Warren Buffet indicator

[Backdraft57]

What do you think of this? Below from a website that follows Buffet and his GNP indicator.

"As of today, the Total Market Index is at $ 27720.8 billion, which is about 142.1% of the last reported GDP. This indicates that the market is Significantly Overvalued. The US stock market is positioned for an average annualized return of -1.9%, estimated from the historical valuations of the stock market. This includes the returns from the dividends, currently yielding at 1.8%."


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[Backdraft57]

Sorry should have posted link
https://www.gurufocus.com/buffett_assets_allocations.php


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[FlaGator]

Has anyone seen analysis of Warren Buffett as a prognositicator? I have not, and would like to something, anything, that shows his predictive ability.

He's built quite a company, but that alone doesn't make me believe his predictions are more likely to be correct than anyone else's.

 

[teejayevans]

I beat the S&P by a lot in the 90s, since then, not so much, last 5 years he’s trailing it.

 

[DrRoy]

Has anyone seen analysis of Warren Buffett as a prognositicator? I have not, and would like to something, anything, that shows his predictive ability.

He's built quite a company, but that alone doesn't make me believe his predictions are more likely to be correct than anyone else's.

+1

 

[NW-Bound]

... The US stock market is positioned for an average annualized return of -1.9%, estimated from the historical valuations of the stock market...

The above was the deduction of the Web page author. It did not come from Buffett.

Indeed if one reads the article, he will see that the article writer wrote at the end:

Warren Buffett is known for not caring what others do in the stock market. But from his asset allocations we can get some idea on where he is finding value among stocks, bonds and cash. Apparently he is bearish with bonds as the percentage of bonds is at the lowest level. As for stocks, he is relative bullish.​

I own BRK class B shares, but never bother to read much about the company. The author pointed out that BRK has significantly cut back on bonds and stashing cash instead. The AA of BRK is currently as follows: 48.6% stock, 7% bond, 31% cash (not adding up to 100?).

In public, Warren, same as Bogle, never claims he knows what stock will do in the next year, or the year after next. However, same as Bogle he did offer a projection of stock price over the next decade or two, and it is going to be in the mid single digit based on their view of the US economy.

But regarding bonds, Warren does not mince words. Even as of a few years ago, he already called bonds "return-free risk". And the AA of Berkshire reflects his viewpoint. Will he be proven right? I will wait to see.

 

[NW-Bound]

I beat the S&P by a lot in the 90s, since then, not so much, last 5 years he’s trailing it.

Eh, do not make fun of Buffett yet.

Considering that he's only 50% in stocks, and shuns high-flying tech stocks at that, he's doing quite well. Does that not mean his stocks and other deals he did beat the S&P?

I only bought BRK shares after the Great Recession, so just now looked back to see how he fared. From the top in late 2007 to the bottom in March 2009, the S&P lost nearly 50%. BRK lost 30%, and that's because of the cash and bonds in its portfolio.

 

[Running_Man]

Eh, do not make fun of Buffett yet.

Considering that he's only 50% in stocks, and shuns high-flying tech stocks at that, he's doing quite well. Does that not mean his stocks and other deals he did beat the S&P?

I only bought BRK shares after the Great Recession, so just now looked back to see how he fared. From the top in late 2007 to the bottom in March 2009, the S&P lost nearly 50%. BRK lost 30%, and that's because of the cash and bonds in its portfolio.

IN Dec 2007 BRK was at $148,220 at March 2009 at $73,195 just over a 50% drop

 

[NW-Bound]

You are correct. So, where did I err? I used Morningstar.

So, I went back and checked. It was because of the time frame used for comparison. The S&P and BRK peaked at different times. I just took a starting point in Oct 2017 because I remember the S&P hit a peak at that time.

I did it again, and noted the time interval carefully. The S&P peaked on 10/09/2007. A $10,000 invested on that date with Vanguard S&P VFINX became $4,555 on 3/06/2009. Do the same with BRK, and the $10K became $5,932, as BRK hit bottom on the same date in March 2009.

If counted from BRK's own peak to its own trough, the loss is higher as you noted.

 

[ERD50]

So BRK dropped about as much as S&P, despite being ~ 30% cash/bonds?

That's a little scary.

-ERD50

 

[RobbieB]

I would think that dropping 40% is not "about as much" as dropping 55%. And that 15% difference would be explained by the bonds and cash.

 

[NW-Bound]

In 1997, BRK was about 77% in stocks as a chart in the OP article shows.

During the crash, American Express got hit hard like all financial companies. As BRK has a big stake in AXP that might hurt it some.

 

[RenoJay]

I don’t bet against the Fed or against Warren Buffet. Buffet’s prognosticating skills are shown in his results, not his predictions. In previous periods of over valuation he went on a stock buying strike, waiting for cheaper deals. I take this metric and many others pretty seriously. I believe euphoria can propel the market higher for a while, but stocks have always reverted to the mean.

 

[ERD50]

I would think that dropping 40% is not "about as much" as dropping 55%. And that 15% difference would be explained by the bonds and cash.

You are right, I didn't look at the numbers that closely, was going by earlier loose descriptions.

-ERD50

 

[Cayman]

Sorry should have posted link
https://www.gurufocus.com/buffett_assets_allocations.php


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Who knows if the author's got it right? One thing's for sure - the market will go up and it will go down. I stick with the basics of investing, my AA and I don't try to time the markets.

 

[Free bird]

I don't watch the cable financial stations but it seems like Buffet has been off the grid the last few months.

 

[teejayevans]

Eh, do not make fun of Buffett yet.

Considering that he's only 50% in stocks, and shuns high-flying tech stocks at that, he's doing quite well. Does that not mean his stocks and other deals he did beat the S&P?

I only bought BRK shares after the Great Recession, so just now looked back to see how he fared. From the top in late 2007 to the bottom in March 2009, the S&P lost nearly 50%. BRK lost 30%, and that's because of the cash and bonds in its portfolio.

Then compare him with Wessley,Wellington balance funds.

 

[DEC-1982]

Do we confuse organizations or individuals with past successes with their ability for prognostications? All mutual funds put out their disclaimer, and I paraphrase loosely here "great past performance results don't necessarily mean future results will be the same". Shouldn't we assume the same disclaimer is true for successful individuals?