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Comment by knapcio | Hacker News Reader

I don’t think this indicator is relevant anymore. Nowadays, it’s extremely easy for anyone around the world to invest in US stocks when in 2000/2008 that was nearly impossible in the majority of countries. I’m from eastern europe and invested in a few american companies a while ago. People underestimate the value of that.

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It doesn't change the main point, which is that the value of the stock market is derived from the value of the actual companies. It doesn't matter where the money is coming from to buy those stocks.

How is that value determined though? It's just by what people think the stock is worth. If you have more money coming in to the market the listed companies' stocks will naturally be at a higher price point.

Capital doesn't have to be invested in stocks, much less American ones.

>How is that value determined though?

By the real profits of the companies in question according to standard accounting rules.

It's not "perceived value" or "demand" or anything else that can be affected by speculation or hype. It's literally the units of money produced by the company that issued the stock.

Buffet's rule of thumb says that ultimately the value matters. Investors and banks can play whatever games they like trading securities, building new financial instruments, speculation, etc, but ultimately the value of stocks is tied to the amount of money produced as profit, and eventually the market corrects.

So far he's been right.

Strong point IMHO. Also, the indicator has been close to the same level since 2014 (6 years). If this indicator were perfectly predictive, then we would have seen a recession shortly after 2014.

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