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Warren Buffett's favorite stock-market indicator hits record high, signaling a crash could be coming

Warren Buffett

EDITOR'S NOTE: Say what you want about Warren ”Buffett, but he’s no dummy! Warren‘s, Buffett indicator” just hit an all-time-high, signaling the all-time best opportunity to convert cash to gold or silver before the stock market crashes! 

 

  • Warren Buffett's preferred stock-market gauge hit a record high, signaling that stocks are overvalued and that a crash could be coming.
  • The "Buffett indicator" divides the total value of publicly traded stocks by quarterly GDP.
  • "It is probably the best single measure of where valuations stand at any given moment," Buffett wrote in a Fortune magazine article in 2001.
  • The famed investor and Berkshire Hathaway boss said it was "a very strong warning signal" when the indicator peaked just before the dot-com bubble burst.
  • Visit Business Insider's homepage for more stories.

Warren Buffett's favorite stock-market indicator has climbed to a record high, signaling that stocks are overvalued and that another crash could be coming.

The so-called Buffett indicator takes the combined market capitalizations of a country's publicly traded stocks and divides it by quarterly gross domestic product. Investors use it to gauge whether the stock market is overvalued or undervalued relative to the size of the economy.

Buffett, a billionaire investor and the boss of Berkshire Hathaway, described it in a Fortune magazine article in December 2001 as "probably the best single measure of where valuations stand at any given moment.

The indicator has its flaws, including GDP not counting income earned overseas and US-listed companies not necessarily contributing to the US economy.

But it has a strong track record of predicting downturns — for example, it surged to 118% just before the dot-com bubble burst in 2000, and it topped 100% before the 2008 financial crisis.

Read Original Article at markets.businessinsider.com

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