The Warren Buffett Indicator is less mysterious than it sounds. It might as well be called the common-sense indicator. It’s simply the relationship between gross domestic product (GDP)—or the sum total of a country’s economic activity—and the value of stocks in the S&P 500. So, in simpler terms, the Warren Buffett Indicator in terms of Wall Street measures market capitalization versus U.S. GDP. (Source: “Why Warren Buffett Is Betting Against Warren Buffett,” Seeking Alpha, October 24, 2017.)
It is just another business cycle, albeit an extended one, coming to an end: not TEOTWAWKI. Therefore it is safe to say that the downturn will be extended too because foreclosures (as an example) have not been assimilated from the last crash yet; and a new round of bankruptcies and foreclosures will follow the economic decline for those who are levered.
Some point to the Ontario government’s Places to Grow intensification plan as the major culprit in skyrocketing single detached home prices. Toronto condo prices haven’t risen like house prices have, yet condo demand is usually not spoken much about. It does look like a growing population want house to live in. A growing millennial family would certainly find it tough to live in highrise condos designed for adult living.

None of the research however, seems to be applied to human expectations, human happiness, and human panic. Human’s don’t pay attention to historical trends and data, nor what AI systems advise. They generally pay attention to now just like herding animals before a stampede. The signal that sets the herd off, could be one or two animals stumbling over a pothole.
That's bad news because a rise in global prices not only pushes up dollar demand by importers, which impacts the already-widening current account deficit, but also raises inflation concerns back home. Disappointing CAD data - predicted to deteriorate to 2.8 per cent this year from 1.9 per cent of GDP in FY18 - has been haunting Dalal Street for the past few weeks now.
By the end of the weekend of November 11, the index stood at 228, a cumulative drop of 40% from the September high. The markets rallied in succeeding months, but it was a temporary recovery that led unsuspecting investors into further losses. The Dow Jones Industrial Average lost 89% of its value before finally bottoming out in July 1932. The crash was followed by the Great Depression, the worst economic crisis of modern times, which plagued the stock market and Wall Street throughout the 1930s.
Thanks for voicing your opinion too Violet. This isn’t Nazi Germany and it’s important that we can all speak freely without feeling threatened. I think my portrayal of Obama and Clinton was generous. I’ve witnessed the downfall of the US in the last 30 years and it’s awful to see. I hope you’ll get a chance to read my other post on the US debt: http://www.gordcollins.com/investment-2/massive-deficit-debt-china/ Do you think Obama generated the results he did get with that $20 trillion debt? If you don’t bring back the good paying jobs and reduce the deficit, how will you pay off that horrible debt? The US needed a strong leader, and although the Tweeting @realDonaldTrump is creating more friction, you have to admire how he’s standing up against the media who have a stake in the status quo. I hope as well that he will level the playing field between multinational corporations and small businesses like yours. My loyalty is with SMBs like your company!
Surging oil prices: Oil has been rallying as worries about Iran sanctions, which kick in on November 4, threaten global supply. International crude oil benchmark Brent yesterday hit a four-year high of $86.74 a barrel. Given that India is the world's third largest oil consumer, and heavily dependent on imports to boot, this is the biggest threat to the domestic economy.
The effect was worse in the United Kingdom, particularly on the London Stock Exchange's FT 30, which lost 73% of its value during the crash.[4] From a rate of 5.1% real GDP growth in 1972, the UK went into recession in 1974, with GDP falling by 1.1%.[1] At the time, the UK's property market was going through a major crisis, and a secondary banking crisis forced the Bank of England to bail out a number of lenders.[5] In the United Kingdom, the crash ended after the rent freeze was lifted on 19 December 1974, allowing a readjustment of property prices; over the following year, stock prices rose by 150%. The definitive market low for the FT30 Index (a forerunner of the FTSE100 today) came on 6 January 1975, when the index closed at 146 (having reached a nadir of 145.8 intra-day). The market then practically doubled in just over 3 months.[5] However, unlike in the United States, inflation continued to rise, to 25% in 1975, giving way to the era of stagflation. The Hong Kong Hang Seng Index also fell from 1,800 in early 1973 to close to 300.[6]
As the large seller's trades were executed in the futures market, buyers included high-frequency trading firms—trading firms that specialize in high-speed trading and rarely hold on to any given position for very long—and within minutes these high-frequency trading firms started trying to sell the long futures contracts they had just picked up from the mutual fund.[23] The Wall Street Journal quoted the joint report, "'HFTs [then] began to quickly buy and then resell contracts to each other—generating a 'hot-potato' volume effect as the same positions were passed rapidly back and forth.'"[23] The combined sales by the large seller and high-frequency firms quickly drove "the E-Mini price down 3% in just four minutes".[23]
By 1983, consumers found that most predicted uses of home computers were unrealistic, except for games. Children used most home computers[9]—Coleco planned to market its Adam home computer to "boys age 8 to 16 and their fathers ... the two groups that really fuel computer purchases"[10]—so games dominated home computers' software libraries. A 1984 compendium of reviews of Atari 8-bit software used 198 pages for games compared to 167 for all other software types.[11] Because computers generally had more memory and faster processors than a console, they permitted more sophisticated games. They could also be used for tasks such as word processing and home accounting. Games were easier to duplicate, since they could be packaged as floppy disks or cassette tapes instead of ROM modules (though some cassette-based systems retained ROM modules as an "instant-on" option). This opened the field to a cottage industry of third-party software developers. Writeable storage media allowed players to save games in progress, a useful feature for increasingly complex games which was not available on the consoles of the era.
Though, again, that may be generally true, at times of severe market moves, surprisingly, often there is very little new news to justify the price change. Research on what moves stock prices, has found that prices can often move a lot without news. Also, in his book Irrational Exuberance, Robert Shiller finds that one of the biggest stock market moves of all time, 1987's Black Monday decline wasn't driven by any obvious economic event. Therefore, it's not clear that market crashes are the result of some unanticipated bad news that shocks investors.
In 2013, the stock market finally recovered. In the first six months, it gained more points than in any year on record. Stock prices rose faster than earnings, creating an asset bubble. The Dow set over 250 closing records until February 2018. Fears of inflation and higher interest rates almost sent the Dow into a correction. Like many other past stock market crashes, it did not lead to a recession.
“I think as Americans lose their jobs, they are going to see the cost of living going up rather dramatically, and so this is going to make it particularly painful,” Schiff said. “This is a bubble not just in the stock market, but the entire economy,” he told Fox News Business. Schiff is predicting a recession, accompanied by rising consumer prices, that will be “far more painful” than the 2007-2009 Great Recession.
Oil futures inched up on Friday amid concerns over supply as U.S. sanctions on Iran's crude exports loom, although calls by U.S. President Donald Trump for lower oil prices dragged, a Reuters report said. Brent crude for November delivery was up 26 cents, or 0.33%, at $78.96 a barrel while US West Texas Intermediate crude for October delivery was up 7 cents, or 0.10%, at $70.39 a barrel, the report added. 
The joint 2010 report "portrayed a market so fragmented and fragile that a single large trade could send stocks into a sudden spiral",[23] and detailed how a large mutual fund firm selling an unusually large number of E-Mini S&P contracts first exhausted available buyers, and then how high-frequency traders (HFT) started aggressively selling, accelerating the effect of the mutual fund's selling and contributing to the sharp price declines that day.[42][23]
Nintendo reserved a large part of NES game revenue for itself by limiting most third-party publishers to only five games per year on its systems (some companies tried to get around this by creating additional company labels like Konami's Ultra Games label); Nintendo would ultimately drop this rule by 1993 with the release of the Super Nintendo Entertainment System.[50] It also required all cartridges to be manufactured by Nintendo, and to be paid for in full before they were manufactured. Cartridges could not be returned to Nintendo, so publishers assumed all the financial risk of selling all units ordered. As a result, some publishers lost more money due to distress sales of remaining inventory at the end of the NES era than they ever earned in profits from sales of the games.
Based on our analysis, we believe that High Frequency Traders exhibit trading patterns inconsistent with the traditional definition of market making. Specifically, High Frequency Traders aggressively trade in the direction of price changes. This activity comprises a large percentage of total trading volume, but does not result in a significant accumulation of inventory. As a result, whether under normal market conditions or during periods of high volatility, High Frequency Traders are not willing to accumulate large positions or absorb large losses. Moreover, their contribution to higher trading volumes may be mistaken for liquidity by Fundamental Traders. Finally, when rebalancing their positions, High Frequency Traders may compete for liquidity and amplify price volatility.
Evan of My Journey to Millions took the conversation back to the bigger picture with your investing goals and, “I honestly do not think you can protect against a stock market crash, and that’s okay! Make sure your risk tolerance matches your asset allocation and ride it out knowing that you should have time to let it all work itself out.  It is unlikely that the next crash is going to be the one that destroys our market system.”
The 1929 crash brought the Roaring Twenties to a halt.[35] As tentatively expressed by economic historian Charles P. Kindleberger, in 1929, there was no lender of last resort effectively present, which, if it had existed and been properly exercised, would have been key in shortening the business slowdown that normally follows financial crises.[32] The crash marked the beginning of widespread and long-lasting consequences for the United States. Historians still debate the question: did the 1929 Crash spark The Great Depression,[36] or did it merely coincide with the bursting of a loose credit-inspired economic bubble? Only 16% of American households were invested in the stock market within the United States during the period leading up to the depression, suggesting that the crash carried somewhat less of a weight in causing the depression.

You might be wondering if we’ve endured one too many ghost apparitions. To suggest that no less than Warren Buffett, whose net worth is north of $80.0 billion, expects the market to reverse its bullish course seems not just scary, it seems silly. But Warren Buffett’s predictions for 2018 call for at least a market correction—if not an outright crash.
DSP Mutual Fund sold Dewan Housing bonds this week to boost its cash holdings before an expected tightening of market liquidity in September, Kalpen Parekh, president of DSP, said in an interview. The firm sold 3 billion rupees ($41.6 million) of the bonds to express “our interest view, not a credit view,” Parekh said. “This has been done across issuers over last few days.”
According to Lee, there are two key factors that will soon bring more institutional interest to the markets. First, it will be the upcoming launch of the digital assets platform Bakkt by the operator of major global exchange New York Stock Exchange (NYSE), Intercontinental Exchange (ICE). Announced in August this year, Bakkt recently confirmed a “target” launch date for Jan. 24, 2019.
On October 31, Halloween, children and adults alike enjoy playing with the frightful themes of death surrounding the feast’s mixture of Christian All Saints’ Day and Celtic pagan origins. But, in 2017, if you are one of millions of people who have investments, here’s something all too real and scary to rob you of your sleep. This Warren Buffett Indicator predicts a stock market crash in 2018.
One disconcerting aspect is that large avalanches, epic earthquakes or giant forest fires do not seem to be very special: They appear to be just less frequent, scaled-up versions of small ones. If this is true, then a stock market crash may not be special at all, but merely a larger-than-usual down day, and just as unpredictable. This would present a big challenge to traditional investment methods.
The following day, Black Tuesday, was a day of chaos. Forced to liquidate their stocks because of margin calls, overextended investors flooded the exchange with sell orders. The Dow fell 30.57 points to close at 230.07 on that day. The glamour stocks of the age saw their values plummet. Across the two days, the Dow Jones Industrial Average fell 23%.
One disconcerting aspect is that large avalanches, epic earthquakes or giant forest fires do not seem to be very special: They appear to be just less frequent, scaled-up versions of small ones. If this is true, then a stock market crash may not be special at all, but merely a larger-than-usual down day, and just as unpredictable. This would present a big challenge to traditional investment methods.

During the 1920s, the U.S. stock market underwent rapid expansion, reaching its peak in August 1929, after a period of wild speculation. By then, production had already declined and unemployment had risen, leaving stocks in great excess of their real value. Among the other causes of the eventual market collapse were low wages, the proliferation of debt, a struggling agricultural sector and an excess of large bank loans that could not be liquidated.


If you break up the components of the correction, the entire fall was concentrated in financials and other sectors where there are valuation concerns. Even within the large cap space, the correction was sharpest in stocks like Kotak Bank, Adani Ports, Bajaj Finserv, Bajaj Finance etc where there already are valuation concerns. The basket selling was largely restricted to stocks like Yes Bank, Indiabulls and DHFL, which were in the news as well as stocks where valuation concerns have been around for quite some time.

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Second, given that the effect of tariffs is to make imported goods more expensive so as to reduce the amount of goods imported, China may retaliate by imposing its own tariffs. Who knows what those will be? Whatever the case, this will make US goods less attractive in Chinese markets, and US companies relying on sales in China will end up making less money.
It look really bad in 2012 and I took everything and pushed it conservative. Bad timing. I wasn’t thinking and I wasn’t looking at the charts. I am now and I know exactly what to do. I retire in just about 15 years. By then, if we don’t have a full on collapse, I expect to be STINKING RICH. Everyone could be. All you have to do is look at the charts. The right ones of course. I’ve been sworn to secrecy and that is all the clue I will give, but, suffice it to say that there is a pattern that even a monkey could see if he looked.
Finally, once the perfect storm outlined above occurs, the policy tools for addressing it will be sorely lacking. The space for fiscal stimulus is already limited by massive public debt. The possibility for more unconventional monetary policies will be limited by bloated balance sheets and the lack of headroom to cut policy rates. And financial-sector bailouts will be intolerable in countries with resurgent populist movements and near-insolvent governments.
The month began with more bad news. The Labor Department reported that the economy had lost a staggering 240,000 jobs in October. The AIG bailout grew to $150 billion. Treasury announced it was using part of the $700 billion bailouts to buy preferred stocks in the nations' banks. The Big Three automakers asked for a federal bailout. By November 20, 2008, the Dow had plummeted to 7,552.29, a new low. But the stock market crash of 2008 was not over yet.
“There’s no question when you look at last week, some of the selling is the result of programmatic selling because as volatility goes up, some of these algorithms force people to sell,” Solomon told CNBC’s Wilfred Frost. “Market structure can, at times, contribute to volatility and one of the things that we’re spending a bunch of time thinking about at the firm is how changes in market structure over the course of the last 10 years will affect market activity.”
As an investment banker who buys blocks of mortgages around America this is an important subject as to whether the value of my collateral will deteriorate. Talbott does a good job presenting his case that there is a relationship between household income and housing prices. His point is well taken that low interest rates have fueled this boom and that when rates rise, housing prices will have to come down. So, from the perspective of his thesis, I found this to be well written and well documented even if I agree there is a risk but do not believe that it will be significant.
To be able to make good decisions amid a stock market crash, investors will need to be able to remain calm. As Buffett has said, "Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."
The cost of ownership in the most high priced markets is going up even more. Why? The limitation on the mortgage interest deduction to $750K and the limitation on the sales and property tax deduction to $10K. With the increase in interest rates, the partial non deductibility of interest and taxes, the overall cost of ownership is going up. Most people will feel the punch in their guts next year when they file the 2018 taxes. That is when most folks would realize what hit them was not a pleasant surprise!
Likewise, stock prices have defeated all forecasting efforts, and may well belong to the same set of basic unpredictability. While occasionally somebody may seem to be on the right side of an investment ahead of a big move, this is a far cry from actually forecasting such move with any kind of precision in terms of timing and size. For each “hunch” that is successful, a myriad others fail. Despite anecdotes, there seems to be no clear evidence that investors who get a big move “right” are anything but lucky.
The S&P BSE Sensex surged 368 points on Friday, the recovery after 970-point fall in this week earlier, to a day's high of 37,489.24 tracking the strongness in Indian rupee value against US dollar, lower crude oil prices, government's directive to oil marketers to book future prices of crude oil and positive Asian cues. Shares of ICICI Bank, Reliance Industries, HDFC Bank, ITC, Axis Bank, HDFC and SBI were the biggest positive point contributors to the benchmark index, as these stocks collectively added about 350 points. 

While the note's warnings are ominous and contradict many other more rosy outlooks for the current bull market, the London-based fund was on point in calling February's market correction weeks before it happened. Filia told CNBC in late January that stock valuations were in "bitcoin territory," "totally disconnected from fundamentals," and that markets were on the "edge of chaos."
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