FRED on Buffett’s favored market measure: Total Market Value-to-GNP


By Greenbackd

Here’s the St Louis Fed’s FRED on the Warren Buffett’s favored market measure, total market capitalization-to-GNP.

FRED Graph

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According to the FRED data, the January 2000 TTM/GNP peak was 158 percent, and the April/July 2007 TTM/GNP peak was 114 percent. The average for the full period – 1949 to October 2012 – is 69 percent. The last time the market traded at a below-average ratio was Q1 2009.

Compare this to the Q3 2012 ratio – unfortunately the most recent point – at 100 percent. If we assume ~1 percent GNP growth in Q4 2012 and Q1 2013 (the long-run CAGR is about 1 percent per quarter), and the market has rallied around 10 percent, the ratio now stands at ~107 percent, which is around 40 percent over the long-run mean (since 1949).

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My name is Tobias Carlisle. I am the founder and managing member of Eyquem Investment Management LLC, and portfolio manager of Eyquem Fund LP. Eyquem Fund LP pursues a deep value, contrarian, Grahamite investment strategy based on the research featured in Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (hardcover, 288 pages, Wiley Finance, December 26, 2012), and discussed on Greenbackd. I have extensive experience in activist investment, company valuation, public company corporate governance, and mergers and acquisitions law. Prior to founding Eyquem, I was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions I have advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam, ranging in value from $50 million to $2.5 billion. I am a graduate of the University of Queensland in Australia with degrees in law and business (management). Contact me I can be contacted at greenbackd [at] gmail [dot] com. I welcome all feedback. Connect on LinkedIn, where we’re Friends.

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