Why Warren Buffett Is Worried About Stocks

Tyler Durden's picture


According to a 2001 Fortune interview, Warren Buffett believes that Market-Cap-to-GDP is "probably the best single measure of where valuations stand at any given moment." As Doug Short shows in the following charts, we suspect Warren is a little more than worried about the valuation of his portfolio (unless of course, it's different this time).


Via Doug Short of dshort.com,



The raw data for the "Buffett indicator" only goes back as far as the middle of the 20th century. Quarterly GDP dates from 1947, and the Fed's B.102 Balance sheet has quarterly updates beginning in Q4 1951. With an acknowledgement of this abbreviated timeframe, let's take a look at the plain vanilla quarterly ratio with no effort to interpolate monthly data or extrapolate since the end of the most recent quarterly numbers. Here is a chart I created using the Federal Reserve Economic Data (FRED) data and charting tool.



That strange numerator in the chart title, MVEONWMVBSNNCB, is the FRED designation for Line 36 in the B.102 balance sheet (Market Value of Equities Outstanding), available on the Federal Reserve website here in PDF format.


For those of you who may have reservations about the Federal Reserve economists' estimation of Market Value, I can offer a more transparent alternate snapshot over a shorter timeframe. Here is the Wilshire 5000 Full Cap Price Index divided by GDP, again using the FRED repository charting tool.



So... Both the "Buffett Index" and the Wilshire 5000 variant suggest that today's market is at lofty valuations, now above housing-bubble peak in 2007.

So, given the unprecedented beta (and very little alpha) of Berkshire Hathaway's stock price to the market...


We suspect Warren is worried...

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Thu, 02/06/2014 - 15:54 | 4408776 Renfield
Renfield's picture

Mentioned this elsewhere, but I think I'll also just leave this here:


Seems appropriate, somehow.

Thu, 02/06/2014 - 15:54 | 4408785 NotApplicable
NotApplicable's picture

Since when does GDP mean anything?

Thu, 02/06/2014 - 15:57 | 4408799 redpill
redpill's picture

Title is incomplete, wording should be "Why Warren Buffet is Pretending to be Worried about Stocks"

Thu, 02/06/2014 - 16:01 | 4408814 fonzannoon
fonzannoon's picture

the guy is 95 years old, has cancer, and the last time stocks crashed he got himself bailed out and made a fortune. He's worried about stocks....yup...

Thu, 02/06/2014 - 16:04 | 4408834 Levadiakos
Levadiakos's picture

Bailed out and still paying the per tx rate of a bus driver

Thu, 02/06/2014 - 16:13 | 4408853 NOTaREALmerican
NOTaREALmerican's picture

Re:  per tx rate of a bus driver

Sure, but if you taxed all of Warrens loot and gave it to the corrupt government what would they do with it?

Just bomb some sandbox or increase the size of Big-PoliceState.  

You can either let the top 10% keep all their loot OR let the government take the loot which will be distributed to a different group of top 10%'ers leaching off the government.

The best thing is to get in on a good corporate or government scam yourself, because the scams are the only way now.

Thu, 02/06/2014 - 16:20 | 4408859 Levadiakos
Levadiakos's picture

So, the govt shd let them keep all their money AND bail them out? Nah. Price of a bailout, Jack

Thu, 02/06/2014 - 16:44 | 4408936 NOTaREALmerican
NOTaREALmerican's picture

Re:  So, the govt shd let them keep all their money AND bail them out? Nah. Price of a bailout, Jack

Oh, well, yeah...   I agree with you on that.    The bailout shouldn't have happened, but - well - Big-MIC should have been disbanded at some point and all the leaches living off of Big-AG should have been arrested too.  

But, in reality, you can tell the adults from the children by how well they scam the dumbasses and live happy duplicitous lives.    So, Warren is no worse - or better - than some defense contractor/worker parasite or wealthy farmer being paid not to grow on his "farm". 

As REAL Mericans I think we should celebrate those who are smarter-n-savvier scammers than the average dumbass.   We really aren't all above average self-actualizing individuals, but the scamers truly ARE.

Thu, 02/06/2014 - 17:40 | 4409197 Clint Liquor
Clint Liquor's picture

It's a good thing they decided to change GDP calculation by adding 'intangibles' last year (thereby adding a couple percent to GDP) or else Uncle Warren would be really worried.

Thu, 02/06/2014 - 16:18 | 4408865 Headbanger
Headbanger's picture

So we could easily see a 50% drop in equities very fast especially since GDP projections are being cut.

Thu, 02/06/2014 - 16:44 | 4408949 NOTaREALmerican
NOTaREALmerican's picture

Re:  So we could easily see a 50% drop in equities very fast especially since GDP projections are being cut

No, you have the add back the "wealth effect" and the "viscosity of money".   So, it should double.

Thu, 02/06/2014 - 16:08 | 4408840 TruthInSunshine
TruthInSunshine's picture

"Title is incomplete, wording should be "Why Warren Buffet is Pretending to be Worried about Stocks" "

No, it should have read "Why Warren 'Fuck You, Taxpayers' Buffet WOULD be worried about stocks IF NOT FOR BERN-YELLEN."

Thu, 02/06/2014 - 16:08 | 4408841 Boston
Boston's picture

That's right. If I were Warren, the only thing I'd be worried about is waking up in the morning.

Thu, 02/06/2014 - 17:01 | 4409037 Harbanger
Harbanger's picture

Hi Fonz, off topic but I just listened to Peter schiff talking about his interview on Jon Stewarts Daily Show.  I remembered our discusion where I told you that Jon stewrat is just a mouthpiece for the establishment left and that nothing about the show is real.  You disagreed, here's proof.  If you haven't seen the video yet, watch the link.

The Truth Behind my Daily Show Interview


Thu, 02/06/2014 - 17:49 | 4409225 fonzannoon
fonzannoon's picture

I see u still misunderstand every aspect of what i was saying. no point in rehashing it. but what is interesting is I said that he would spearhead the agenda as the fed looks to discredit people like him through the msm...and boy did he ever.  the other thing i said is he was a smart dude. apparently a lot smarter than schiff who fell right in the trap that show set for him.


Thu, 02/06/2014 - 17:54 | 4409243 Harbanger
Harbanger's picture

This only exemplifies the fraud that the MSM is, everything is orchestrated to fit a liberal political agenda.  You're ok with this and Schiff is the idiot?  Wow, I never knew you were such a fucking liberal.  I'm ok with that, I just don't want to hear you bitchin about any of your neighbors in the Hamptons or your progressive NY politicians.

Thu, 02/06/2014 - 21:00 | 4409848 fonzannoon
fonzannoon's picture

My god you are neanderthal dumb. i'm not okay with it. I am just pointing it out. Yes Schiff is a fucking idiot for not noticing it and falling right into it's trap. I mean even you know it's a trap and you can't seem to reconcile the difference between me pointing it out and endorsing it. It's two different things. And no i'm not a fucking liberal so stop being such a fucking faggot. 

when did i say i was okay with it? I said he is an evil motherfucker because he knows what he is doing. Jon stewart is smart. his audience is dumb. Anyone at this point on the left or right is fucking dumb and he wins over a lot of people on both sides. he comes off like some liberal who can reach across to the other side. the msm champions him and he plays to it well. He is better at it than most.  Him doing that to Schiff only exemplifies what a fraud it is...to people on here with a brain. The minority. The dumb sheep (BOTH FUCKING PARTIES...I can't tell u how many repubs I know that say "that Jon Stewart is alright") that love him only buy into him more. that does not mean i'm okay with it and i'm done with your ad hominem bullshit and putting words in my mouth. 



Thu, 02/06/2014 - 22:00 | 4410260 Harbanger
Harbanger's picture

What's wrong with Neandethals?
I took issue with you for thinking Schiff is an idiot for falling into their trap.  That means you somehow accept these traps as normal course of business that he should have anticipated.  That's a sad state we've come to where lying and fraud is to be expected.  They didin't just lie to him they lied to their public audience and gave them fabricated propaganda.  But besides ethics and legality, they have zero integrity and cannot be trusted in anything.  This is typical of a biased MSM that has been doing this for years.  Editing, lying and presenting 1/2 truths and fabrications as News to an unsuspecting audience. This and the edited CNBC zimmerman tapes are only the latest examples. 

I really don't understand your admiration for Jon Stewart,
How smart do you have to be to read a script prepared by your producers?  Maybe  he reads them in a convincing, unbiased sounding, smart looking way.  If not they'll do another take until they get it right But he's a puppet of the progressive establishment and makes a living deceiving people with a sublime politically driven agenda.  Ok maybe you're not a fucking liberal but you are very confused.  turn off the TV.

Thu, 02/06/2014 - 23:25 | 4410505 fonzannoon
fonzannoon's picture


in case u missed it. check out the comments section...how many people even on here are fooled by him.

and regarding Schiff...i just think he should never have gone near them. he knew they had an angle and he was going to be the bad guy. why bother with it?

Thu, 02/06/2014 - 17:20 | 4409113 fooshorter
fooshorter's picture

I'm sure his disowned grand daughter could tell you how concerned ol grandpa buffer is.


Same over glorifed piece of shit different name


rinse repeat

Thu, 02/06/2014 - 21:51 | 4410216 stocktivity
stocktivity's picture

Stop the presses! CNBC will have to fly Becky to Omaha for an "interview".

Fuck you Warren.

Thu, 02/06/2014 - 15:59 | 4408811 Divided States ...
Divided States of America's picture

these are minnows, inconsequential...i mean if it was a big fish hooked up, like a Larry Motherfuckin Finkster or a Chucky Evans, then the real game begins.

Thu, 02/06/2014 - 16:00 | 4408816 TideFighter
TideFighter's picture

Shouldn't he be more worried about the Keystone Pipeline?  His Fairy Godfather is.

Thu, 02/06/2014 - 16:04 | 4408828 seek
seek's picture

ZH already covered this story a week ago (see here). It's also just 3 bankers, not 4, the silverdoctors story is including some exec from Tata motors in the count and that's a complete red herring.

Thu, 02/06/2014 - 16:10 | 4408842 Renfield
Renfield's picture

Mea culpa, seek. Far be it from me to spread misinformation. Must have got over-excited for a minute there.

Have to admit this comments section is the best place to get discussion on any news item out there.

Thu, 02/06/2014 - 15:54 | 4408777 Levadiakos
Levadiakos's picture

Because the Dow hit new highs and Becky still won't give him a Quicky?

Thu, 02/06/2014 - 16:00 | 4408806 knukles
knukles's picture

Come on, she had her orthadontia and wouldn't want to expalin the stains to her dentist....


Thu, 02/06/2014 - 16:04 | 4408826 Levadiakos
Levadiakos's picture

She still needs funding for the bottom front

Thu, 02/06/2014 - 18:31 | 4409444 RebelDevil
RebelDevil's picture

Well isn't that nice - Short of the month: Berkshire Hathaway.

Thu, 02/06/2014 - 15:54 | 4408784 medium giraffe
medium giraffe's picture

All these superstar stock pickers that got rich on a parabolic then paraded around like the second coming.  Lol. 

Thu, 02/06/2014 - 16:03 | 4408823 Winston Churchill
Winston Churchill's picture

Keeping those riches has always been the problem.These in bred idiots

start to belive its their acumen , not crony capitalism that made them

richer than us.Many will go down with the Titanic.


Thu, 02/06/2014 - 16:26 | 4408888 WillyGroper
WillyGroper's picture

Hope there's some non-gmo popcorn available as it transpires.

Thu, 02/06/2014 - 16:10 | 4408850 Levadiakos
Levadiakos's picture

SPX still tracking USDJPY by the tick like a beagle in heat

Thu, 02/06/2014 - 16:21 | 4408873 medium giraffe
medium giraffe's picture

SPX was pretending to be the USD a couple of weeks back, even though it defied all logic.  More like a MMORPG than a stock index.

Thu, 02/06/2014 - 15:57 | 4408789 NOTaREALmerican
NOTaREALmerican's picture

Well,  assuming GDP means anything anymore I guess Warren might be worried.  

I'd be more worried that GDP is actually a function of market value: in which case I'm not sure of what the result of something divided by a proportion of itself represents.

Thu, 02/06/2014 - 15:57 | 4408791 q99x2
q99x2's picture

Just because you can doesn't mean you should. Arrest Warren Buffet. Redistribute his stolen wealth.

Thu, 02/06/2014 - 15:59 | 4408802 tradewithdave
tradewithdave's picture

Why worry... Altucher 20,000!

Thu, 02/06/2014 - 16:00 | 4408817 Levadiakos
Levadiakos's picture

I'll see your Altucher 20,000 and raise you a James Paulsen Wells Cap DJI 40,000!!

Thu, 02/06/2014 - 16:14 | 4408860 TruthInSunshine
TruthInSunshine's picture

In between Altucher 20,000 & James Paulsen Wells Cap DJI 40,000 lay -

James Glassman Dow 36,000

Thu, 02/06/2014 - 16:21 | 4408874 Levadiakos
Levadiakos's picture

If you're all in w Altucher and Glassman, I see you and raise you a James "Buy Buy Buy" Cramer and 75,000! CALL!

Thu, 02/06/2014 - 16:06 | 4408839 NOTaREALmerican
NOTaREALmerican's picture

Let's hope Janet keeps the engine of "Keynesian" happiness running at full throttle.

Thu, 02/06/2014 - 16:22 | 4408878 Levadiakos
Levadiakos's picture

Ridin that nitrus fueled chopper flyin her Hell's Angels 1%-er colors!!

Thu, 02/06/2014 - 16:10 | 4408837 socalbeach
socalbeach's picture


Thu, 02/06/2014 - 16:46 | 4408848 dobermangang
dobermangang's picture

Buffett worried about buying stocks?  At his age, he should only worry about buying green bananas.


Thu, 02/06/2014 - 16:10 | 4408852 TideFighter
TideFighter's picture

SO, he is MOAR worried than in Q1/2009? I don't think so.

Thu, 02/06/2014 - 16:21 | 4408869 Muppet
Muppet's picture

Its a little disingenious to suggest Buffet expresses current worry when basing this on a 2001 article.   I'll admit  Buffet has held belief in the Market Cap to GDP ratio, but this headline suggests he (re)expressed something today.    This doesn't pass the smell test IMO.

Thu, 02/06/2014 - 16:44 | 4408917 El Hosel
El Hosel's picture

...... Don't worry, be happy, short the BBH... They can't get it green today.




Thu, 02/06/2014 - 16:36 | 4408913 Smegley Wanxalot
Smegley Wanxalot's picture

If I were 90 something years old and worth 10s of billions I would only concern myself with sticking my dick in as many hot looking tight 19 year old pussies as I can buy.

Thu, 02/06/2014 - 16:48 | 4408966 NOTaREALmerican
NOTaREALmerican's picture

Re:  tight 19 year

Maybe he's one of the lucky ones who has lost his sex OCD.   Now he's got time for other hobbyies, like model trains (or something).

Thu, 02/06/2014 - 16:40 | 4408922 Rockfish
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