Dear Reader,

The Buffett Indicator — so-called — is simply the ratio of total United States stock market capitalization to the gross domestic product.

The Sage of Omaha himself hatched the analytical contraption. Under this framework:

If United States stock market capitalization precisely equals the gross domestic product… you have a reading of 100%.

Wall Street and Main Street run perfectly parallel, the one the perfect mirror of the other.

A reading below 100% indicates a stock market undervalued against the economy underlying it.

Stocks are steals. Thus the sagacious Omahan argues that:

Meantime, any reading above 100% indicates a stock market overvalued against the economy underlying it.

Stocks are steep.

And in Mr. Buffett’s telling, anytime the indicating needle nears 200%, investors are "playing with fire."

Stocks, in this instance, are snares.

What ratio, then, does Mr. Buffett’s famous indicator presently report?

Your choices are these:

A): 181%

B): 197%

C) 206%

D) 217%

Have you made your selection? You will have your answer shortly.

Meantime, Bank of America reports that investors jettisoned some $3.1 billion last week — in single stocks and exchange-traded funds.

The jettisoning represents the greatest stock sale since last August. It represents also the sixth-largest market sale on record… claims Bank of America.

We are informed that institutional investors — the “smart money” — led the exodus out.

Retail investors, the “dumb money,” came on in. They were in fact net stock purchasers.

What does the smart money know that the dumb money does not know?

I am not smart money. Thus I do not know the answer.

Might the answer center upon the Buffett Indicator?

The needle jumped alarmingly into the red-shaded section in 1999 and 2000.

Do you recall the subsequent rupturing of the vast technology bubble?

The needle once again neared 200% in November 2021.

The S&P 500 soon shed some 25%.

So again I ask: What is the Buffett Indicator’s present reading?

Here again are your options:

A): 181%

B): 197%

C) 206%

D) 217%

I have left you dangling upon my sharpened hook long enough. Here then is your answer:

C) — 206% — a record height.

That is, investors are “playing with fire.”

The stock market is not merely overvalued relative to the gross domestic product.

The stock market is “significantly overvalued” relative to the gross domestic product.

Reports Mitrade:

Adds The Globe and Mail:

Do we now know why the smart money is fleeing from stocks?

Please understand: This Buffett Indicator is not a clear crystal sphere. The glass is heavily clouded over.

And it reveals neither day nor hour of reckoning.

It merely takes the overall view… as climate represents the overall patterns of variable weather.

Thus reports The Motley Fool, wisely:

Yet sufficient short-terms translate ultimately to long-terms.

Should you expect extended sunshine in a rain-drenched climate?

Is it not wise to keep an umbrella close at hand?

I cling to my faith in mean reversion — my trust in general climate over particular weather.

Or as I have argued before:

I believe that scales balance ultimately, that which goes up comes down, that which goes down comes up.

The mighty fall and the meek inherit the earth.

I hazard stock market and economy will meet once again on fair ground, at a 100% ratio of the Buffett Indicator.

When? Once again, I do not know of course. The answer… as always… is on the knees of the gods.

Perhaps “Too Late” Powell and mates can hold the sun up in the sky a while longer.

Perhaps their tricks can even keep the show going indefinitely.

And perhaps pigs will one day sprout wings… and take flight.

Brian Maher

for Freedom Financial News

P.S. You’ll never guess what Robert Kiyosaki calls the “financial guillotine” hanging over the U.S. economy. He’s naming names, showing charts, and mapping out his entire action plan here.