When looking at the financial weather, Runnymede uses a multi-factor model to track where we are in the market cycle. One of the key components is valuation. Two of the most famous valuation models are Warren Buffett's total market capitalization to GDP and Nobel laureate Robert Shiller's CAPE (cyclically adjusted PE) ratio. If you look at either of these measures, the market is overvalued.
Is there value in the Chinese stock market or is it a dangerous bubble?
The last couple of weeks have been dominated by two topics: Greece and China. Last week we tackled what a Greek default means to your investment portfolio. This week we give our insight on the Chinese market which has tumbled in the last month. At Runnymede, we want to give our readers a different perspective than the alarmist headlines from other news sources. Unfortunately with internet news, they are paid on clicks so it's reliant on attention grabbing headlines, not necessarily the reality. We don't simply rehash what the mainstream news reports on. We look deeper beneath the surface to help you make informed investment decisions.
Storm Warning: Warren Buffett stockpiling record cash
Berkshire Hathaway just reported its most profitable quarter ever. Operating income topped $4.3 billion, far surpassing analyst expectations. Thanks to Warren Buffett's savvy investing, Berkshire is now sitting on its largest stockpile of cash in its storied history. Cash and cash equivalents are above $55.4 billion for the first time ever and is 55% higher than a year ago.
Robert Shiller definitely concerned about stock market peak
Robert Shiller, Yale professor and Nobel prize winner, is “definitely concerned” about the valuation of stocks which are trading at historic highs. Using his CAPE (cyclically adjusted price-to-earnings ratio) model, stocks are trading at 26x multiple which is well above its long-term average of 17. Shiller points out that the CAPE level has only been higher 3 previous times: 1929, 2000 and 2007. That sure sounds like a dire warning of a huge market drop. But is it?