How did Warren Buffett manage to understand the stock market and achieve significant profits even in the worst years of the global economy?
The answer is very complex and not well known, but one of the very important indicators is called
Buffett indicator ๐ธ
The indicator compares the total value of the US stock market (based on the Wilshire 5000 index) to the US gross domestic product.
The purpose of the indicator is to tell us whether stock prices are reasonable in relation to the reality we live in, or if prices are inflated, or if prices are too low.
For more than 20 years, the indicator has been above 100%, meaning we are living in a bubble and everything is priced excessively ๐คฏ
Currently, the indicator is at 195% and is very close to 200%, a level that the indicator has reached only a few times historically.
Do we urgently need an economic recession?