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.

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

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