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The Buffett Indicator

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Re: The Buffett Indicator

#91

Post by mewpmewp2 »

greesil wrote: post #67

I thought for sure we were headed for a recession prior to covid based on this. The great thing about being a permabear is that eventually you are right. In the meantime you're a terrible investor who can't afford to buy a house. And then when your predictions are fulfilled, the prize for winning is everything going to crap in the world

> The great thing about being a permabear is that eventually you are right.

No guarantees. Even if a significant crash in the future happens, there's no guarantee it would even remotely reach the level we are at now.

I'm not saying "this time it's different", I'm saying it's always possible that "this time it's different".

Re: The Buffett Indicator

#92

Post by mewpmewp2 »

zcbenz wrote: post #24

Is Buffett indicator still relevant today with deep globalization? It does not take account of at least following factors: * Companies like BABA or SE that contribute little to US GDP. * Tech giants shift profits to low-tax countries. * Income from US only makes part of global giants' income. (I know almost nothing about economy so this is novice question, instead of a statement against the effectiveness of Buffett i…

I'd think this and everything Buffet used to do is obviously outdated. Any simplistic indicator or metric won't be more accurate than what a current market cap for the company is as financial companies, with state of the art tools, researchers and experience can determine what is accurate with far more efficiency than Buffet or any simple metric ever could. If they realise there's inaccuracy in a market cap somewhere, and there's reason to believe that the market cap will change in some direction, they will take the profit from it until there's nothing to take and market cap will be accurate again according to their calculations. Even if in some cases they might be wrong, they will be more accurate in the long run as any usual metric due to law of large numbers. Essentially when trying to use any indicators or metrics here you are playing poker against people who have far more information about the cards compared to what you have.

Re: The Buffett Indicator

#93

Post by mewpmewp2 »

sb057 wrote: post #44

I would just like to point out the fact that the S&P 500 is almost four times higher capitalized than it was a decade ago. There are three obvious reasons for this that come to my mind: * There has been massive asset inflation. * The market is in a speculative bubble. * The 500 largest American companies really are ~4 times more valuable than they were 10 years ago. Even with #3, the best case scenario, that alone sh…

4. We could be very soon reaching productivity explosion. You might think it's 2., but market has to account for that.

Re: The Buffett Indicator

#94

Post by belter »

belter wrote: post #88
nlitened wrote: post #85

Earlier quoted context omitted.

> It is a huge shame which central bankers somehow will have to pay for. You surely mean that central bankers will have to pay nothing, and poor people will pay.

Central Bankers will argue they did not know how the Economy works. They were able to pull off that one before: "Greenspan - I was wrong about the economy. Sort of" https://www.theguardian.com/business/2008/oct/24/economics-c... "‘I made a mistake,’ admits Greenspan" https://www.ft.com/content/aee9e3a2-a11f-11dd-82fd-000077b07... "Greenspan: I was wrong about the economy" https://youtu.be/XQFq97ljy3k "Greenspan Says…

In case you are wondering the current Fed chairman is considered a Greenspan admirer:

"Powell’s Homage to Greenspan Hints at a Fed Flashback" https://archive.is/Fk5Ou#selection-2695.0-2695.53

"Jerome Powell Channels Alan Greenspan in Putting Stamp on Fed" https://archive.is/R90mw#selection-3027.0-3027.61

"Fed Chairman Jerome Powell makes no secret of his admiration for Alan Greenspan—and now his actions looks a lot like his predecessor's" https://twitter.com/business/status/1303641312693039105

Re: The Buffett Indicator

#95

Post by autosharp »

Iv wrote: post #55
sb057 wrote: post #44

I would just like to point out the fact that the S&P 500 is almost four times higher capitalized than it was a decade ago. There are three obvious reasons for this that come to my mind: * There has been massive asset inflation. * The market is in a speculative bubble. * The 500 largest American companies really are ~4 times more valuable than they were 10 years ago. Even with #3, the best case scenario, that alone sh…

> their material contribution to society hasn't increased fourfold, If their contribution to the top 1% increased 400-fold, does that balance out?

As OP said,

> that alone should be setting off major alarm bells

No I don't think that balances out unless you think the 1% is much more important than the rest of society.

Re: The Buffett Indicator

#96

Post by autosharp »

californical wrote: post #61
jbay808 wrote: post #59

Earlier quoted context omitted.

You can actually create negative interest paper bank notes without needing cryptocurrency. One example is stamp scrip, where one must pay a recurring fee to maintain the note's validity: https://en.m.wikipedia.org/wiki/Scrip#Stamp_scrip

Isn’t that what we have inflation for though, essentially? It’s basically just an annual ~2% tax on cash (with some volatility)

The central bank only sets interest rates directly, but not inflation.

Re: The Buffett Indicator

#97

Post by pfortuny »

nlitened wrote: post #85
pfortuny wrote: post #65

As long as interest rates are essentially Breaking the concept of money as value in time (and that is what the ineterest rate means, because value now is better than value later) has broken all the basics of economics and finance. And is totally distorting. It is a huge shame which central bankers somehow will have to pay for. Edit: just to explain. "Value now" is better than "value later" or otherwise actions are ge…

> It is a huge shame which central bankers somehow will have to pay for. You surely mean that central bankers will have to pay nothing, and poor people will pay.

Payment comes either in this life or in the next one, as far as I believe. It is best to pay in this life, though...

Re: The Buffett Indicator

#98

Post by roenxi »

mewpmewp2 wrote: post #90
roenxi wrote: post #70

Earlier quoted context omitted.

The denizens of the investor forum would be wrong; it isn't trying to time the market. This strategy is simply valuing the stocks. The problem with the plan is that holding piles of cash is a game for losers; you need the money to be in some sort of asset - it matters not what - to avoid the printers of the central banks. There is a real chance that stock prices never come down as much as everything else goes up.

As a sole investor you can't in modern day value stocks more accurately than their current market cap. Any difference in valuation you come up with compared to the market cap would simply mean that there's something missing in your calculations that makes up the difference, as the stock and its market cap is coming from thousands of times more complicated methods for valuing the stock than whatever few metrics you we…

> Any difference in valuation you come up with compared to the market cap would simply mean that there's something missing in your calculations that makes up the difference

Not necessarily, can also mean that your circumstances are different from the large traders. Value is relative to your net worth, status RE the tax system, risk tolerance and current allocation. So it is not only possible but likely that the large traders have a valuation that is correct for them and wrong for you as a small market participant.

Besides, if all assets are - in some sense - equal then any inane strategy that involves buying assets is equivalent to any other and just dumping all the cash into any basket of assets is workable. So people could probably buy just assets they like and expect an equivalent return to everyone else. If that logic holds.

Re: The Buffett Indicator

#99

Post by mrkramer »

I respect Buffet Indicator but small and medium sized businesses are not part of US stock market so it is somewhat irrelevant to compare GDP to Stock Market Value if you do not include approximated valuation of small and medium sized businesses.

Re: The Buffett Indicator

#100

Post by mewpmewp2 »

roenxi wrote: post #98
mewpmewp2 wrote: post #90

Earlier quoted context omitted.

As a sole investor you can't in modern day value stocks more accurately than their current market cap. Any difference in valuation you come up with compared to the market cap would simply mean that there's something missing in your calculations that makes up the difference, as the stock and its market cap is coming from thousands of times more complicated methods for valuing the stock than whatever few metrics you we…

> Any difference in valuation you come up with compared to the market cap would simply mean that there's something missing in your calculations that makes up the difference Not necessarily, can also mean that your circumstances are different from the large traders. Value is relative to your net worth, status RE the tax system, risk tolerance and current allocation. So it is not only possible but likely that the large…

> people could probably buy just assets they like and expect an equivalent return to everyone else

That's pretty much true. Although risk and volatility does differ from asset to asset. So as a lone investor you can decide how much you are willing to risk to get better returns.

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