The New Buffett Rule: Equities Are Overvalued

Based on Heinz’ new best friend from Omaha’s “best single measure of where valuations stand at any given momen,” US equities are now over-valued for the first time since 2007. Buffett’s measure – the percentage of total market cap (TMC) relative to the US GNP – as Cullen Roche indicates on Bloomberg’s Chart of the Day, crossed 100% this week into stretched territory. As Gurufocus notes, this implies a mere return of around 3.3% annualized (including dividends) ove rthe folowing years – though as is clear from the chart below – the ride is extremely bumpy…

 

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