Are stocks now priced reasonably?
An interesting chart at Fortune plots the total market value of stocks divided by GNP. The article’s titled Buffett’s metric says it’s time to buy because Warren Buffett said in 2001, “If the percentage relationship falls to the 70% to 80% area, buying stocks is likely to work very well.” It’s now at approximately 75%.
I’m not at all sure this signals a market bottom. The metric averaged about 50% until 1990. But 75% is certainly more reasonable than the 190% it hit in March 2000.
Posted by James on Wednesday, February 04, 2009