World Dominators

Warren Buffett's favorite valuation measure has hit an important new level

From PragCap:
For the first time since the recovery began, Warren Buffett's favorite valuation metric has breached the 100% level. That, of course, is the Wilshire 5,000 total market cap index relative to GNP. See the chart below for historical reference.

I only point this out because it's a rather unusual occurrence and the recent move has been fairly sizable. It happened during the stock market bubble of the late 90's, but then occurred again just briefly during the 2006-2007 period when the valuation broke the 100% range in Q3 2006 and stayed above that range for about a year. We all know what followed the 2007 peak in stock prices.

Here we are in this wonderful new world where everyone values nominal stock prices more than they value the actual output that underlies it. If this indicator isn't a sign that we are still residing in this Fed-driven asset targeting mania, then I don't know what is.
To me, the whole thinking is backwards...
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