Last week I updated the Warren Buffett yardstick, market cap-to-GNP. The only time it was ever higher than it is today was for a few months at the top of the dotcom mania.
NEW POST: Why Warren Buffett Is So Reluctant To Call Stocks A ‘Bubble’ https://t.co/HSqxmgC6ep pic.twitter.com/BPSOjaioMX
— Jesse Felder (@jessefelder) March 1, 2017
However, when you look under the surface of the market-cap-weighted indexes at median valuations they are currently far more extreme than they were back then. As my friend John Hussman puts it, this is now “the most broadly overvalued moment in market history.”
The Most Broadly Overvalued Moment in Market History https://t.co/XleMnXh3NZ by @hussmanjp pic.twitter.com/AjviMnPt6U
— Jesse Felder (@jessefelder) March 7, 2017
Another way to look at stock prices is in relation to monetary velocity and here, too, we see something totally unprecedented.
Nothing to see here. Move along pic.twitter.com/ELZojkcElM
— Eric Pomboy (@epomboy) March 3, 2017
Finally, when you look at equity valuations relative to economic growth it quickly becomes clear that investor euphoria has entered uncharted territory.
Could current valuations be higher than 1999 and 1929? Our latest article might surprise you. https://t.co/jUe5q8uhTg pic.twitter.com/cMbJwvRYru
— Michael Lebowitz (@michaellebowitz) February 28, 2017
Critics will say “valuations aren’t an effective timing tool.” I’m not saying they are. But if you believe that “the price you pay determines your rate of return” then at current prices you must believe we currently face some of the worst prospective returns in history.