“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:
- 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
- Orange: The peak of the internet bubble – if you bought stocks there you lost money every year for a DECADE
- Today: The most expensive stocks have been in US history – history suggest terrible losses for those investing today
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