r/stocks
Warren Buffett's Market Indicator Tops 232.1% as US Stocks Trade at Extreme Valuations: Why It Matters
Buffett's market indicator hits a record 232.1%, signaling extreme US stock valuations and historically preceding market downturns.
- Buffett indicator hit a record high of 232.1%, indicating extreme US stock valuations.
- Historically, similar peaks in the late 1960s, 2000, and 2021 were precursors to severe market downturns and bear markets.
https://www.ibtimes.co.uk/buffett-stock-market-gauge-record-high-1802117
Warren Buffett's time-tested stock market gauge just surged to an all-time high of 232.1%, showing that US stock valuations have reached extreme levels.
Historically, such elevated Buffett indicator levels have been precursors to market downturns. In the late 1960s, Buffett's indicator approached similarly high levels, as it did in 2000 during the dot-com bubble, and again in late 2021. After the 2021 peak of 197%, the US stock market experienced a prolonged bear market. Similarly, when the indicator hit 190% during the dot-com bubble, the market subsequently declined sharply.
This fking metric surges for 5 years now
Long the metric lul
That metric is obsolete. Most corporations are international now.
Better to just look at overall market PE and forward PE. As far as valuation goes.
Buffett himself has said it's obsolete. That said, most measures of the market such as the Shiller PE Ratio, Price/Sales, Price/Earnings, 10 Year US Treasury Interest Rates, S&P 500 Dividend Yield, you'll see that by almost any metric the market is fully valued or richly valued. That's not to say overvalued.
I think that's why so many people clash on this subject. The market isn't on the verge of crash but it is richly valued. Expensive, but not ready to burst. That implies more risk, but also less downside. It's difficult to rationalize those two things, and it tends to put people into a state of paralysis where they can't act, or a state of cognitive dissonance where they choose to believe this time is different.
The truth is, we're kind of just playing a game of chicken. The more expensive stocks get relative to their cash flows, the more risk is taken on. Right now we're all taking on more risk but there's little else to be done.
That implies more risk, but also less downside.
This doesn't make any sense. Higher valuations are riskier because they have more downside.
Most useless metric ever.
This metric compares only US GDP to US stock market, but market is now more global. More than 40% money in US stocks are from other countires. More people invest now than before, investing is more accessable to everyone. And so on, many things changed.
This is the biggest counter point in my opinion. Apple, Microsoft, google, meta, Nvidia, Amazon, Coca-Cola, Eli lily, you name an SP500 company, they all get way more international revenue than any company did back when this indicator was first popularized
So now when it crashes, everybody gets butt graped!
More than half of all Apple revenue is from overseas. US companies are more international than ever. This metric is no longer relevant.
It should really be World GDP to stock market cap.
Retail entering the market after COVID changed the game completely. It's the wild west now.
The casino doesn't care about metrics and fundamentals.
The metric is broken because it fails to account for the fact that US companies can earn income abroad.
Vibes. Everything runs on vibes and tweets now
Outdated metric
Meta is like 18 p/e....i dont see anything extreme...in fact i see undervalued assest...like Microsoft...etc
Other than IG, Meta doesn't have much going for it product-wise..
Lol oh no not the great bear market of 2022.
Also known as the "I should had fucking bought more" era
I was betting against Nvidia in 2022 because the 4000 series cards seemed not great value lol. Oh was I wrong
Sure thing, even if it happens, it will be bought up by the asset owning class pretty quickly.
The time of the middle class is over, it was a nice post WW2 experiment.
It would take a lot more disruption and pain than some arbitrary “market crash” to bring us back to ideals of the past.
How van i invest in the metric?
Even Buffett denounced this metric. Doomers on reddit love it though.
nope.
It was 250% when Nasdaq was 12k
What’s your point, this is old metric, before technological moats existed
We're gonna crash easilly to Nasdaq to 5k
It doesnt matter anymore because people buy the story, not the fondamental!
Maybe when most of the markets are actually ran by people. 70% of trades today are algorithms/bots
The middle class can afford to buy assets right now. I wouldn’t say physical real estate but anyone can buy stocks. There is still a ton of attractively priced assets for under $100 or even $50 per share.
My tulip sentiment tracker has been quiet so I’m not concerned.
Stocks gonna crash by 50%, enjoy bagholders.
In the long term, GDP growth averages 2% growth, stock market averages 10% growth. Isn't there a natural upward drift of the ratio of two numbers that grow at different rates
Stay broke fam ✌️
Doing better than you fam ✌🏼
Big super doubt but glad you feel that way. META will be a bigger company 5 years from now. If you don’t see that, that’s your problem!
It's too big to fail, of course it'll still be around and likely doing decently well. But its stock won't grow as much as other companies.
It’s extremely stupid when everyone takes this indicator lol 😂
But tech companies are carrying and they’re uniquely able to expand to overseas markets. ChatGPT barely has to change to expand all over the world instantly.
Don’t the guy just buy a metric ton of Google though? Thats why most of this stuff is noise.
what the fuck does extreme valuations mean? is this just the author's made-up term? be precise.
1999-2000 was a generational opportunity to buy beaten down value stocks.
Don’t sell just because the market is expensive, just make sure youre getting a good deal on the companies youre buying and youll be fine