Greenbackd

Warren Buffett’s favored market valuation metric, market capitalization-to-gross national product, has passed an unwelcome milestone: the 2007 valuation peak, according to GuruFocus:

TMTGNP 2007

The index topped out at 110.7 percent in 2007, and presently stands at 111.7 percent. From GuruFocus:

As of today, the Total Market Index is at $ 17624.4 billion, which is about 111.7% of the last reported GDP. The US stock market is positioned for an average annualized return of 2.2%, estimated from the historical valuations of the stock market. This includes the returns from the dividends, currently yielding at 2%.

I’ve seen several arguments for why this time is different, and why it’s not a bubble. I don’t buy it. When we see clear skies, that’s all we can imagine, and so we extrapolate it over the horizon. From Seth Klarman’s latest:

Investing, when it looks the easiest, is at its hardest

View original post 301 more words

Advertisements