Stocks Are Getting Cheaper- According to Buffett's Ratio
Saw this interesting article from Motley Fool which states that a ratio that Warren Buffett uses says that stocks are cheap now.
In the article, it states that Buffett calls this "probably the best single measure of where valuations stand at any given moment." It goes on to present in table form the returns 2 years after the ratio hits below 80% or more.
And the returns from investment is 20% or more when this ratio goes south of 80%.
What is the ratio now? 79%.
So according to the ratio which Buffett champions, it is time to look at buying.
If you look closely at the chart in the same article, it shows the last time it went below 80%. It was around the 2007-2008 period when it went all the way to 60%. You never know when the market will start to turn, so this is a good time to go in. I would too, if not for the fact that my wife is due to give birth soon and need more emergency funds :)
Thus, if you need another reason to seriously look at buying stocks, this is a good time to start looking at them now.
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