Sep 29, 2018
Welcome to the Broken Pie Chart Podcast Episode 8. In this episode Derek Moore reviews the so-called Buffett Indicator as well as the Shiller PE Ratio. With markets once again at all-time highs we are seeing some various articles and commentary on how to tell what market valuations might be considered too high or low.
Key Takeaways:
- • What is the Warren Buffett Indicator?
- • How is the Buffett Indicator calculated?
- • Where to find the Nominal GDP and market cap to use to calculate the Buffet Indicator
- • How do interest rates affect stock market valuations?
- • Present value versus future value of future earnings estimates
- • What is the Shiller PE Ratio?
- • How is the Shiller PE Ratio Calculated?
- • Rolling average of S&P 500 Index earnings vs current PE Ratio
- • Possible solutions to protecting downside market moves
- • How valuation indicators may or may not predict future market moves
Mentioned in this Episode:
Razor Wealth article explaining Buffett Indicator https://razorwealth.com/the-buffett-indicator-explained/
Fortune Article http://archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm
Nominal GDP
https://fred.stlouisfed.org/series/GDP
Wilshire 5000 Full Cap Price Index
https://fred.stlouisfed.org/series/WILL5000PRFC
Nonfinancial corporate business; debt securities; liability, Level (NCBDBIQ027S)
https://fred.stlouisfed.org/series/NCBDBIQ027S
Shiller PE Ratio
http://www.multpl.com/shiller-pe/
Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk