Buffett Says It's Time To Buy

[Mistermj]

Buffett's metric says it's time to buy

According to investing guru Warren Buffett, U.S. stocks are a logical investment when their total market value equals 70% to 80% of Gross National Product.

By Carol J. Loomis and Doris Burke
February 4, 2009: 9:49 AM ET
(Fortune Magazine) -- Is it time to buy U.S. stocks?
According to both this 85-year chart and famed investor Warren Buffett, it just might be. The point of the chart is that there should be a rational relationship between the total market value of U.S. stocks and the output of the U.S. economy - its GNP.
Fortune first ran a version of this chart in late 2001 (see "Warren Buffett on the stock market"). Stocks had by that time retreated sharply from the manic levels of the Internet bubble. But they were still very high, with stock values at 133% of GNP. That level certainly did not suggest to Buffett that it was time to buy stocks.
But he visualized a moment when purchases might make sense, saying, "If the percentage relationship falls to the 70% to 80% area, buying stocks is likely to work very well for you."
Well, that's where stocks were in late January, when the ratio was 75%. Nothing about that reversion to sanity surprises Buffett, who told Fortune that the shift in the ratio reminds him of investor Ben Graham's statement about the stock market: "In the short run it's a voting machine, but in the long run it's a weighing machine."
Not just liking the chart's message in theory, Buffett also put himself on record in an Oct. 17 New York Times op-ed piece, saying that he was personally buying U.S. stocks after a long period of owning nothing (outside of Berkshire Hathaway (BRKB) stock) but U.S. government bonds.
He said that if prices kept falling, he expected to soon have 100% of his net worth in U.S. equities. Prices did keep falling - the Dow Jones industrials have dropped by about 10% since Oct. 17 - so presumably Buffett kept buying. Alas for all curious investors, he isn't saying what he bought.
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[tiznow]

yeah saw that earlier today

kinda fuckin hilarous

if you go by that chart based on where it is now

the time to buy was every year from 1924 to 1995.....not time to buy from last 5 years of tech bubble till now....

think that chart gonna do a little dip sub 50% before its buy time

in the end all that chart really shows me is that stocks were historically very overvalued from 1995 till today

and if you look at any historical average P/E ratio chart it will tell you the same thing pretty much

now we reentering into the historical range....

and usually overvalued periods....are typically followed by undervalued periods

also if you look at dividend yields of today vs. history they are very very low

 

[tiznow]

..

 

[tiznow]

well can't seem to get the P/E thing inserted

here's a link

http://upload.wikimedia.org/wikipedia/commons/d/d2/SP500pe.svg

in year 2000 the S&P was had the highest P/E ever and after each major peak in the past P/E ratios have all fallen to a sub 10 average so expect us to head there once again

 

[Willie99]

Time for him to invest billions, I don't want to lose my $ 20 don't y'know

 

[eek.]

I've sold all my gold at $900 and bought citi at $3.49

Thanks Mr MJ

:toast:

 

[fletchisrhsm]

I've sold all my gold at $900 and bought citi at $3.49

Thanks Mr MJ

:toast:

@)

 

[billbeater]

Buffet cannot come out and say "dont buy stocks now"..... however i will bet that he owns alot of gold
$*)

 

[t2050]

I think he is right if you can figure out what quality is left.
Just based on contrarian sentiment, remember the days when joe6pack loved to talk about stocks. Everywhere you went you would over hear ppl blabbing about their stocks and mutuals. These are ppl who really had no clue what a mutual fund was before they bought it and many still couldn't tell you what it was only that it was going up.

Now I don't hear any positive stock talk and mention stocks in any conversation and the person just kinda looks at the ground shuffling their feet like change the subject.

So I guess its time to buy what I dunno, but start by looking at the market leaders of growth markets.

 

[kingbill]

Canadian Banks...

 

[t2050]

Canadian Banks...

If you buy a Canadian Bank here right now I would sell a covered call at the same time say 3-6 months out(out of the money of course). Combine that with 9% div yield could give you some protection short term if yields hold.

I'm thinking if Canadian banks get in trouble government still has a pretty gd bullet left, which would be to allow bank mergers.