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Warren Buffett’s Favorite Indicator,  Market Cap to GDP, Signals Stock Market is Way Overbought

Warren Buffett’s Favorite Indicator,  Market Cap to GDP, Signals Stock Market is Way Overbought.  Stock guru Warren Buffett is holding more than $128 billion in cash. That’s about 23% of the value of Berkshire Hathaway  A class stock, and about 60% of its portfolio of public companies.   This huge cash position  should be taken as a warning. Buffett believes stocks are way overvalued and that a crash is coming. In fact, the only time Buffett has had a bigger cash position as percentage of his portfolio of public companies is before the 2008 financial crisis, according to Bloomberg. The charts below, from Jill Mislinski of Advisor Perspectives shows how wildly overvalued historically stocks are based on Buffett’s favorite GDP vs. market cap indicator, as well as Wilshire 5000 to GDP.  It should be noted that this famous value investor appears to believe so strongly that bad times are ahead. He is sticking to his guns despite underperformance as a result of  his growing cash position.

Warren Buffett’s Favorite Indicator,  Market Cap to GDP, Signals Stock Market is Way Overbought

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warren Buffett’s Favorite Indicator,  Market Cap to GDP, Signals Stock Market is Way Overbought

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warren Buffett’s Favorite Indicator,  Market Cap to GDP, Signals Stock Market is Way Overbought
Warren Buffett’s Favorite Indicator,  Market Cap to GDP, Signals Stock Market is Way Overbought

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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