Warren Buffett's Berkshire Hathaway Is Sounding a Warning. What History Tells Us.
Berkshire Hathaway's moves, and a metric named for Warren Buffett, are flashing a warning, but history suggests the smartest investors prepare for the next downturn instead of trying to predict it.
Overview
Warren Buffett's Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) is sitting on a record cash pile approaching $400 billion and has been a net seller of stocks for more than three years. At the same time, the famous "Buffett indicator" -- which compares the U.S. stock market to U.S. GDP -- has climbed to an all-time high.
A quarter of a century ago, Buffett called the Buffett indicator the "best single measure of where valuations stand." It recently topped 230%, meaning stocks are worth more than twice the nation's annual output. For perspective, that is far above the roughly 140% reading at the peak of the dot-com bubble in 2000. Add Berkshire's mountain of cash and its steady selling, and the message is hard to miss: Stocks look expensive.
Details
Can history give us any guidance on how to react to these yellow flags?
Source
Originally published at www.fool.com.