Warren Buffett favorite stock indicator hits record 133 percent, indicating that global stocks are overvalued and risk collapsing - Warren Buffett's favorite indicator on the stock market has reached the highest point in its history this Sunday, 133%, indicating that global stocks are highly overvalued and there is a risk that they may collapse in the coming months.

The 'Buffett indicator' compares stock market capitalization with gross domestic product (GDP) and has already exceeded the red line in the past. In particular before the dotcom crisis and also the financial crisis of 2008. Holger Zschaepitz, market analyst at Welt, referred in a tweet to the record level of this metric: "The Buffett indicator screams BUBBLE!".

If the indicator exceeds the 100% barrier, it means that the combined market capitalization of publicly traded stocks is higher than world GDP, so a new crisis could be brewing.

Warren Buffett favorite stock indicator hits record 133 percent

The Berkshire Hathaway tycoon and CEO indicator gained relevance after Buffett himself referred to him in a 2001 Fortune magazine article as "probably the best individual indicator of how valuations are at any given time." In the same article he pointed out that it should have been interpreted as an alarm signal before the bursting of the dotcom bubble. Something that was not taken into consideration, with the results already known.

However, the 'Buffett indicator' has also received some criticism. For example, by comparing current stock market valuations with old GDP figures, so their readings are artificially inflated due to the ravages caused by the crisis resulting from the COVID-19 pandemic.

Warren Buffett favorite stock indicator hits record 133 percent

Also because stocks may receive a higher valuation as a result of low interest rates and low returns, which have made investors have few places to invest profitably, as well as the role of technology companies, which can grow significantly. "Perhaps this time it will be different, in an era with negative real returns and an upcoming exponential growth of profits in the tech sector," Zschaepitz adds on Twitter.

The US version of the billionaire indicator also raised alarm bells about the stock market situation of US companies earlier this year, when it surpassed another record, reaching 200%. It continues at that level today.

Warren Buffett favorite stock indicator hits record 133 percent

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Cryptocurrencies are too volatile to be used as payment and investors should be ready to lose all their money, according to the governor of the Bank of England

The governor of the Bank of England, Andrew Bailey, has assured on Monday that he does not believe in cryptocurrencies as a reliable method of payment, highlighting its volatility.

"Its value fluctuates substantially," he summed up during a virtual conference reported by Bloomberg. "That's why, in general, they're not a good way to make payments."

Bailey's comments come days after lawmakers in El Salvador voted to become the first country in the world to make bitcoin a legal tender in their nation, alongside the U.S. dollar.

"Given the volatility of the asset's value and the fact that there is no real asset to support it, I'm afraid if you want to buy it, please understand that you can lose. You can lose all your money," Bailey said.

Bitcoin's value rose above $ 40,000 on Monday after Elon Musk slipped that Tesla is weighing it back as payment, once the coin can be mined with cleaner energy.

Musk's reversal in mid-May, stopping accepting bitcoin, caused an earthquake in the digital asset ecosystem and caused the price of bitcoin to plummet.

"We're going to reach out to users and the tech industry to understand the potential of these things," Bailey summed up. "There is a lot of work underway within the Bank of England to understand its implications for central banking."

This is not the first time that the governor of the Bank of England has expressed skepticism regarding cryptocurrencies.

In May, he told reporters that cryptocurrencies had no "intrinsic value" and that people should only buy them if they were prepared to lose all their money.

"I'm afraid for me, forex and crypto are two words that don't go together," he said.

The governor's comments amplify the message previously issued by the UK Financial Conduct Authority (FCA), a body that regulates financial services companies that is independent of the BRITISH government, as well as by the President of the European Central Bank (ECB), Christine Lagarde.

Lagarde referred to bitcoin as "a highly speculative asset that has produced some shady deals... And totally reprehensible money laundering activity."

Despite Governor Bailey having doubts about cryptocurrencies, the Bank of England said this month that it is scrutinizing the option of launching its own central bank digital currency.