[HN Gopher] The Buffett Indicator
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The Buffett Indicator
Author : xqcgrek2
Score : 27 points
Date : 2021-09-12 20:31 UTC (2 hours ago)
(HTM) web link (www.currentmarketvaluation.com)
(TXT) w3m dump (www.currentmarketvaluation.com)
| chrisblackwell wrote:
| Just a reminder that a larger portion of today's market value is
| made up from Tech stocks. Tech stocks are typically higher
| valuations and P/E multiples, giving a skewed data point
| perspective vs. 20 years ago.
| aazaa wrote:
| Market excesses are always marked by a "hot" sector. Remember
| the Nifty 50?
|
| https://en.wikipedia.org/wiki/Nifty_Fifty
|
| The members of that group were the tech giants of their time.
|
| Replace "large-cap" with "tech" in that article. Rinse and
| repeat.
| dbs wrote:
| Same can be said of market valuation in 99/00.
|
| And just like at that time people are looking for adjusted
| valuation measures and all type of excuses to justify
| unrealistic growth expectations.
|
| Like ALL previous bubbles it will end in tears.
| mmmmkay wrote:
| This doesn't take into account interest rates.
|
| Buffett himself has said recently that given the current interest
| rates stocks are not overvalued.
| mmmmkay wrote:
| nvm, just got to the "Criticisms of The Buffett Indicator"
| section where they cover just this topic :)
| [deleted]
| ethbr0 wrote:
| The problem with macro-economic composites is that at that level,
| everything is unfolding on different timescales. So around
| transitional moments, your end result is going to go wonky.
|
| GDP plummets -> interest rates are dropped -> GDP recovers ->
| interest rates are raised
|
| You're balancing between responsiveness, accuracy, and
| reliability: pick two.
|
| I'd have thought the last few crises would have taught us that we
| should be thinking about the system more in terms of stability,
| or lack thereof.
|
| The housing crisis _could_ have not exploded, if key institutions
| and /or investors had acted differently. But it _was_ objectively
| true that the entire system was in a very unstable state.
| aazaa wrote:
| The problem with these indicators is that, although they may
| indicate over- or undervaluation, they tell you nothing about
| _when_ a mean reversion will happen.
|
| As Keynes famously said: "The market can stay irrational longer
| than you can stay solvent."
|
| An indicator that does a pretty good job of signaling the "when"
| of a recession, and by extension the likely "when" of large
| market corrections, is yield curve inversion. It predicted the
| recession of early 2020 quite well, even with the external shock
| of the pandemic.
|
| https://www.forbes.com/sites/leonlabrecque/2020/02/26/anothe...
|
| From the perspective that somehow a reset of the business cycle
| has happened through government transfers (not exactly a sound
| assumption), watch interest rates, and in particular the
| relationship between the 2 and 10 year.
|
| Should we start to see a rise in short-term rates, without a
| similar rise in long rates, watch out. You'll no doubt see a
| multitude of articles explaining how "this time is different." It
| won't be. And on top of all of that, we'll head into it with the
| most overvalued market in history.
| hhmc wrote:
| An inverted yield curve has accurately predicted 9 out of the
| last 5 recessions ;)
|
| You can even see it on the chart in the linked article, in
| 2005/06 -- that time, it was different.
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(page generated 2021-09-12 23:00 UTC)