Originally Posted by MasterBlaster
Thanks. This gives a reading that corresponds to the chart in the article.
Clearly there are many problems- for example right before the 73-74 crash this indicator was saying normal valuation, and obviously the current average has been pulled way up by the high markets of recent years. Maybe this is a distortion that will be corrected, maybe not.
But Buffet's comment in giving the rationale does make sense- he says clearly the line can't just keep climbing up and off the chart. IOW, if quoted market cap reflects 100% or more of total US GNP, it's in the nature of capitalism that this tree will not grow to the sky. Although the late 90s showed us that it can get pretty close.