When is the right time to buy stocks?

Warren Buffett says now is the time to buy stocks.  Is he freakin’ nuts?  Or is the stock market dead wrong?

According to a recent Fortune article, Warren Buffett says “buy now.”  Buffett bases his recommendation on the ratio between the sum of the market caps of all U.S. stocks to the Gross National Product.

The ratio is lower than it has been in almost two decades, fueled by a combination of falling stock prices and rising GNP.  Even as the Gross Domestic Product (a broad measure of goods and services sold within U.S. borders) continues to fall (3.8% drop in the 4th quarter of 2008), the Gross National Product (goods sold by U.S. corporations anywhere in the world) keeps growing.

Lending further credence to Buffett’s assertion is the record low borrowing rate.  While 0% interest from the U.S. Treasury is unsustainable in an inflationary economy, in the short-term it is likely to fuel investment.

The problem with recommending that investors rush back into the market now is that very few Americans have anything to invest.  The U.S. savings rate has only recently returned to historic averages (after a long drought of gluttonous spending), but Americans now need to dump an ever higher percentage of those savings in investments that are more stable than stocks (cash and CDs).

With unemployment rates nearing historic highs, the stock market just isn’t a viable investment option for many.  If you’re not sure you’ll be able to make your mortgage payment next month, you’re not likely to be funding your retirement anytime soon.

What does this all mean for those of us with secure jobs and fat salaries?  Buffett advises you to park it in the market, but you could be waiting a long time before you see any meaningful gains.