Take guard! It smells like a bubble: ‘Buffett indicator’ rings alarm bells for D-Street

The 'Buffett indicator' shows something is majorly wrong with the Indian stock market, and we may be on the verge of a major crash. The market cap-to-GDP ratio, more famously called the 'Buffett indicator' as the Oracle of Omaha , Warren Buffett , considers it his 'single best measure' for long-term valuation of stocks, suggests a huge mismatch between the rate of growth in the economy and that of the stock market.

The crucial measure, calculated by dividing the market capitalisation of a country's stock market with the GDP of the economy, is suddenly at a very high level, suggesting either a too high market cap or a too low GDP figure.

India's latest GDP data has kicked off a row, with many experts questioning the accuracy of the measure, which doesn't quite add up at certain levels. That could be one factor that has sent the 'Buffett indicator' haywire, making it impossible to base your valuation judgment on it.

In an interview way back in 2001, Buffett had this to say about his favourite indicator: "It is probably the single-best measure of where valuations stand at any given moment."

As per the latest figures, India's m-cap-to-GDP ratio stands at 83 per cent, way above the 10-year average of 76 per cent. In fact, this has been so for the past two financial years.

But the above data is true only if you believe in India's GDP number, and in the way it has been calculated.

India's GDP grew 7.6 per cent during FY2016, making it the fastest growing large economy in the world ahead of China.

But some, such as the Centre for Monitoring Indian Economy ..

Comments

Wizard of Dalal Street: Govind Parikh's investment mantra

Wizard of Dalal Street: Govind Parikh's investment mantra Govind Parikh of Govind Parikh Securities says selling right is more important than correct buying. He says it is necessary to keep a lot of cash. "We keep an average 10 percent cash in our portfolio," he says I like to buy things in a bad market. Additionally, don't look current cash flow, concentrate on future cash flows — that is what I look at," says Govind Parikh of Govind Parikh Securities. He advises investors to buy good quality stocks when the market crashes. While sharing his investment philosophy with ace investor Ramesh Damani, on the Wizards of Dalal Street, Parikh says management integrity is very important when deciding which stock to bet on. He tells investors not to buy stocks impulsively. According to him, selling right is more important than correct buying. He says it is necessary to keep a lot of cash. "We keep an average 10 percent cash in our portfolio," he says. He al

LIC IPO Shorts The largest market capitalization in the making. The govt selling 5 percent stake...... The cuttoff price 2100 Listing price 3000 or more shall be included in the nifty Pro Large base of policies Large Market Share Cons Decling market share viz viz private companies higher cost insurance policies Bottom line can apply for LIC IPO for listing gains..... For More do have a look at the Link Below https://www.youtube.com/watch?v=VPGp5V1ecDM

IT giants beat the sTREET

and HCL Technologies, to do an encore in their December 2013 quarter earnings. All three companies also exuded confidence about the future demand environment. N Chandrasekaran, chief executive officer & managing director of TCS, said he believed next year would be a stronger one than 2013-14, as customers executed their business plans in a relatively stable environment. HCL Technologies Chief Financial Officer Anil Chanana said the deal pipeline looked significantly better. “We won 15 large deals in this quarter — about half of them in the IMS (infrastructure management services) space. We remain confident of the growth ahead as client budgets remain stable”. Infosys had also improved its revenue guidance for the financial year from 9-10 per cent to 11.5-12 per cent. For the December 2013 quarter, TCS’ revenues grew 32.5 per cent to Rs 21,294 crore and net profit stood at Rs 5,314 crore, up 49.6 per cent from that in the year-ago period. For Infosys and HCL T

Bulls & Bear Hfund of India

Search This Blog