What are ‘Big Short’ Michael Burry and Warren Buffett seeing that we aren’t?

[traider]

I'm shocked the article didn't mention the Buffett Indicator because it's off the charts right now.

In a nutshell, a little over 20 years ago Warren Buffett came up with an indicator that compares the total economic output of the U.S. (GDP) to the total capitalization of all publicly traded stocks (Wilshire 5000). From Buffett's perspective, they should pretty much be equal to achieve homeostasis, so when that ratio gets out of wack, it's either a buy or a sell signal. So for example, if the Wilshire 5000 value dips to 70% of GDP, that's a buy signal for stocks. But conversely, if the stock market is on fire which causes the Wilshire 5000 total value to be 150% greater (or more) than GDP output, then that would be a sell signal for stocks.

Currently we are at 181%, which means that the value of all stocks is almost double the total current economic output of the U.S.

So there's your Burry and Buffett sell signal.

You could have sold at 140% and lost 40%
The indicator is kinda worthless

 

[zdreg]

You could have sold at 140% and lost 40%
The indicator is kinda worthless

I was curious to see if somebody would come up with your reply. that was the purpose of my previous post"The market can remain irrational longer than you can remain solvent."
However, it is not completely worthless. It serves as a warning.

 

[murray t turtle]

If there are higher real yields, can stocks really sport $2-3 trillion market caps?

The Buffett indicator made sense in the old days when companies weren't as global.

%%
Maybe good global points, so many companies are now.
Answer to your question,SURE can, because bonds so seldom do anywhere near what stocks, +SPY benchmark does.
It maybe good bond selling points they average less loss than stock$, SPY ??
Cant really predict markets, nor can bonds predict.
NOT saying all bond traders as bad as SVB, Warren Buffet buy bonds sometimes.
In history hindsight, some may have bought a good money market..... @18% +\, so seldom happens, i dont regret not doing that, that year.
Nicole Goodkind article article maybe right about US economy [+ chicoms] slowing down;
but if that's right/ oil buyers do not think so.
NOT a prediction; 50dma last SPY close was down

 

[ironchef]

I'm shocked the article didn't mention the Buffett Indicator because it's off the charts right now.

In a nutshell, a little over 20 years ago Warren Buffett came up with an indicator that compares the total economic output of the U.S. (GDP) to the total capitalization of all publicly traded stocks (Wilshire 5000). From Buffett's perspective, they should pretty much be equal to achieve homeostasis, so when that ratio gets out of wack, it's either a buy or a sell signal. So for example, if the Wilshire 5000 value dips to 70% of GDP, that's a buy signal for stocks. But conversely, if the stock market is on fire which causes the Wilshire 5000 total value to be 150% greater (or more) than GDP output, then that would be a sell signal for stocks.

Currently we are at 181%, which means that the value of all stocks is almost double the total current economic output of the U.S.

So there's your Burry and Buffett sell signal.

The Buffett indicator is out of date. Nowadays, US companies are global corporations and US GDP under represented their value.