{"id":36423,"date":"2018-08-04T12:49:28","date_gmt":"2018-08-04T17:49:28","guid":{"rendered":"http:\/\/olduvai.ca\/?p=36423"},"modified":"2018-08-04T12:49:28","modified_gmt":"2018-08-04T17:49:28","slug":"warren-buffets-favorite-stock-market-metric-is-signaling-huge-downside-ahead","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=36423","title":{"rendered":"Warren Buffet\u2019s Favorite Stock Market Metric Is Signaling Huge Downside Ahead"},"content":{"rendered":"
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Warren Buffet\u2019s Favorite Stock Market Metric Is Signaling Huge Downside Ahead<\/a><\/h3>\n

Today \u2013 Apple became the first<\/em> public company\u00a0worth over $1 trillion dollars. . .<\/p>\n

Thanks to very low interest rates \u2013 the company\u2019s piling on debt<\/a> and buying their own shares back \u2013 shrinking the float.<\/p>\n

\"\"<\/p>\n

And because of a worldwide rush into mutual funds and exchange traded funds (ETF\u2019s) \u2013 there\u2019s crazy demand for Apple shares.<\/p>\n

The king of \u2018buy and hold\u2019 investing and a Champion of equities \u2013 Warren Buffet<\/em> \u2013 must a have grin on his face from ear to ear. Because Apple\u2019s surge just netted him a huge<\/em> profit for his company \u2013 Berkshire Hathaway \u2013 of over $2.6 billion.<\/p>\n

Many, now, may be thinking that they<\/em> should buy\u00a0Apple and other such stocks \u2013 right?<\/p>\n

Well, not exactly.<\/em><\/p>\n

Because according to this favorite Buffet metric \u2013 the market looks extremely<\/i> overvalued and the future looks scary.<\/p>\n

The Market Cap-to-GDP metric is a long-term value indicator. And it\u2019s become popular recently thanks to Warren Buffet.<\/p>\n

During an interview in 2001 with Fortune<\/a> \u2013 he claimed that this indicator is \u201cprobably the best single measure of where valuations stand at any given moment.\u201d<\/em><\/p>\n

And what his favorite indicator\u2019s showing us today is that stocks are more over-valued than they\u2019ve ever been. . .<\/p>\n

So \u2013 what is the Market Cap to GDP \u2013 aka the \u2018Buffet Indicator\u2019?<\/p>\n

It\u2019s easy. Just calculate the total market value of all stocks outstanding and divide it by the nations GDP<\/em>.<\/p>\n

When the ratio is greater<\/em> than 100% \u2013 it means that stocks are considered overvalued and have historically less upside going forward.<\/p>\n

And when the ratio is less<\/em> than 100% \u2013 it means the opposite. That stocks are considered undervalued and historically have more upside.<\/p>\n

I look at it this way: when the \u2018Buffet Indicator\u201d is more than 100%, the stock market is negatively asymmetric<\/em> (high risk, low reward). And when it\u2019s less than 100%, the stock market is positively asymmetric<\/em> (low risk, high reward).<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

Warren Buffet\u2019s Favorite Stock Market Metric Is Signaling Huge Downside Ahead Today \u2013 Apple became the first public company\u00a0worth over $1 trillion dollars. . . Thanks to very low interest rates \u2013 the company\u2019s piling on debt and buying their own shares back \u2013 shrinking the float. And because of a worldwide rush into mutual […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[19913,29,4585,195,8258,8259,7824,13208,11417,19915,21103,1138,2567],"class_list":["post-36423","post","type-post","status-publish","format-standard","hentry","category-economics","tag-adem-tumerkan","tag-apple","tag-berkshire-hathaway","tag-debt","tag-etfs","tag-exchange-traded-funds","tag-market-cap","tag-market-cap-to-gdp","tag-mutual-funds","tag-palisade-research","tag-stock-buyback","tag-stock-market","tag-warren-buffet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36423","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=36423"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36423\/revisions"}],"predecessor-version":[{"id":36424,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36423\/revisions\/36424"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=36423"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=36423"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=36423"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}