Loading...

Forum

You need to log in to create posts and topics.

Buffet Indicator, is it dead?

Equity Market Cap/GDP seems to be pointing to a record high in valuations.

Do you think this indicator is permanently higher ever since the dotcom bubble?

or is it dead and buried?

why the change if any? Interest rates?

hi @ZACH-ABEL,

I've done some research on this and there doesn't seem to be any rhyme or reason to the indicator. In some countries it is colossally higher with good equity performance and in others it is very low with poor equity performance.

Honestly, I am not sure what to make of it all. It does seem as though inflation determines most of the outcomes here. That is, growth does well when inflation is low and/or falling and value tends to do better when inflation is high/and or rising. But I am not a huge "factor" investor to begin with. I am sort of your cookie cutter boring market cap weighting equity guy. I know. Lame. But to me stocks are stocks are stocks. And once you're a public company they're so mature that they're very very difficult to differentiate according to any single "factor".

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

the only reason I foolishly followed this indicator was because it was associated with Warren Buffett

I still believe it is helpful in assessing the overall equity valuations.  With constantly decreasing interest rates the levels have changed, but ultimately fundamentals do matter, so earnings and GDP must have a say in valuations.