“Be FEARFUL when others are GREEDY” ­–Warren Buffett:

  • The chart below is Buffett’s favorite broad market valuation tool – Market Cap/GDP – a Kailash topic discussed here
  • When stocks are expensive relative to GDP the payoffs to investing in stocks is terrible
  • At the peak of the internet bubble, a point often considered maximum greed US stocks were valued at 175% of GDP
  • Stocks today are at 206% of US GDP – the highest reading ever – to see the historical payoff expected from today’s reckless greed view the second chart below
  • Kailash encourages readers to ignore the greedy crowds and click here to find proven & profitable companies at reasonable prices

Rule #1: Never lose money, Rule #2: Never forget rule #1″ ­–Warren Buffett

  • The chart below shows the historical payoffs to Buffett’s favorite broad market valuation tool – Market Cap/GDP
  • The ratio of Market Cap to GDP is across the bottom axis and the realized subsequent 10-year annual returns on the vertical axis
  • We highlight three observations:
    1. Green: Buffett openly stated he was buying stock in the GFC in 2008, stocks were priced at ~80% of GDP and went on to deliver 14% annual returns through 2018
    2. Orange: The peak of the internet bubble – if you bought stocks there you lost money every year for a DECADE
    3. Today: The most expensive stocks have been in US history – history suggest terrible losses for those investing today

Disclaimer
The information, data, analyses and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital, LLC and its affiliates (collectively, “Kailash Capital”) shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital. 

Kailash Capital, in preparing the information, data, analyses and opinions presented herein, has obtained data, statistics and information from sources it believes to be reliable. Kailash Capital, however, does not perform an audit or seeks independent verification of any of the data, statistics, and information it receives. 

Kailash Capital and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.