Mike Maloney’s Stock Fragility Index Is Screaming “Bubble”

Thursday, October 11, 2018
By Paul Martin

Jeff Clark, Senior Precious Metals Analyst
OCT 11, 2018

A funny thing happened in the middle of one of Mike Maloney’s deep-research sessions recently. As you know, he just released a brand new presentation, but while analyzing the stock market he wasn’t satisfied with the way most valuation measures were calculated. With all due respect to Warren Buffet, even his indicator fell short in Mike’s view. It was time for something new, something more insightful, something more accurate.

Mike’s refusal to settle for “good enough” culminated in his own metric: the Market Fragility Index. Here’s your peek into this brand new economic indicator, found in Part II of his 5-part Early Warning Report…

The Warren Buffet Indicator

Warren Buffett, probably the most successful investor of modern times, came up with his own indicator to tell him if the stock market was overvalued or undervalued. He compares the size of the stock market to GDP, the premise being that the US stock market should not be bigger than the country’s annual economic output. If it is, the market is overvalued. If it’s smaller than GDP, it is, by varying degrees, undervalued.

The formula is simple: divide total US stock market capitalization by GDP. If the reading is greater than one, the stock market is overvalued relative to economic output. If it’s less than one, the market is undervalued.

The Rest…HERE

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