The latest reading on Warren Buffett’s favorite valuation metric shows a bit of a decline, but still elevated levels. The latest reading of 105% is still consistent with a market that is overvalued and unattractive from a pure value standpoint. In the past, Buffett has said that he prefers to see this metric at 70%-80% before buying equities:
“For me, the message of that chart is this: 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.”
Clearly, we’re far from a level where equities are highly attractive according to this indicator.
See here for more on this metric.
![Cullen Roche](https://pragcap.com/wp-content/uploads/2022/01/Headshot2022-1-144x144.png)
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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