The ratio of total market capitalization to gross national product is charted above. Currently it is 127% Buffett told us in Fortune to buy stocks when the ratio is in the 70 to 80% region, meaning that relative to the economy valued by GNP stocks are inexpensive. When stocks are expensive relative to economic activity, over 100, and the ratio approaches 200%, he said "you are playing with fire." Whatever you think of Buffett who is the epitome of a modern financial capitalist (his company Berkshire Hathaway does not make anything because it is a stock holding company) he practices what he preaches. He buys low and sells high [misnamed chart below]. Because he is an insider with more information than you dear reader, his stock plays are often profitable Right now Berkshire is sitting on its largest accumulation of cash and cash equivalents ever.
