Warren Buffett's Favorite Market Indicator Says Stocks Are in Trouble
Source: MSN Money
Paul J. Lim 6 hrs ago
Forget trying to run complicated calculations or read the stock markets tea leaves. Warren Buffett says the single best way to tell if stocks are too expensive is to look at two simple numbers: the total value of all equities in the market and the total size of the economy.
Then compare them.
When the value of all stocks is 80% or less than the size of the economy, buying stocks is likely to work very well for you, Buffett wrote in an article for Fortune back in 2001. But when total equity value exceeds the size of the economy and then some, its a sign that investors are getting too giddy and greedy.
Today, Buffetts favorite market indicator is flashing its biggest warning sign yet.
The value of all the equities in the Wilshire 5000 Total Market Full Cap Index (a proxy for the entire domestic market) stands at $26 trillion. Thats 135% of U.S. gross domestic product (GDP), according to figures tracked on a quarterly basis by the Federal Reserve Bank of St. Louis.
Read more: http://www.msn.com/en-us/money/markets/warren-buffetts-favorite-market-indicator-says-stocks-are-in-trouble/ar-AAsgyph?li=BBnbfcN
Bernardo de La Paz
(49,007 posts)When the Trump Slump arrives, he needs to be reminded that he has to take the blame because by then it will be his policies that will be taking hold.
saidsimplesimon
(7,888 posts)will blame, who else, Former Secretary and First Lady Hillary R. Clinton.
bucolic_frolic
(43,182 posts)Few realize it but stock markets turn lower when the economy approaches full potential because there's limited upside remaining.
Go short, young man!
Plenty of ETF index inverse (short) funds that are pretty cheap right now. But beware, these are not for the long haul because as structured they lose NAV when the market is not moving at all. It's more a timing play, short to light intermediate term.
saidsimplesimon
(7,888 posts)is a favourite hedge fund tactic.
I wonder what George Soros has to say? Silly me, why would he signal a move?
haveahart
(905 posts)And, a combination of ways to do this are important.
1. Raise taxes on the wealthy and reduce taxes on the middle and lower class.
2. Raise the Federal contribution to the ACA so that more people can get Medicaid and other forms of health insurance.
3. Invest more and more money in cities and rural areas to create good paying jobs with good benefits subsidized by Fed Taxes raised from the wealth stock profit hoarders.
4. NEVER, get rid of the Estate Taxes and raise them if necessary.
5. Force through legislation the reduction of housing costs, especially the high costs associated with vulture real estate con artists that are mostly foreigners not even living in the US.
6. Subsidized childcare for families based on their income with respect to the poverty level.
7. Legislate PROFIT controls on all health insurers if single-payer is not adopted.
saidsimplesimon
(7,888 posts)Critters had a desire to improve the economical situation of the majority. From your lips to legislation would be marvelous.
metalbot
(1,058 posts)And in some ways it's one of the WORST things about the ACA. Insurance companies are required to pay out a certain percentage of what they take in as premiums. Since that limits their potential profit margins, one way that you increase your profits is to not fight as hard for lower pricing, and then to pass the costs on to your consumers in the form of higher premiums the next year.
Bernardo de La Paz
(49,007 posts)Money sitting in real estate is idle money. Real estate doesn't produce anything: people do and people banded together as companies are even more productive and companies that can raise capital by stock sales are usually the most productive.
There's an orange real estate vulture perched in the Oval Office.
GeorgeGist
(25,321 posts)greediest men on earth. Just my 2 cents.
Bernardo de La Paz
(49,007 posts)http://archive.fortune.com/2010/06/15/news/newsmakers/Warren_Buffett_Pledge_Letter.fortune/index.htm
(excerpt)
Now, Bill and Melinda Gates and I are asking hundreds of rich Americans to pledge at least 50% of their wealth to charity. So I think it is fitting that I reiterate my intentions and explain the thinking that lies behind them.
First, my pledge: More than 99% of my wealth will go to philanthropy during my lifetime or at death. Measured by dollars, this commitment is large. In a comparative sense, though, many individuals give more to others every day.
JackRiddler
(24,979 posts)The billionaires' foundations are a way of converting robber barons into "philanthropists." The Gates Foundation in particular is supposed to still be around many decades after the deaths of its principals, determining policy and investment priorities for the world. This is a form of acquiring power, not ceding it. The Gates Foundation is more responsible than any other single actor for the kind of education "reform" that is destroying public education in this country.
masmdu
(2,536 posts)begin from S&P futures 2510.25 (8 points away). If exceeded the next likely area to mark a major turn is 2553-2575.
And, yes, I will be shorting here.
You're welcome