
Jim
No. of Recommendations: 7
I prefer to compare Wilshire to metrics of the value of Wilshire, or S&P to metrics of the value of S&P 500, etc.
But still, it's not so bad. The fraction of US companies that are publicly listed doesn't change THAT much though time.
The most interesting thing I found from that article is how close relatively recent valuation levels were to their crazy 1999/2000 peak.
Those are levels I never expected to see again.
Using the Wilshire quarterly numbers for market cap (quarter average) as a percentage of GDP:
Average since 1970: 82.8%
2000 peak: 136.9%
2008 low: 56.6%
2022 peak (Q1): 195.3%
End of 2022 (Q4): 146.7%
So recent levels (at least for the last 4 years) are not just close to the 2000 peak, they are all well above that crazy 2000 peak. The Wilkshire 5000 is down about 15% from its all-time peak at the end of October, 2021, and GDP is up a bit, but that's not enough to bring the most recent ratio back down to the 2000 peak.
This is not at all in tune with what many people are saying about 'low share prices' since the recent correction. We are still more than 60% higher than the 50-year average. And even counting only the years since 1995, the average of the last 25 years is still way below where we are now.
dtb
No. of Recommendations: 1
how close relatively recent valuation levels were to their crazy 1999/2000 peak.
Those are levels I never expected to see again.
How do you see this in light of their observation that "A conspicuous feature of the Buffett indicator is the upward trend over the decades" which seems to give a very different picture than the pure number 140%?
No. of Recommendations: 3
We've reached a permanently high plateau I reckon. A new age, era. It's different this time.
I'll grab my coat.
No. of Recommendations: 12
Warren said,
"If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you.
If the ratio approaches 200% as it did in 1999 and a part of 2000 you are playing with fire."
70-80% is a long way down...
Please make sure your seat backs and tray tables are in their full upright position!
No. of Recommendations: 1
Yes for sure. I heard, I'm sure you did too, that Buffett had sold all his personal holdings and is in process of wiping out the Berkshire stocks too.
Right? Easy call isn't it?
No. of Recommendations: 5
99.99% want to avoid lower quotes no matter what it takes and no matter in the end what the outcome. Those lower quotes, they are just horriffic. If you don't believe that just turn on CNBC on a down day...or down week...or month.
Old dealraker is always the same jerk, his posts never get likes, and sometimes like when he questioned the outrageous upside forcasted for BPY or the fact that just maybe Occidental was a better buy than Google and Facebook he gets tossed.
My biggest concern is that the "bigs" take out all the good businesses. For instance, in my investors club when Warren slid in and took out (read STOLE) Burlington Northern which out club and I personally owned...what was the reaction?
The club bunch had a wine and cheeze celebration.
Old dealraker got a prescription from the doc to treat "investment depression."
Life is great...if you can stand it.
No. of Recommendations: 3
Warren and Charlie said such high valuations could only make sense in a prevailing low interest rate environment.
Those days are gone and we are resetting back to normalcy, higher interest rates long term and back towards long term market averages. The pendulum is swinging back.
No. of Recommendations: 5
"Link summarizes what The Buffett Indicator is and different ways it can be calculated."
The author doesn't show forward returns versus the Buffett indicator, but such a graph gives a reasonably good fit, with 10-year nominal returns of around 15% at the low end of the indicator scale and around 0% at the high end. The trendline of the graph of return vs indicator suggests about a 3% forward return as of today.
Just a nit-picky point regarding the article... I would not "de-trend" the Buffett ratio by assuming that it increases exponentially with time. Rather, simply plot the market cap (or S&P 500 index or Wilshire 5000 index) versus GDP (log-log) and fit a trendline to it (power law). Then plot market cap/trendline versus time to see how much the market is overvalued or undervalued at any point in time. This approach does not assume that the Buffett ratio increases exponentially with time; it simply assumes, as the data show, that market cap tends to increase as GDP increases. Just my two cents.
No. of Recommendations: 6
No. of Recommendations: 3
"This 2013 article compares returns versus various metrics"
John Hussman discusses various forecasting metrics in his Feb 2022 market commentary.
https://www.hussmanfunds.com/comment/mc230221/His preferred metric predicts a 12-year nominal, annualized return for the S&P 500 of about -2%. P/S also predicts about -2%.
Whatever metric we use, market cap/GDP, P/S, nonfinancial market cap/gross value added or whatever, the forecast for the return of the S&P 500 over the next 10-2 years is dim, lower than Treasuries. The primary reason is not low sales or earnings growth, or declining margins, but rather high valuation. Fortunately, value stocks, including Berkshire Hathaway, tend to outperform the S&P 500 during periods when the return of the S&P is low, typically by about 3 percentage points.
No. of Recommendations: 0
"John Hussman discusses various forecasting metrics in his Feb 2022 market commentary."
That should be the Feb 2023 commentary.
No. of Recommendations: 1
"Whatever metric we use, market cap/GDP, P/S, nonfinancial market cap/gross value added or whatever, the forecast for the return of the S&P 500 over the next 10-2 years is dim, lower than Treasuries."
GMO updated its forecasts for various asset classes on Friday. Their 7-year forecast for US large caps is -1.1% real. Research Affiliates' 10-year forecast for US large caps as of Feb 28 is +2.2% real.
