Where is the Buffett Indicator?

[Parsad]

When was the last time you looked at it?  Cheers!

 

[Stuart D]

Is there any double counting with ETF’s? 

[DooDiligence]

GDP includes public and private businesses. Also, does the Wilshire include foreign businesses?

[UK]

2 hours ago, Parsad said:

When was the last time you looked at it?  Cheers!

 

Yea, but you have to factor in this 10-20 percent growth, which is coming soon because of AI

 

Edited February 11 by UK

[Loss Horizon]

Anyone who takes it seriously has been losing money at least for the last 5 years.

[gfp]

The large US companies are almost all global enterprises so it stopped being super useful to compare their market cap to just US GDP.  But nobody thinks we are at generational lows in valuations so there are no shocking revelations that the "buffett indicator" is high.

[Parsad]

3 hours ago, Loss Horizon said:

Anyone who takes it seriously has been losing money at least for the last 5 years.

 

They were losing money between 1997 and 2000 as well...then came an 80% drop on the Nasdaq!  Not saying that is going to happen again...I think earnings are more real than then and P/E's aren't as lofty.  But some reckoning for accepting low premiums for risk will occur.  Cheers!

[Gregmal]

Whats the Buffett indicator these days? Selling banks and airlines at the bottom?

Edited February 18 by Gregmal

[UK]

Was reading some article on Icahn and this stuck with me:

 

Still, Icahn admitted to being too proud in the past.

“It was hubris,” he told Puck News last year.

“I thought I could figure out what the market was going to do. That’s the dumbest thing you can do.”

[frommi]

7 hours ago, gfp said:

The large US companies are almost all global enterprises so it stopped being super useful to compare their market cap to just US GDP.  But nobody thinks we are at generational lows in valuations so there are no shocking revelations that the "buffett indicator" is high.

I was also of that impression, but the revenue sources didnt change from 2000 to today. Its still roughly the same 30-35% for the S&P 500.

[Parsad]

8 hours ago, gfp said:

The large US companies are almost all global enterprises so it stopped being super useful to compare their market cap to just US GDP.  But nobody thinks we are at generational lows in valuations so there are no shocking revelations that the "buffett indicator" is high.

 

4 hours ago, Gregmal said:

Whats the Buffett indicator these days? Selling banks and airlines at the bottom?

 

Even if you make adjustments for global revenues, private capital, etc...you simply look at what the risk premium is in most assets classes and you are near low levels for the majority of assets. 

 

Obviously for the most part, none of us are buying the market...and even if we are, we are of the intuition to buy more if markets fall.  But the average investor's intuition is not the same...a lot of people have plowed capital into assets without adequate risk premium. 

 

Hindsight always gives the correct answer...so we'll find out one day!  Cheers!

[UK]

1 hour ago, Parsad said:

 

 

Even if you make adjustments for global revenues, private capital, etc...you simply look at what the risk premium is in most assets classes and you are near low levels for the majority of assets. 

 

Obviously for the most part, none of us are buying the market...and even if we are, we are of the intuition to buy more if markets fall.  But the average investor's intuition is not the same...a lot of people have plowed capital into assets without adequate risk premium. 

 

Hindsight always gives the correct answer...so we'll find out one day!  Cheers!

 

I think you are right here, market as a whole is not very attractive, and barring some productivity miracle, future returns from here will be low. I would be very unexcited or even sad, if my only option today would be SNP500. But lots of stocks or sectors are still of quite decent valuation, some thing perhaps even cheap, many fair. I did not invested during 2000, but from the reading and description of it, current market looks very similar (even AI mania/disruption is not unlike Internet's at a time), but still not so crazy at the extremes.

[adesigar]

I think the administration has to do everything it can to make the market go up as much as possible into the elections to improve their chances of holding the senate.
 

[Longnose]

11 hours ago, UK said:

 

I think you are right here, market as a whole is not very attractive, and barring some productivity miracle, future returns from here will be low. I would be very unexcited or even sad, if my only option today would be SNP500. But lots of stocks or sectors are still of quite decent valuation, some thing perhaps even cheap, many fair. I did not invested during 2000, but from the reading and description of it, current market looks very similar (even AI mania/disruption is not unlike Internet's at a time), but still not so crazy at the extremes.

 

I dunno know market as a whole has some serious tailwinds behind it IMO barring a black swan war or plague or something. 

 

and 

 

Some some major names in SAAS are getting stupid cheap.  AI will not replace all of these SAAS businesses. It will make them stronger and more efficient with less OPEX and potentially more CAPEX as they need to build their own AI infrastructure internally.

[UK]

11 minutes ago, Longnose said:

 

I dunno know market as a whole has some serious tailwinds behind it IMO barring a black swan war or plague or something. 

 

and 

 

Some some major names in SAAS are getting stupid cheap.  AI will not replace all of these SAAS businesses. It will make them stronger and more efficient with less OPEX and potentially more CAPEX as they need to build their own AI infrastructure internally.

If nothing really bad or good happens, the main tailwind for a larger expected returns is valuation.

[Longnose]

4 minutes ago, UK said:

If nothing really bad or good happens, the main tailwind for a larger expected returns is valuation.

I expect AI will enable some wild TAM expansions... hence market tailwinds. 

[UK]

Just now, Longnose said:

I expect AI will enable some wild TAM expansions... hence market tailwinds. 

I agree, if AI will substantially increase productivity and growth, this could solve the current high valuation problem:)

[Parsad]

4 hours ago, Longnose said:

I expect AI will enable some wild TAM expansions... hence market tailwinds. 

 

4 hours ago, UK said:

I agree, if AI will substantially increase productivity and growth, this could solve the current high valuation problem:)

 

Unlike the Internet Bubble, I agree with you both and think that AI will be accretive to revenues and earnings rather than a wholesale massive capital investment with no commensurate return for a while like 2000-2003.  The amount of capital directed at AI is also multiples higher than the Internet Bubble, so I think shorter term, capital may not be getting the correct risk premium even for AI, relative to future cash flows from those investments.  Again, not as bad as 2000-2003, but some reality may set in.  Cheers!