The stock market has taken a good cowhiding this year under the Federal Reserve’s pitiless onslaughts.
The Dow Jones has hemorrhaged some 6,500 points year to date. Both S&P 500 and Nasdaq Composite have absorbed similar blasts — on a percent basis.
Trillions in stock market wealth have vanished into the great nothingness… whence it sprung.
And so the delirious excesses of the past several years are wringing out of the financial system.
Yet are they?
Mr. Warren Buffett’s preferred market barometer — the “Buffett Indicator” — stacks stock market valuations against the gross domestic product.
A reading of “1” indicates a stock market and economy marching in step, neatly formationed.
A reading below 1 indicates an undervalued stock market against the economy underlying it. Stocks are bargains.
A reading above 1 indicates an overvalued stock market against the economy underlying it. Stocks are dear, costly.