Buffett's Buy Metric

Discussion in 'Stock Market' started by Chris, Feb 17, 2009.

  1. Chris
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    Chris Gold Member

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    This is for DavidS.....

    http://money.cnn.com/2009/02/04/magazines/fortune/buffett_metric.fortune/index.htm

    (Fortune Magazine) -- Is it time to buy U.S. stocks?

    According to both this 85-year chart and famed investor Warren Buffett, it just might be. The point of the chart is that there should be a rational relationship between the total market value of U.S. stocks and the output of the U.S. economy - its GNP.

    Fortune first ran a version of this chart in late 2001 (see "Warren Buffett on the stock market"). Stocks had by that time retreated sharply from the manic levels of the Internet bubble. But they were still very high, with stock values at 133% of GNP. That level certainly did not suggest to Buffett that it was time to buy stocks.

    But he visualized a moment when purchases might make sense, saying, "If the percentage relationship falls to the 70% to 80% area, buying stocks is likely to work very well for you."

    Well, that's where stocks were in late January, when the ratio was 75%.
     
    Last edited: Feb 17, 2009
  2. alan1
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    alan1 USMB Mod Staff Member Supporting Member

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    Don't forget Buffet's other advice,

    When people get scared, get greedy.
     
  3. Chris
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    Chris Gold Member

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    There are only two ways to build wealth, either you buy stocks or you buy real estate.

    Both are cheap right now.
     
  4. Meister
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    Meister Platinum Member Supporting Member

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    Chris you surprised me. Your absolutely right.
     
  5. Chris
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    Chris Gold Member

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    I am right a lot of the time.

    But that doesn't stop people on this board from name calling. It's what they do best.
     
  6. Meister
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    Meister Platinum Member Supporting Member

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    Chris, Don't let it go to your head
     
  7. Chris
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    Chris Gold Member

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    The solutions to our problems are simple.

    Getting the body politic to implement those solutions is hard.
     
  8. Meister
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    Meister Platinum Member Supporting Member

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    Don't be naive, Chris. The solutions are very very complex. Rhetoic is simple.
     
  9. alan1
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    alan1 USMB Mod Staff Member Supporting Member

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    My daughter was going to buy the house next door to me, then the owners decided to rent it out instead. She could have bought for payments about 25% less than what the renter is currently paying for it.
     

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