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Comment by rajnathani | Hacker News Reader

I would rename the title to “The Buffett Indicator shows an overvalued market”. For those curious of its definition (from the article):

> The Buffett Indicator, a ratio that measures the market cap of the entire stock market against the GDP of the United States, has hit a record of ~232%. Historically, anything above ~120% is a signal of the market being overvalued.

That being said, it’s not clear that the Buffet Indicator is fully relevant, as a lot of the US AI and AI hardware companies’ market caps which are driving the stock market valuation growth involve a significant portion of their revenue from outside the US, and thus this wouldn’t necessarily count fully to the US’s GDP (for example, tax entity workarounds for foreign obtained revenue).

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The fact the AI emperor wears no clothes seems clear to me at least. The dot-com bubble looked obvious in 1997; it popped in 2000. Anyone shorting in '97-'98 was carried out on a stretcher before being vindicated. In fact 2000-2002 fell in three brutal legs over two years, and anyone who leveraged up after the first 25% leg was destroyed by the next two.

My strat is to accumulate cash to buy the drop. The danger with this is; will the bubble continue until the bottom is even higher than today? I’ll take that bet.

This is the way. Did the same thing for 3 years before corona. Drop came, went all in, fast forward a year or two, we did not die, and the stocks were about 150%-200% higher.

I'm doing the same thing now. Slowly starting to sell off the shares I have, putting the profit in bonds/interest accounts, when the bubble pops, I'll go all-in (phasing it in over a few quarters most likely) and then profit after 1-2 years.

I was to conservative on the corona drop. I was expecting a dead cat bounce that never came, it was truly v-shaped.

2017 the SPY went from 2200 to 2600, in March 2017 it was around 2350.

The lowest it hit in March 2020 was 2190, on March 23rd. It was back at 2500 3 days later.

Well done on your 7% discount. Hope you didn't sleep in that day

No, I did not invest in index funds, and I did not invest in SPY. But please try again.

Timing the market is far harder to predict than it will crash. As you said in 1997.

In 1997 the Nasdaq was about 1700. In hindsight sure, sit on cash and buy at 1200 in 2002.

In reality you'd have either bought around the 1900 mark in 2001, or perhaps waited until 2003 when it was back to 1900.

Then come 2009 you'd be back down to 1300, so would you have waited 12 years?

You are

1) betting the bubble continue until the bottom is even higher than today

2) betting that AI won't be bailed out by the most honest administration ever seen

3) betting that you can accurately time the bottom of the market

Good luck catching your falling knife

Yeah. This is why BRK is in cash equivalents rather than being short.

Buffett has said a number of times that he never is intentionally sitting on the sidelines as a bet that things will go down. He’s simply there because he can’t find value. He’s also said that if he was dealing with millions rather than billions, he could probably find loads of value.

My guess is that is still true today, so the rest of us can probably find deals even in this market.

The Buffett indicator has been over 120% since December 2016. It dipped to 130% in March 2020.

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