Stocks vs. GNP

February 4, 2009 at 6:59 pm 1 comment

Below is the graph of total stock market capitalization vs. Gross National Product.  According to Warren Buffet, stocks become attractive investments when total market cap is in within 70-80% of GNP.  Right now, we are in the middle of that range, at 75%.

Note, however, that based on this metric, the ratio still is higher than it was during World War II, or during the recession in 1980, when it stood around 50%.  To get to that level, the market will need to drop by another third.

For more discussion, take a look at this article from Fortune.

Entry filed under: Market Conditions.

Q4 GDP Shrinks by 3.8% Cash Is King

1 Comment Add your own

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed

Blog Author

Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.


Recent Posts

%d bloggers like this: