Warren Buffett’s Favorite Indicator Just Flashed 'Warning'

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Warren Buffett’s Favorite Indicator Just Flashed 'Warning'

www.investing.com/analysis/warren-buffetts-favorite-indicator-just-flashed-warning-200276137

Warren Buffett’s Favorite Indicator Just Flashed 'Warning'

By Phoenix Capital Research | Dec 27, 2017 12:15PM ET

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It is clear stocks are in a massive bubble based on their Price to Sale (P/S valuation).

What about the economy?

Warren Buffett once famously stated that his favorite means of valuing stock was the stock market capitalization to GDP ratio.

Below is a chart for this metric. As you can see, the stock market today is as overvalued relative to the economy as it was at the peak of the 1999 Tech Mania.

Stock Market Capitalization To GDP Ratio

So stocks are overvalued based on the most reliable corporate data point (revenues) and they are also overvalued relative to the economy. Scratch that, they’re not overvalued… they’re trading at 1999 Tech-Bubble insanity levels.

We all remember what came after that…

What’s coming will take time for this to unfold, but as I recently told clients of my Private Wealth Advisory report, we’re currently in “late 2007” for the coming crisis. However, there is one main difference between 1999 and today…

Namely, that the Fed has been INTENTIONALLY creating bubbles for nearly 20 years today… and it’s out of more senior asset classes to use!

Let me explain…

The late ‘90s was the Tech Bubble.

When that burst in the mid-‘00s, the Fed created a bubble in housing.

When that burst in ’08 the Fed created a bubble in US sovereign bonds or Treasuries.

And because these bonds are the bedrock of the US financial system, the “risk-free rate” of return against which ALL risk assets are valued, when the Fed did this it created a bubble in EVERYTHING (hence our coining of the term “The Everything Bubble” and our bestselling book by the same name).

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Dec 27, 2017 10:16PM ET

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You've been saying the sky is falling for quite a while now. Does help promote your book?

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Central Banks

Interest Rates

Next Meeting

FED

2.50%

Mar 20, 2019

ECB

0.00%

Mar 07, 2019

BOE

0.75%

Mar 21, 2019

SNB

-0.75%

Mar 21, 2019

RBA

1.50%

Mar 05, 2019

BOC

1.75%

Mar 06, 2019

RBNZ

1.75%

Mar 27, 2019

BOJ

-0.10%

Mar 15, 2019

CBR

7.75%

Mar 22, 2019

RBI

6.25%

Apr 04, 2019

PBOC

4.35%

BCB

6.50%

Mar 20, 2019

S&P 500 Futures	2,777.62	+34.12	+1.24%
S&P 500	2,775.60	+29.87	+1.09%
Nasdaq 100	7,055.18	+32.76	+0.47%
Dow 30	25,883.25	+443.86	+1.74%
SmallCap 2000	1,570.04	+21.35	+1.38%
S&P 500 VIX	14.91	-1.31	-8.08%
FTSE 100	7,236.68	+39.67	+0.55%
DAX	11,299.80	+210.01	+1.89%

Crude Oil WTI	55.81	+1.40	+2.57%
Brent Oil	66.31	+1.74	+2.69%
Natural Gas	2.634	+0.061	+2.37%
Gold	1,324.75	+10.85	+0.83%
Silver	15.755	+0.227	+1.46%
Copper	2.816	+0.042	+1.51%
US Soybeans	907.62	+3.62	+0.40%
US Wheat	503.38	-3.62	-0.71%

SPDR S&P 500	277.37	+2.99	+1.09%
VelocityShares Daily 2x VIX Short Term linked to S	33.58	-2.06	-5.78%
Invesco QQQ Trust Series 1	171.94	+0.72	+0.42%
Direxion Daily Junior Gold Miners Bull 3X Shares	11.48	+0.64	+5.90%
VelocityShares 3x Inverse Natural Gas linked to S&	111.91	-5.86	-4.98%
ProShares Ultra VIX Short-Term Futures	46.4900	-2.3700	-4.85%
ProShares UltraPro QQQ	50.03	+0.59	+1.19%
VanEck Vectors Gold Miners	22.4300	+0.2900	+1.31%

BTC/USD	3,705.0	+42.3	+1.15%
ETH/USD	125.97	+2.27	+1.83%
BCH/USD	122.40	+1.50	+1.24%
XRP/USD	0.30215	+0.00200	+0.67%
EOS/USD	2.8965	+0.0766	+2.72%
LTC/USD	43.400	+1.830	+4.40%
ADA/USD	0.041940	+0.000757	+1.84%
XLM/USD	0.07797	+0.00043	+0.55%

Warren Buffett’s Favorite Indicator Just Flashed 'Warning'

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