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Global Financial Data’s Market Tops and Bottoms Indicator

Global Financial Data tracks bull and bear markets in over 100 stock markets.  We have calculated when bull and bear markets have begun and ended throughout the world beginning in 1602. We have over 100 years of data to analyze when bull and bear markets have begun and the number of market tops and bottoms that have occurred each year. GFD defines a bear market as a 20% decline in the primary market index for each country and a bull market as a 50% increase in the primary market index.  A market top occurs when the index declines by 20% or more after a 50% increase, and a market bottom occurs when the market rises by 50% after a 20% decline.

Global Financial Data Adds Data on Warren Buffett’s Favorite indicator

Co-Authored by Michelle Kangas & Dr. Bryan Taylor


Warrant Buffett once said that the stock market capitalization to GDP Ratio (MC/GDP) is “probably the best measure of where valuations stand at any given moment.”  Global Financial Data has decided to follow in Warren Buffett’s footsteps and has added data on the ratio of stock market capitalization to GDP for all the stock markets in the world.  GFD has the most extensive historical data on stock market capitalization and GDP available anywhere.  This enables us to provide data on Buffett’s favorite indicator going back centuries, not decades.  MC/GDP data for the United States begins in 1792 and data for the United Kingdom begins in 1688.

There are several factors which influence the ratio of stock market capitalization to GDP.  First, countries with more multinational companies have a higher ratio than countries without.  The MC/GDP ratio is particularly high for Switzerland and Hong Kong because those countries have numerous multinationals listed on their exchanges. Switzerland’s MC/GDP ratio is over 200% and Hong Kong’s ratio is over 1000%. Second, interest rates influence the ratio.  Bond yields provide an opportunity cost for investing in the stock market.  The higher bond yields are, the lower will be the MC/GDP ratio.  The lower bond yields are, the higher will be the ratio.  Third, government ownership of major industries, banks and utilities reduces the MC/GDP ratio because these industries are publicly owned rather than privately owned.  Fourth, industrialization of the economy increases the MC/GDP ratio and has generally increased over time.  Fifth, whether a country relies more on markets or banks to direct capital to industry affects this ratio.  Anglo-Saxon countries generally rely more on stock markets than continental European countries and tend to have a higher MC/GDP ratio.  Sixth, wars tend to redirect capital to funding government bonds and increases regulation of industry.  This tends to reduce the MC/GDP ratio.  All of these factors should be taken into consideration when trying to analyze whether the MC/GDP ratio indicates that the stock market is overvalued or undervalued for any country.

GFD has created a simple mnemonic that enables subscribers to quickly find data for the country they are interest in.  The ticker begins with “SC”, then adds the ISO code, then adds “MPC” at the end, so the symbol for the market cap of the United States as a share of GDP is SCUSAMPC and for Canada it is SCCANMPC.

There are many things that subscribers can do with this information.  Figure 1 compares the stock market capitalization of the United States with the outstanding government debt as a share of GDP.   Several of the factors mentioned above are clearly visible.  The inverse correlation between war, stock market capitalization and debt is visible during World War I and World War II.  The impact of rising interest rates in the 1970s and falling interest rates since 1981 have clearly impacted the MC/GDP ratio.  Since 1980, both the debt/GDP and the MC/GDP ratios have risen. Over the past 50 years, the United States has deregulated many markets which has contributed to the increase in the MC/GDP ratio.


Figure 1. United States Government Debt and Stock Market Capitalization to GDP, 1792 to 2018


Global Financial Data provides data on the MC/GDP ratio for every major stock market in the world.  GFD provides more history for this ratio than any other data vendor.  The MC/GDP ratio in the United States is around 164% today.  This is one of the highest ratios in history; however, bond yields are also at their lowest levels in history.  Could the MC/GDP ratio be headed to 200% as in Switzerland, or does the high ratio portend a crash as occurred at previous peaks in 1999 and 2007? Time will tell.

300 years of the Equity-Risk Premium

The equity-risk premium (ERP) is one of the most important variables in finance. It tells investors how much a risky investment such as stocks returns relative to a risk-free investment such as government bonds.  Any history of the equity premium shows that its value is not constant.  It varies dramatically from one year to the next.  In theory, riskier stocks should provide a higher return than risk-free government bonds, but unfortunately, this has not always been true.

Dunkin’ Doesn’t Do Donuts but they Do Do Profits

I often crave donuts being the sugar lover that I am. And I am not alone here at Global Financial Data.  On the way to the office there is a local Donut shop called Rose Donuts & Cafe, which has the best donuts as is depicted in Figure 1 — fluffy, fresh, overly large delights such as maple bars, cake donuts, sprinkles, chocolate glazed, old fashioned, Bavarian crème filled goodies, and cinnamon rolls so large you could quarter them and still be stuffed.  So many flavors to choose from, French-croissants and fresh baked muffins.


Figure 1. Rose Donuts & Café, 624 Camino De Los Mares, San Clemente, CA 92673


So, I ask myself why is there still a Dunkin’ Donuts, across the street when Rose’s donuts taste so much better?  I had to find out who owns the Dunkin chain because it must have some story behind it because they certainly don’t have good tasting donuts in my opinion. And quite a story there is.

Dunkin’ Donuts, Figure 2, as it is known today, was founded by William Rosenberg, a Jewish immigrant, who only completed the eighth grade.  He was quickly forced to work at the age of 14 to help support his family when his father Nathan lost the family grocery store during the great depression and held many jobs during his teen years.  After working for Western Union, as a full-time telegram delivery boy, Rosenberg began working for Simco, a company that distributed ice cream from refrigerated trucks. At Simco, he quickly rose through the company and by age 21, he was a manager supervising their production and manufacturing of nearly 100 trucks.

Figure 2. Example of Dunkin’ Donuts


Through his observation of human purchasing behavior over the course of his many jobs in the service industry, Rosenberg gained the knowledge necessary to start his own donut shop. However, Rosenberg did more than just that. He started an entire franchise and even adjusting for inflation – he did it with very little cash in 1940s.

After World War II, Rosenberg borrowed $1,000 and combined this with $1,500 (roughly $25,000 today) he had in war bonds to start his mobile catering service “Industrial Lunch Services” that delivered meals and offered coffee break services to factory workers outside of Boston, Massachusetts.

Rosenberg designed his own catering vehicle, as seen in Figure 3, that had custom-built stainless steel shelves that stocked snacks and sandwiches which were basically a prototype for the current mobile catering vans still used today.  Rosenberg’s focus was on making the customer happy through options and choice as his trucks clearly displayed the items for customers to make their own selection.  Shortly, thereafter, Rosenberg had over 200 catering trucks, 25 in-plant outlets and a vending operation that delivered food to factory workers. Through continued observation, while serving food at construction sites and factories, where that donuts and coffee were the top picks of the daily visitors who were often in a hurry, Rosenberg’s knowledge grew as he continued to study the human experience.


Figure 3. Industrial Lunch Services Catering Truck


Shortly thereafter, he decided to open a store that specialized in coffee and donuts after he determined that 40% of his revenues came from coffee and donuts and wanted to offer 52 varieties of donuts since traditional donut shops offered only five different varieties.  On Memorial Day in 1948 in Quincy, Massachusetts, Rosenberg founded Open Kettle Donuts, changed its name to Kettle Donuts, and then to Dunkin’ Donuts in 1950.

Early on Rosenberg began laying an excellent foundation of marketing concepts for Dunkin’ Donuts beginning with an ideal name for his business combining the coffee and donuts theme from his previous personal experience.  He laid the foundation for the brand even before it began through his keen sense of human need and Rosenberg coined the phrase “The Customer is Boss.” His initial brand foundation was off to a great start and within five years, others began expressing a franchise interest. Rosenberg continued to grow the franchise chain to 100 locations in 1963, when he turned the day to day operations over to his son.

In 1990, with more 1000 stores, British beverage conglomerate, Allied Domecq purchased the thriving Dunkin’ Brands fast food restaurant chain.  Figure 4 shows the performance of Dunkin’ Donuts between 1968 and 1990 when the company was bought out at $43.75 per share.  The company underperformed the S&P 500 in the 1970s, but during the 1980s, it hit its stride and the stock price rose dramatically.  The company had stock splits in 1981, 1983 and 1985.  The company’s revenues more than doubled and the stock price rose over tenfold. You can see why Allied Domecq felt they had made a good investment.  I have also included the fundamentals for your review.  These can be seen in Figure 5.


Figure 4. Dunkin’ Donuts, Inc. vs. S&P 500, 1968 to 1990




Date Net Sales ($ Million) Shareholder’s Equity Price To Sales Price To Cash Flow
10/31/1968 14.352 5.1 6.28 81.67
10/31/1969 14.229 6.7 3.07 29.01
10/31/1970 17.578 8.2 1.77 17.50
10/31/1971 19.2024 9.3 1.33 24.55
10/31/1972 23.4498 12.3 0.64 12.97
10/31/1973 24.9546 10.5 0.15 -2.40
10/31/1974 27.4 11.8 0.14 6.70
10/31/1975 34.5 13.3 0.29 12.03
10/31/1976 43.3 16.1 0.30 11.93
10/31/1977 51.8 18.9 0.38 14.93
10/31/1978 57.1 22.3 0.50 7.94
10/31/1979 63.2 23.5 0.37 5.75
10/31/1980 63.5 27.1 0.49 6.70
10/31/1981 66.331 27.148 1.64 4.92
10/31/1982 64.918 31.802 1.23 8.24
10/31/1983 71.318 38.104 1.51 9.90
10/31/1984 77.495 44.994 1.44 8.93
10/31/1985 85.45 53.028 1.92 11.40
10/31/1986 94.391 62.158 2.31 13.22
10/31/1987 101.037 72.603 1.65 9.91
10/31/1988 102.714 68.219 1.68 8.65
10/31/1989 109.336 72.653 2.46 12.48

Figure 5. Dunkin’ Donuts Fundamentals, 1968 to 1989

Fifteen years later, in July 2005, Allied Domecq was acquired by their parent company, Pernod Ricard SA.  Pernod knew quickly that they needed to alleviate debt, so the French beverage company began searching for a buyer for this segment of their product line.

In December 2005, Pernod Ricard SA, sold Dunkin’ Brands, to three private equity groups: Thomas H. Lee Partners, the Carlyle Group and Bain Capital for $2.43 billion.  Thomas H. Lee, Carlyle Group and Bain all had vast fast food experience. Each had an equal share in Dunkin’, each desired to be partners, and each wanted to work with the existing Dunkin’ management team and CEO Ron Luther.  Their combined goal was to take the chain to the next level.  Their plans were aggressive seeking expansion to the west, to offer additional franchises, branch into more coffee beverages, offer higher-end, glamorous coffee drinks that would compete with Starbucks. The results are can be seen in Figure 6.


Figure 6. Dunkin’ Brands Inc. (Black) vs. Starbucks Inc. (Green), 2011 to 2020


Five years later with a thriving business, T.H Lee, Carlyle Group, and Bain Capital applied for an I.P.O.  and the company went public in 2011.  The company had 97 million shares outstanding making the company worth $2.7 billion when it IPO’d on July 27, 2011, providing the three private equity groups, each with a 10% return, over their cost of buying the company in 2005.

During the past eight years, as Figure 7 shows, Dunkin’ Brands has outperformed the S&P 500. The company is now worth over $6.5 billion, providing a 13% annual return to anyone who invested in the IPO in 2011.  Today DNKN trades on the Nasdaq and consistently shows rising sales, profits and the number of its locations.  Due to Rosenberg’s brilliant observations and his ability to respond to consumer needs, he was able to build his business.


Figure 7. Dunkin’ Brands Group (Black) vs. S&P 500 (Green), 2011 to 2020


Dunkin’ Brands currently includes the Dunkin’ Donuts chain, Baskin-Robbins ice cream parlors and Togo’s sandwich stores. In the United States and the rest of the world, the growth of Dunkin’ Donuts has been strong. Today, Dunkin’ Donuts offers a mind-boggling mix of over 15,000 varieties of coffee. This includes Turbo Shots, Espresso, Iced Coffee, sugar free, with or without cream, low-calorie options, and dozens of other variations of the world’s favorite beverage, coffee! Some of the flavors you can get include Butter Pecan Swirl, Caramel, Cookie Dough, White Chocolate Raspberry and Rocky Road swirl.

I hadn’t even heard of all these flavors of coffee before.  Had you?  I think that I’m going to check out Dunkin’ Donuts later this week.

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Our comprehensive financial databases span global markets offering data never compiled into an electronic format. We create and generate our own proprietary data series while we continue to investigate new sources and extend existing series whenever possible. GFD supports full data transparency to enable our users to verify financial data points, tracing them back to the original source documents. GFD is the original supplier of complete historical data.