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Business Insider: Warren Buffett’s famed measure of stock valuations has entered dangerous territory

Posted by Claude Buettner

Poster's Comment

Originally brought to my attention in a Guy McPherson post, I'm presenting the origin article that current stock market valuation is 200% of US GDP, a dangerously high valuation.

By William Edwards

  • The Warren Buffett indicator has surged to a level that suggests stocks are overvalued.

  • This week marks the highest level for the indicator since 2021.

  • Buffett has said that when the indicator reaches current levels, “you are playing with fire.”

The Warren Buffett indicator — which measures the stock market’s total value against the US economy’s GDP — topped 200% this week.It’s the first time that the valuation gauge has reached these levels since 2021, the only other instance when it’s risen that high. At the height of the dot-com bubble in 2000, the measure reached 150%.

The indicator at these levels could imply that stock prices are overheated relative to economic fundamentals, as investors factor in substantial earnings upside in the coming years that may or may not materialize.

Buffett, the legendary investor and CEO of Berkshire Hathaway, once told Fortune that the metric is “probably the best single measure of where valuations stand at any given moment.” He also said that “when it gets above 100% — and especially when it gets to 200% — you are playing with fire.”…

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