Warren Buffett’s global market indicator hits a record 142%, signaling stocks are too expensive and could crash

warren buffett newspaper
Warren Buffett.

  • The global version of the “Buffett indicator” has reached a record high of 142%.
  • Warren Buffett’s namesake gauge divides the total market cap of global stocks by worldwide GDP.
  • Buffett said the indicator spiking before the dot-com crash was a “very strong warning signal.”
  • See more stories on Insider’s business page.

Warren Buffett’s favorite market indicator has surged to a record high of 142%, signaling US and international stocks are heavily overpriced and could plummet in the months ahead.

The global version of the “Buffett indicator” takes the combined market capitalization of the world’s publicly traded stocks, and divides it by global GDP. A reading north of 100% indicates the global stock market is overvalued relative to the world economy.

“BOOM! Global stocks have gained another $1.6 trillion in market capitalization this week,” Welt market analyst Holger Zschaepitz tweeted on Sunday. “Equities now worth $120.3 trillion, highest in history.”

“Global stock market cap now equal to 142% of world GDP, an all-time high as well,” he added.

Buffett trumpeted his namesake gauge in a Fortune magazine article in 2001. The billionaire boss of Berkshire Hathaway described it as “probably the best single measure of where valuations stand at any given moment.”

Moreover, Buffett said it should have been a “very strong warning signal” when the yardstick skyrocketed during the dot-com bubble. He added that buying stocks at a reading of 70% or 80% would likely be lucrative, but investors would be “playing with fire” when the ratio approaches 200%.

The US stock market is firmly in “fire” territory with a current Buffett indicator reading of 208%. That figure is well above its 187% reading in the second quarter of 2020, when the pandemic was in full swing and GDP was about 15% lower.

However, the Buffett indicator isn’t flawless. For example, it compares the current value of the stock market to past GDP. Governments around the world have also battled the pandemic by ramping up stimulus and shutting down large parts of their economies over the past 18 months, artificially inflating the yardstick’s readings.

Here’s the global version of the Buffett indicator:

Global Buffett Indicator
The global version of the Buffett indicator.

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Warren Buffett’s Berkshire Hathaway has scored a $2 billion gain on BYD stock this year

warren buffett
Warren Buffett.

  • Warren Buffett’s Berkshire Hathaway has made a $2 billion gain on BYD this year.
  • Berkshire spent $232 million in 2008 for a stake in the automaker worth nearly $8 billion today.
  • The Chinese group’s sales of electric and hybrid vehicles rose by over 300% year-on-year in August.
  • See more stories on Insider’s business page.

Warren Buffett’s Berkshire Hathaway has racked up a $2 billion gain on BYD stock this year, boosting the value of its bet on the Chinese electric-vehicle company to almost $8 billion – a 3,400% gain on its investment in under 13 years.

The famed investor’s company spent $232 million to buy 225 million shares of BYD in 2008. Its stake was worth $5.9 billion at the end of last year, Berkshire’s latest annual report shows. Yet BYD’s stock price has surged by about 23% since then, lifting the value of Berkshire’s roughly 8% stake to $7.9 billion.

BYD’s Hong Kong-listed shares climbed 8% on Monday alone after the automaker revealed its sales of passenger vehicles more than quadrupled year-on-year to 60,500 units in August. It sold a total of 261,000 passenger vehicles in the first eight months of this year – more than triple the 85,000 it sold in the same period of 2020.

The robust sales growth reflected a 125% rise in sales of fully electric vehicles to 149,000 units in the first eight months of this year, along with a 485% increase in sales of plug-in hybrids to 112,000 units. In contrast, BYD’s sales of gas-powered vehicles dropped 22% to 106,000 units during that period.

Buffett’s business partner and Berkshire’s vice-chairman, Charlie Munger, has repeatedly sung BYD’s praises since he first brought the company to Buffett’s attention. For example, he described BYD’s founder and CEO, Wang Chuanfu, as a mixture of inventor Thomas Edison and former GE boss Jack Welch in a Fortune interview in 2009.

Munger has been right about BYD’s prospects so far. The company has grown its revenue by nearly six-fold to the equivalent of $24 billion since Berkshire invested, and more than tripled its net income to around $1 billion.

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Reddit is targeting a $15 billion valuation in its New York IPO and looking to hire advisers, report says

In this photo illustration the Reddit logo in App Store seen displayed on a smartphone screen.
  • Reddit is targeting a $15 billion valuation when it lists on the US stock market, Reuters reported late Thursday.
  • The discussion site is looking to hire investment bankers and lawyers, according to people familiar with the matter.
  • Reddit CEO Steve Huffman recently said that “all good companies should go public when they can.”
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Reddit is eyeing a $15 billion valuation for its public market debut in New York early next year, and is looking to hire advisers to help it with the launch, Reuters reported late Thursday, citing people familiar with the matter.

The online forum, which inspired this year’s meme-stock trading frenzy, scored a $10 billion valuation in a private fundraising from Fidelity Investments last month.

Aiming for an initial public offering in early 2022, Reddit is working on hiring investment bankers and lawyers, two sources told Reuters. The timing and size of the IPO depend on market conditions, they added.

The company’s CEO Steve Huffman said “all good companies should go public when they can,” speaking recently to the New York Times about Reddit’s stock market ambitions. But no firm timeline has been decided for the IPO, he added.

Reddit didn’t immediately respond to Insider’s request for comment on the IPO valuation and recruitment of advisers.

The number of people using the discussion site surged in 2021 as retail traders coordinated their efforts on forums such as Wall Street Bets. Their aim was to drive the price of GameStop, AMC, and other highly shorted stocks higher, hoping to profit as hedge funds covered those short positions. The chat on the WSB subreddit took on a populist tone where rebellious novice investors banded together to give Wall Street a black eye.

It counted about 52 million daily active users and more than 100,000 sub-reddits as of October 2020, Reuters reported. Its total number of active users stood at 430 million as of July this year, according to Statista data.

Founded in 2005, Reddit was acquired by magazine publisher Conde Nast just a year later. The employee headcount stood at 700 at the start of 2021, but Reddit had announced plans to double that number. Fidelity Investments, Andreessen Horowitz, Sequoia Capital, and Tencent Holding are its biggest investors.

Trading app Robinhood, among the popular brokerages used by investors in the Reddit-fuelled rally, launched an IPO in July. Its shares are up 28% since.

Read More: A doge miner whose setup earns up to 24 dogecoins a day shares how he maximizes returns – and explains how a single machine rakes in passive income from multiple cryptos

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Warren Buffett’s deputy explained how he snowballed his retirement account from $70,000 into $264 million, how he shrugs off losses, and how people can save a fortune

Ted Weschler
Ted Weschler.

  • Warren Buffett’s deputy grew his retirement fund from $70,000 to $264 million in less than 30 years.
  • Ted Weschler explained his strategy and shared tips for savers in a recent interview.
  • Weschler revealed how he deals with losses and spoke about his role at Berkshire Hathaway.
  • See more stories on Insider’s business page.

Warren Buffett’s deputy grew his retirement fund from $70,000 to $264 million in under 30 years. He detailed how he did it, revealed the way he shrugs off investment losses, and offered tips on saving for retirement in a recent Washington Post interview.

Ted Weschler, who helps Buffett manage Berkshire Hathaway’s investment portfolio, discussed his approach with Allan Sloan for the writer’s latest column. ProPublica first disclosed the size of Weschler’s nest egg in June, citing federal tax returns it obtained.

“In a perfect world, nobody would know about this account,” Weschler told Sloan in an email, adding that he hoped the revelation would motivate people to start saving and investing early in their careers.

The investor opened his independent retirement account (IRA) in 1984. He was 22 and earning a salary of $22,000 a year as a junior financial analyst at WR Grace, a chemicals company. Maximizing his contributions and capitalizing on a generous employer match, he grew his account to over $70,000 by the end of 1989 – the year he quit his job to start a private equity firm, and transferred his savings into a self-directed IRA under his control.

Weschler went on to launch a hedge fund in 2000, which delivered after-fee, compounded annual returns of 22% for its clients between 2000 and 2011. He joined Berkshire in 2012 after shelling out $5 million to join Buffett for his annual charity lunch in 2010 and 2011.

The investor’s retirement fund ballooned in value by more than 300,000% between 1989 and 2018, despite his IRA shedding 52% of its value in 1990 after two key holdings tanked that year. However, Weschler brushed off the unrealized loss by focusing on learning from it.

“One of my personal investment mantras is that there’s no such thing as a loss, it’s just an unmonetized lesson,” he told Sloan.

Notably, Weschler converted his IRA into a Roth IRA in 2012, paying over $28 million of federal income tax to do so. The switch means he won’t owe any taxes when he cashes out his retirement account.

Buffett’s deputy told Sloan that he’s paid less attention to his nest egg since joining Berkshire, partly because there’s no longer an overlap between the investments he analyzes for work and those he would buy for his account. He now seeks out companies that can absorb at least $500 million without giving Berkshire a stake of 10% or more, implying he focuses on businesses with a market capitalization of over $5 billion.

Echoing Buffett, Weschler underscored to Sloan the value of index funds for people who don’t have the time or interest to study investments closely. He pointed out that if his $70,535 in savings at the end of 1989 had been parked in Vanguard’s S&P 500 index fund, it would be worth about $1.6 million as of June 30 this year – a roughly 23-fold gain.

“That $1.6 million drives some very simple advice: Start early, maximize the (employer) match, invest 100% in equities, and ignore all the other noise,” Weschler said.

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Nasdaq notches record high as hiring slowdown supports the potential for continued Fed stimulus

traders nyse
  • The Nasdaq Composite closed at a record high Wednesday as trading in September kicked off.
  • The S&P 500 also rose as slower private-sector hiring stoked hopes the Fed will keep stimulus measures in place.
  • Investors are looking forward to Friday’s jobs report for August from the Labor Department.
  • See more stories on Insider’s business page.

The Nasdaq Composite index closed at a record high Wednesday, fueled by hopes of further Federal Reserve support for the economy after ADP employment data fell short of expectations.

Tech stock gains helped both the Nasdaq and the S&P 500 advance, but the Dow Jones industrial average was hurt as industrial equipment maker Caterpillar was among its losing components.

Private payrolls rose by 374,000 in August, missing the estimate of 613,000 from economists surveyed by Bloomberg. August marked the second-smallest increase in hiring since February.

Last week, Federal Reserve Chairman Jerome Powell reiterated that the central bank could start tapering asset purchases but also said the labor market still needs help to fully recover.

Here’s where US indexes stood at the 4 p.m. market close on Wednesday:

Read more: The ‘Wolf of All Streets’ trader shares the 6 altcoins he’s bullishly ‘hodling’, and why investing in crypto now is the largest upside opportunity that our generation will see

The benchmark S&P 500 on Tuesday ended higher for the seventh consecutive month, the longest winning streak since January 2018.

The ADP report was released before Friday’s release of August jobs data from the Labor Department.

“The private payrolls numbers have been all over the map during the pandemic, and often not the strongest indicator of how the rest of the jobs report will play out,” Mike Loewengart, managing director of investment strategy at E-Trade Financial, told Insider in a note. “But with so much pressure on improvement on the labor market front coming from the Fed, this could send a signal that jobs growth is stagnating. That’s likely a good thing for the markets though as it means easy money policy continues.”

Gold rose as much as 0.4% to $1,820.13 per ounce.

West Texas Intermediate crude fell as much as 2% to $67.12 per barrel.

Bitcoin rose as much as 4.5% to $49,107.95.

Read the original article on Business Insider

A BofA indicator that measures Wall Street stock bullishness is signaling weak 12-month returns

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  • Bank of America said its contrarian indicator measuring Wall Street bullishness is close to triggering a sell signal.
  • The Sell Side Indicator is at 59.5%, which is near the contrarian sell signal of 60.1%.
  • The current level projects 12-month price returns of 6%, lagging the average forecast of 13% since the financial crisis ended in 2008.
  • See more stories on Insider’s business page.

Bank of America on Wednesday said its measure of equity-investor enthusiasm is signaling underperformance relative to history for the S&P 500 over the next year.

The investment bank said its Sell Side Indicator – which assesses sell-side analyst sentiment across Wall Street – was at 59.5% in August for a second straight month. It remains dangerously close to the 60.1% threshold, which would trigger a contrarian sell signal. That level has not been breached since 2007, according to BofA.

The figures come as investors assess a mix of factors that could cause gyrations in stocks, such as a drop in consumer sentiment, peak profit growth for corporate earnings, and potential benefits from a pending infrastructure bill in Washington.

“The current level is forecasting 12-month price returns of just 6%, a much weaker outlook compared to an average 12-month forecast of 13% since the end of the Global Financial Crisis,” said equity strategists led by Savita Subramanian in a note.

The indicator is at its closest sell threshold since May 2007, after which the S&P 500 declined 7% on a total return basis in the subsequent 12 months. BofA said usually when the indicator has been this close to a sell signal – or even closer – subsequent 12-month total returns have been positive 62% of the time compared with 83% positive returns over the entire time period.

BofA’s caution arrived as the S&P 500 index finished August trading with a seventh consecutive month of gains and as numerous record highs have pushed the index up by 20%.

September historically is the worst month in the year for stocks in terms of generating returns. But research firm Fundstrat this week said September market returns could be stronger than consensus after a strong performance in equities during the first half of the year.

Read more: A 48-year market vet warns that the Fed will be forced to tighten policy ‘way sooner’ than investors anticipate as inflation continues to soar – triggering a stock market crash of up to 80%

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Sneaker company Allbirds wants to pioneer the ‘sustainable public equity offering’ by convincing potential IPO investors it’s meeting ESG goals

allbirds tree runners 1
  • Sustainable sneaker company Allbirds took its first steps to go public on Tuesday with its S-1 filing.
  • Allbirds detailed its commitment to sustainability and revealed financial results in the filing.
  • The company was targeting a valuation of at least $2 billion in June, according to Bloomberg.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Allbirds, the direct-to-consumer sneaker company focused on sustainability, made the first steps necessary to go public on Tuesday with its S-1 filing submission to the SEC.

The company, which was founded in 2016, was valued at $1.7 billion in its last funding round, and was targeting a valuation of at least $2 billion in June, according to a Bloomberg report.

Allbirds detailed in the S-1 filing its plans to pioneer a “sustainable public equity offering,” which is “an expression of our belief and commitment that our environmental credentials are not in conflict with phenomenal financial outcomes.”

The company said in its filing that it is committed to establishing “rigorous, objective, and clearly defined ESG criteria, and holding ourselves accountable to meeting those criteria.” The criteria established by the company is meant to be assessed by a third party and provides an easily replicated framework that other companies can use in their own IPOs, the filing said.

Allbirds also said in the filing that it hopes to “reward investors with eye-popping returns over the long-term,” adding that it will “work our tails off to do just that.”

But Allbirds will likely need to turn profitable to delight investors, which it has yet to do. According to the S-1 filing, Allbirds’ net loss was $14.5 million in 2019, which ballooned to $25.9 million in 2020 amid the COVID-19 pandemic.

Despite the accelerated losses, revenue is on the rise at Allbirds, jumping to $219.3 million in 2020 from $193.7 million in 2019. In the first six months of 2021, Allbirds recorded $117.5 billion.

While Allbirds operates 27 physical stores, 89% of the company’s revenue came from online. The company ultimately expects to grow its store count to “hundreds,” according to the filing.

Allbirds plans to trade under the ticker symbol “BIRD” and list its shares on the Nasdaq.

Read the original article on Business Insider

Nasdaq hits record high as soft jobs data fuels hopes of more Fed support

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 24, 2017.  REUTERS/Brendan McDermid
  • The Nasdaq Composite index hit an intraday record high on Wednesday after weaker-than-expected ADP employment data spurred hopes of further Federal Reserve support.
  • The S&P 500 – which hovered near records – enters September free off seven months of gains.
  • See more stories on Insider’s business page.

The Nasdaq Composite index hit record intraday highs on Wednesday after weaker-than-expected ADP employment data spurred hopes of further Federal Reserve support.

Private payrolls rose by 374,000 in August, a figure that missed the estimate of 613,000 from economists surveyed by Bloomberg. August marked the second-smallest increase in hiring since February.

Last week, Federal Reserve Chairman Jerome Powell reiterated that the central bank could start tapering asset purchases but also said that the labor market’s recovery still needs assistance.

Here’s where US indexes stood shortly after the 9:30 a.m. market open on Wednesday:

Read more: The ‘Wolf of All Streets’ trader shares the 6 altcoins he’s bullishly ‘hodling’, and why investing in crypto now is the largest upside opportunity that our generation will see

The benchmark S&P 500 on Tuesday ended higher for the seventh consecutive month, its longest winning streak since January 2018.

“Even as the major averages all finished higher in August … we’re advising caution for investors here in September for several reasons,” said Greg Bassuk, CEO of AXS Investments, told Insider in a note. “Uncertainties sparked by the Delta COVID variant, the uncertain outcome of the Fed’s meeting this month, and rising geopolitical tensions including in Russia, China and Afghanistan, all weigh heavily on the markets.”

Gold rose as much as 0.4% to $1,820.13 per ounce.

Oil prices fell, with West Texas Intermediate crude down 1.8% to $67.30 per barrel at intraday lows.

Bitcoin rose as much as 1.8% to $47,843.19.

Read the original article on Business Insider

September is historically the worst month of the year for stocks, but recent strength suggests the market could buck the trend

NYSE Trader
A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., March 3, 2020.

  • September is historically the worst month of the year for returns in the stock market.
  • Since 1928, the month of September has generated an average stock return of -0.1% with a win-ratio of only 46%.
  • But after such a strong start to the year, September market returns could be stronger than consensus.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

September has historically been the worst month of the year in terms of stocks generating returns, but recent strength in the S&P 500 suggests this year may be different.

Since 1928, the month of September generated an average stock market return of -0.1%, with a win-ratio of only 46%, according to data from Fundstrat.

Even in the last 1o and 20 years, and in post-election years, September was on average a down month for stocks, according to LPL. And last year, even in the face of a rapid recovery from the COVID-19 pandemic, stocks staged a 10% correction.

Given the tendency for September to be a down month for stocks, investors are likely wary about the next four weeks. But according to Fundstrat, data shows strong equity returns in September when markets see a strong first half of the year.

Since 1928, the stock market delivered median returns of 1.4% with a win-ratio of 67% in September when the first half of the year saw gains of at least 13%. The S&P 500 was up more than 15% in the first six months of 2021.

Strength often begets strength, so investors should not be surprised if stocks continue to buck the trend in seasonality data, as August was also an up month for stocks this year despite it being historically weak for equity returns.

And if September does turn out to be a down month for the stock market, investors should take advantage of the dip and buy it, because “this bull market is alive and well,” LPL concluded.

Read the original article on Business Insider

Sneaker company Allbirds wants to pioneer the ‘sustainable public equity offering’ by ensuring investors it meets ESG criteria in its upcoming IPO

allbirds tree runners 1
  • Sustainable sneaker company Allbirds took its first steps to go public on Tuesday with its S-1 filing.
  • Allbirds detailed its commitment to sustainability and revealed financial results in the filing.
  • The company was targeting a valuation of at least $2 billion in June, according to Bloomberg.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Allbirds, the direct-to-consumer sneaker company focused on sustainability, made the first steps necessary to go public on Tuesday with its S-1 filing submission to the SEC.

The company, which was founded in 2016, was valued at $1.7 billion in its last funding round, and was targeting a valuation of at least $2 billion in June, according to a Bloomberg report.

Allbirds detailed in the S-1 filing its plans to pioneer a “sustainable public equity offering,” which is “an expression of our belief and commitment that our environmental credentials are not in conflict with phenomenal financial outcomes.”

The company said in its filing that it is committed to establishing “rigorous, objective, and clearly defined ESG criteria, and holding ourselves accountable to meeting those criteria.” The criteria established by the company is meant to be assessed by a third party and provides an easily replicated framework that other companies can use in their own IPOs, the filing said.

Allbirds also said in the filing that it hopes to “reward investors with eye-popping returns over the long-term,” adding that it will “work our tails off to do just that.”

But Allbirds will likely need to turn profitable to delight investors, which it has yet to do. According to the S-1 filing, Allbirds’ net loss was $14.5 million in 2019, which ballooned to $25.9 million in 2020 amid the COVID-19 pandemic.

Despite the accelerated losses, revenue is on the rise at Allbirds, jumping to $219.3 million in 2020 from $193.7 million in 2019. In the first six months of 2021, Allbirds recorded $117.5 billion.

While Allbirds operates 27 physical stores, 89% of the company’s revenue came from online. The company ultimately expects to grow its store count to “hundreds,” according to the filing.

Allbirds plans to trade under the ticker symbol “BIRD” and list its shares on the Nasdaq.

Read the original article on Business Insider