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This doesn't take into account interest rates. Buffett himself has said recently that given the current interest rates stocks are not overvalued.
by mmmmkay 5y ago
This doesn't take into account interest rates.
Buffett himself has said recently that given the current interest rates stocks are not overvalued.
- mmmmkay 5y agonvm, just got to the "Criticisms of The Buffett Indicator" section where they cover just this topic :)
- danielmarkbruce 5y agoThey don't cover the % of revenue derived from overseas. Ie the GDP of the US is less meaningful over time for the S&P 500. It really should show total market cap / GDP of relevant jurisdictions weighted.
- plater 5y agoI don't think you are wrong, but then some of the US GDP belongs to other countries so there are also some deductions to do.
- danielmarkbruce 5y agoYup, I guess the MSCI 1500 (or similar) / global GDP is probably easiest.
- betterunix2 5y agoOn the other hand it is not likely that interest rates will remain this low for very long. How much money can be poured into 30 year bonds with less than a 2% coupon rate? How long will the Fed continue its asset purchase program? How much more supply can be added to the bond market before demand begins to run out? One way or another interest rates will begin to rise, and then the stock market will be forced to correct. We have had a 40 year bull market in bonds, but that is almost certainly coming to an end. There is just no more room for that bull to run.
- mmmmkay 5y agoWhile I don't disagree with you, another thing Buffett has said is, we can't predict what interest rates will be in the future, so why bother? You can only invest given the information you have today.