The Buffett Indicator Just Hit an All-Time High. Here's What History Says Comes Next.
By one of Warren Buffett's favorite measures, U.S. stocks recently became more expensive than ever.
Overview
There's a stock market gauge that famed investor Warren Buffett once called "probably the best single measure of where valuations stand at any given moment." Recently, it sat higher than at any point in records going back more than half a century.
The measure is simple: the total value of the U.S. stock market divided by the size of the economy, as measured by gross domestic product. It recently climbed past 230%, meaning American stocks are worth about 2.3 times the country's annual economic output. That's a record. For perspective, the same gauge peaked near 140% just before the dot-com bubble burst in 2000.
Details
Warren Buffett himself flagged the risk years ago. When the ratio "approaches 200%," he wrote in a 2001 Fortune essay, "you are playing with fire."
Source
Originally published at www.fool.com.