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The Warren Buffett indicator takes the Wilshire 5000 Total Market Full Cap Index and divides it by the annual gross domestic product.
It compares the total value of the entire stock market, or the overall stock market capitalization, to the total production of the U.S. economy, which Buffett called “the best single measure of where valuations stand at any given moment.”
It is currently severely over valued as the graph below shows.
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