The Fed Started The Fire: Buffet Indicator, Shiller CAPE At All-time Highs With Help A Little Help From The Federal Reserve

by confoundedinterest17

Singer Billy Joel almost got it right in his song “We didn’t start the fire.” The Federal Reserve started the asset bubble fire.

The famous Buffett Indicator is signalling a massive stock market bubble or serious overheating.

Here is your first assignment for class. Plot the Buffett Indicator (Wilshire 5000 Total Market Full Cap Index/GDP *100 against The Federal Reserve Balance sheet). It should look like the following:

How about Robert Shiller’s cyclically-adjusted price-to-earnings (CAPE) ratio? It is climbing rapidly and is above Black Tuesday’s spike in 1929 but still below the peak of the bubble.

We are primarily funded by readers. Please subscribe and donate to support us!

In terms of price-to-book ratio for the S&P 500 index, the P/E ratio is rising rapidly and it just below the bubble level.

The S&P 500 dividend year is at its lowest point since the bubble and considerably below Black Tuesday (1929) and Black Monday (1987).

Speaking of Robert Shiller, the Case-Shiller National Home Price Index keeps rising rapidly along with The Federal Reserve’s balance sheet.

What will happen if The Fed stops flooding the markets with liquidity? I don’t think they can stop the fire.

The Federal Reserve Massive Asset Bubble Band.




Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.