What Warren Buffett’s favorite indicator means for your money [Video]

So far this year, the U.S. stock market, as measured by the S&P 500, has returned about 10% — an average year’s worth of gains in just over three months.

After any first-quarter run-up, two brands of market-watchers tend to appear in headlines: those who think stocks can continue to ascend and those who warn that a bubble may be about to pop.

The latest rumbling from the latter camp have pointed out that stocks look overvalued by the standards of none other than Warren Buffett. The so-called Buffett indicator compares the total market capitalization (share prices times outstanding shares) of all U.S. stocks with the quarterly output of the U.S. economy.

Things are in normal territory if the total value of the Wilshire 5000 index (which measures the total market) is about on par with the latest quarterly GDP estimate. If stocks are at about 70% of GDP, they’re said to be undervalued. Stocks trading at …