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Why Warren Buffett Thinks There Will Be Another Stock Market Crash

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  • Why Warren Buffett Thinks There Will Be Another Stock Market Crash

    Warren Buffett's actions have indicated that he expects another stock market crash. He recently sold most of his stake in Goldman Sachs (GS) Stock, Phillips 66, Travellers, Amazon stock, and his airline stocks last month. Even though Warren Buffett says investing for beginners is easy and to just buy and hold through index fund investing, his actions clearly show he doesn't think this is the best course of action. The reason he thinks this is because of something called the Warren Buffett indicator. This is something he's called the most important indicator for determining stock market value. The indicator is simply Total market cap over GDP. A level over 100% usually indicates the stock market is overvalued. Currently this indicator is over 180% and rising, indicating a wildly overvalued stock market. However even though this indicator is important, it doesn't take into account interest rates when valuing the stock market. A better indicator I like to look at is the brock value (BV) which is the same as the buffett indicator only it takes interest rates into account. The Brock Value actually shows that stocks are UNDERVALUED right now! How? Because interest rates are at an all time low. Warren Buffett has said in 2015 stocks are extremely cheap if interest rates stay this low. And the Brock Value agrees with this assertion. The problem with the brock value is that it assumes interest rates will stay at 0, and this will mostly likely not happen over the long term. Yes, Interest rates may stay at 0 for the rest of this year, but over the next 3-5 years it is very likely they will rise, and at this point it would be reasonable to see outflows from the stock market.
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  • #2


    There's always another one on the way, It wouldn't be the stock market if there wasn't

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    • #3
      Originally posted by PumptheDump View Post
      ::

      There's always another one on the way, It wouldn't be the stock market if there wasn't
      agreed. that's like saying the sun will rise again...

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