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'Buffett' Says Sell; BofAML Asks, Should We Listen?
When Janet Yellen speaks, investors buy stocks (whether she tells you stock valuations are 'substantialy stretched' or not). When Warren Buffett speaks, investors listen... so when his favorite indicator is flashing a huge "sell signal" trading 80% 'expensive' to its long-term average, perhaps, as BofAML suggests, it is time to listen.
On most measures, the S&P 500’s valuation remains elevated relative to history, the exceptions being Price to Normalized EPS and P/FCF. From an asset allocation standpoint, the S&P still looks attractive vs. bonds and small-caps, but trades at an historical premium to oil and gold.
As if that was enough, BofAML further explains...
One metric used by some (including Warren Buffett) to gauge whether the stock market is overextended is the Market Cap to GDP ratio. We show this using S&P 500 market cap below...
While there are other variations...
All of which are highly correlated and illustrate similar trends. The S&P 500 market cap to GDP ratio is 1.03, over 80% above its historical average since 1964.
However, BofAML, provides a "different this time" silver lining - this metric may have limited utility:
Problems with the numerator and denominator: Market Cap/GDP is analogous to Price/Sales, with all of its shortcomings and more. Price/Sales ratios do not account for structural changes in profit margins, which has been the case for the S&P 500, chiefly due to lower taxes, lower interest expense, and higher operating margins in Tech. Meanwhile, using market value or stock price as the numerator is not consistent given that sales accrue to the entire company and not just equity stakeholders. Enterprise value is more appropriate, and is particularly important today given lower leverage ratios vs. history.
Geographic exposure differences: The S&P has increasingly derived sales and profits from overseas, and has thus become more tied to global GDP than US GDP. Comparing market cap to global GDP (since 1980), this metric trades a much lesser premium to its average – 30%, vs. 60% using US GDP over the same period.
Mix differences: Many sectors (such as Tech, Industrials and Energy) carry a much larger weight within the US equity market than they do within the US economy. US GDP is also much more services-oriented, while S&P 500 profits are more goods-oriented.
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So - no don't listen to anyone or anything apart from "buy" - when has that ever ended badly.
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Fuck you Buffett!!!!! (i have never owned stock) and i NEVER Will!
Speaking of Buffy the Vampire...
Greece should donate their $300 billion debt to… the Buffett & Gates “give-it-(not)-all-away” foundation.
Also, if they use the FAS 157 (mark-to-unicorn) accounting, they can become the healthiest and wealthiest nation in the world OVERNIGHT. ;-)
Looney
They could sell what remains of their sovereignty, and taxation powers to Buffet. Then he could change the tax code, and move all his companies there, while collecting dividends from the peasantry.
Yes, Pope Francis is encouraging civil disobedience, leading a rebellion. Listen closely, Francis knows he’s inciting political rebellion, an uprising of the masses against the world’s superrich capitalists. And yet, right-wing conservatives remain in denial, tuning out the pope’s message, hoping he’ll just go away like the “Occupy Wall Street” movement did.
SELL >>>>SELL..DJIA 17250 by Monday. Good luck Warren...
WAIT,!! didnt he dump a few billion into it after 2008? to help bolster?
Market cap is certainly right, the problem is that the GDP is way ti high due to fake inflation. So that ratio should be way up.
Wait, this is not a quote from Buffet. It is a derivative of what he once said. If you want the Oracle of Omaha to tell you whether to sell or buy you need to ask him. Then you have to decide whether or not he is bluffing you to sell or bluffing you to hold. Will you be a bag holder for Buffet or a source of more stocks for him to buy.
Personnaly, I don't think he is buying if he can find someone to whom he can sell. He only buys when there is blood in the street. He doesn't care whose blood it is.
The s.o.b. has already gone short.
right now Buffet is trying to find a back-door way out of his IBM holdings. He'll do something creative to A) not affect the stock prices and B) not pay taxes. He usually does.
considering IBM dropped $10 today, he may have already dropped out.
Warren Buffet - Americas Corrupt Grandpa
.....and overall bullshitting asshat.
I owned a few B shares a while back, and while I would be a little "richer" now had I kept them, I sleep better with the gold I bought with the proceeds.
So Buffett is now a sell side terrorist.
I hope the likes of Buffet, Blankfein, Daimon live to see the collapse of their holy system and lose EVERYTHING. It will be a just deserved exit from this world and and ugly entrance to the next.
I have nothing invested in their system so have nothing to lose!