Buffett’s Index Reaches 205%

Although U.S. stocks have repeatedly set new highs in recent days, the warning signs of market bubbles have not disappeared. Some foreign media pointed out that the “Buffett Index” preferred by the stock god Buffett has climbed to 205%, indicating that U.S. stocks are severely overvalued and a crash may be imminent.

The report pointed out that the “Buffett Index” is the total market value of all US stocks divided by the latest quarter’s gross domestic product (GDP) data, which can be used to measure the valuation of the stock market relative to the size of the economy.

As the S&P 500 Index closed to a record high on Wednesday (26th), the Wilshire 5000 All-Market Index, which represents the total market value of US stocks, reached nearly US$46.69 trillion. At the same time, the latest estimate of US GDP in the second quarter was 22.72 trillion US dollars. As a result, Buffett’s index reached 205%, which was much higher than the 187% in the second quarter of last year. At that time, the epidemic was at its peak and the US GDP fell by about 15%.

Buffett previously stated that when the Buffett indicator soared to a record high during the dot-com bubble, it was a strong warning signal of an impending collapse. Before the global financial crisis, the indicator also continued to soar. Make this indicator a useful tool for predicting the stock market decline. According to reports, this indicator remained below 150% in the two crashes mentioned above.

Michael Burry, the prototype of the movie “The Big Short” and the famous big short, has previously stated that the U.S. stock market is now in “the biggest bubble in history.” Burry pointed out that investors are currently too greedy, speculating wildly, taking too much risk, and chasing unrealistic returns.

Burry warned Tesla, GameStop, Bitcoin, Dogecoin, Robinhood, special purpose acquisition companies (SPAC), inflation, and the overall stock market in early April. The (meme) hype is compared with the dot-com bubble and the real estate bubble, and at the beginning of this year it warned that US stocks are “dancing on the edge.”

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Summary

Although U.S. stocks have repeatedly set new highs in recent days, the warning signs of market bubbles have not disappeared. Some foreign media pointed out that the "Buffett Index" preferred by the stock god Buffett has climbed to 205%, indicating that U.S. stocks are severely overvalued and a crash may be imminent.

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