patrick.net

The Buffett Indicator, also known as Market Cap to GDP, has gained prominence as a long-term valuation indicator for stocks, largely due to Warren Buffett's endorsement. In a Fortune Magazine interview back in 2001, Buffett referred to it as "probably the best single measure of where valuations stand at any given moment." This statement has drawn attention to the indicator's potential significance in assessing market conditions. The calculation of the Buffett Indicator involves dividing the total market value of all publicly-traded stocks within a country by the country's Gross Domestic Product (GDP). By comparing the stock market's size to the overall economic output, this ratio provides insights into the relative valuation of the market.

EBGuy says

The Buffett Indicator

The Buffett trend shows over valuation compared to the year 2000. Same as far as the below indicators.

https://www.currentmarketvaluation.com/models/s&p500-mean-reversion.php

https://www.currentmarketvaluation.com/models/price-earnings.php

Looks like earnings have to increase and catch up with price of stocks, just like income has to catch up with housing costs.

The silver lining is that there is plenty of space or margin to decrease the Fed Funds rate.

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About 40% of the sales of S&P companies are from overseas operations. While the Buffet Indicator may have been useful at one point, it is woefully out of date with respect to current global trade.

Misc says

About 40% of the sales of S&P companies are from overseas operations. While the Buffet Indicator may have been useful at one point, it is woefully out of date with respect to current global trade.

Good point as the valuation is based on foreign sales but obviously GDP is not.

GDP would need to be adjusted to account for this in order to improve the Buffett indicator's accuracy.

Here's the only Buffet indicator one needs to see:



The guy is not beating the market.

Misc says

About 40% of the sales of S&P companies are from overseas operations.

Incidentally, this is why "diversifying" into foreign equities is unnecessary - you get all diversification you'll ever need from the US stocks while avoiding shit sandwiches like GAZP.

RWSGFY says

Here's the only Buffet indicator one needs to see:

I agree as BRK-B has made a few mistakes recently but BRK-B is up 903% compared to 230% for the S&P 500 since 1 January 2000.

https://www.cnbc.com/2021/01/08/how-warren-buffetts-uphill-battle-against-the-sp-500-is-changing.html

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Why is the US economy supposedly doing better based on Biden admin reported economic statistics ? Because its an election year ..

I will laugh my ass off if Biden wins and then the economy crashes by early 2025 especially due to accounting adjustments down to those economic stats

https://www.cnn.com/2024/01/26/economy/us-gdp-other-countries/index.html

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AD says

RWSGFY says

Here's the only Buffet indicator one needs to see:

I agree as BRK-B has made a few mistakes recently but BRK-B is up 903% compared to 230% for the S&P 500 since 1 January 2000.

https://www.cnbc.com/2021/01/08/how-warren-buffetts-uphill-battle-against-the-sp-500-is-changing.html

To me, 5 years seems like a reasonable time span to asses an investment. I usually ditch stocks which fail to beat S&P over 5 years. 20 years is meaningles to me, because it's not much different from HODL. So if I owned BRK-B it would be sold now.