Part 3/8:

To understand Buffett's recent strategy, it is essential to examine current market valuations. The S&P 500 Price-to-Earnings (P/E) ratio stands at 30.6, nearly double the historical average of 16. This suggests that stock prices are at significantly inflated levels, increasing the likelihood of a market correction. Buffett himself has referred to a specific indicator - which compares total U.S. stock market value to GDP. At present, this indicator is at 2011%, indicating a significantly overvalued market condition. Comparatively, before the 2007 financial crisis, this measure was at only 105%.