An excerpt below … Warren would say we are playingwithfire …
[[[[[ Widely known as the “Buffett Indicator,” it measures the size of the US stock market against the size of the economy by taking the total value of all publicly traded companies (measured using the Wilshire 5000 index) and dividing that by the last quarterly estimate for gross domestic product.The resulting ratio is supposed to tell us how fairly priced stocks are by providing a simple gauge of whether the market is overvalued or undervalued relative to economic output. If the stock market is growing a lot faster than the economy, that could be a sign of a bubble.Buffett’s Berkshire Hathaway says that a reading of 100% is fair, if it’s closer to 70% stocks are at a bargain price, and if it’s anywhere near the 200% mark, investors are “playingwithfire.” The indicator is currently sitting near a two-year high, at nearly 190%.The last time the indicator was this high was in 2022, when it hit 211% and the S&P 500 dropped by 19% over the next year.]]]]]
