Ratio Of GDP ($14.3 trillion) to total stock market value($11.8 trillion) now stands at 82.5%. This compares to 139.1% a year ago and 190% in 2000. Buffett said in 2001 that satisfactory investment results could be expected when the ratio “70% to 80% area”
In 1974 the ratio was below 50%, but long treasuries were yielding 11% and sucking money from equities. You can argue that it is still too soon to buy, but I see lots of individual prices that are cheap and have started to commit some cash.
I think that even if it is too soon to buy, it is way, way too late to sell.
[via chucks_angels]
[later in the thread]
This is not correct. Buffett uses GNP:
You are right. I wrote my question incorrectly. I meant to ask Losch why he used GDP instead of GNP. That only makes sense given the context of the exchange.
Also, I am genuinely interested to find out how to get up to date and accurate numbers for total stock market capitalization. When I made a post on this topic a couple of days ago, a poster wrote me an email asking why I used the quoted index number for the Wilshire 5000. I made that assunmption given the index's description of itself being a good dollar for dollar measure of the US stock market. But after thinking about it for a while, I am not convinced that is a good approximation of total market capitalization. It definitely does not include the pink sheet or the OTC markets, and there could be other problems with the weighting et cetera. I figured if anyone could clear my misunderstanding up on the board, Losch could.
If my method was right (Wilshire 5000 quote divided by government GNP numbers), on the other hand, Losch is understating the general attractiveness of stocks by almost 25% using this value metric. Any help would be greatly appreciated.
* * *
I was wondering about the same thing. I found this in Wikipedia, but of course don't know how reliable it is:
"One index point corresponds to about US$1 billion. Hence the value of the index, multiplied by one billion dollars, roughly equals the total capitalization of the US stock market."
http://en.wikipedia.org/wiki/Wilshire_5000
If that were true, then 9,200 bn Total Market Cap would be around 65% of 14,300 bn GNP.
[stay tuned?]
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