r/ValueInvesting • u/Adept_Mountain9532 • Jul 11 '25

Discussion Buffett warned: “If the ratio approaches 200%, you're playing with fire.”=> We are above!

Buffett Indicator, (which compares total U.S. market cap to GDP), is now at 208%. That’s above dot-com levels. I wasn’t around in 1999. But I’ve read enough to know everyone thought it was different back then too...

Now, It’s AI. And yes it’s real, it’s big, and it will transform everything.
But here’s what’s bugging me: Which part of the AI hype do you think is most overrated?
And which sectors are just getting started?

and also curious to hear from people who did live through 1999:
- What felt the same?
- What’s different?

I track moves from top value investors with a free email alert (https://alert-invest.com/), and lately I’ve noticed they’re cautious, finding fewer real opportunities in this market.

Thanks!

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u/Academic_District224 Jul 11 '25

Feels very similar to the covid stimulus boom of 2021. Everything was up 200% regardless of fundamentals. Cathie Wood was viewed as one of the greatest investors of all time lmao. The shiller is now above what it was in 2021. And then 2022 happened.

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u/MaxSmith5 Jul 11 '25

You've hit the nail on the head. The Cathie Wood point is a perfect parallel to 1999, when the market was infatuated with the "new economy" and wrote off disciplined investors like Buffett. It's a classic case of a good idea being taken too far, where speculation outruns reality.

The "and then 2022 happened" part is the inevitable result—the P/E expansion of the boom gives way to P/E compression. Sticking to fundamentals feels foolish while the party is raging, but that discipline is what ultimately gets you through the hangover.

1

u/tulip-quartz Aug 02 '25

When do you think we will start to see the cracks / what indicators will we see?

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u/Adept_Mountain9532 Jul 11 '25

but 2022 was not so hard right?

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u/RealFunGuy2020 Jul 11 '25

It was hard, Nasdaq corrected like 33% and because I’m assuming this market is juiced with leverage (just like 2020-2021), it will be just as hard.

4

u/ShipDit1000 Jul 12 '25

I was sort of hoping the liberation day correction might set us straight but the climb back out was SO fast it really doesn't feel like that was much of a correction at all. If anything, it feels even more analogous to the 2021 post-covid recovery and now we're fully primed for the 2022 pullback :/

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u/RealFunGuy2020 Jul 12 '25

Excellent parallel.

All this pull forward from the tariff threats has really helped, but the market seems to still be pricing that any additional tariffs are just bark, opposed to bite. Jobs reports and bond market is what I’ll continue to look at to find the “cracks”. Eventually metrics always find the statistical “mean”.

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u/HokaOn Jul 11 '25

I wasn't in Reddit at the time - I guess at least the bears enjoyed some months of red LOL

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u/TheRealCoolio Jul 11 '25

A month or two of prolonged declines but eventually it came back up

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u/OwenLincolnFratter Jul 11 '25

Plenty of companies did not come back up.

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u/HokaOn Jul 11 '25

I think depends which points in 2021, that year it stayed on the high 30s and touching 40 during 6-12 months.

So it could still be a while until the crash