Everyone is concerned about an overvalued stock market. And they should be. You don't reach a full decade of a bull run without asking the reasonable question about stock values. A simple explanation that Warren Buffett once gave for knowing when the market is overvalued doesn't present a full-throated endorsement of market bargains being plentiful right now. The Berkshire Hathaway chairman and billionaire investor told attendees at the Berkshire annual conference back in May 1998, only a few months before stocks plummeted, that the easiest way to gain confidence that the market is not overvalued is if two conditions are met: "Interest rates remain at or near present levels or go lower, and that corporate profitability in the U.S. stay at the present — or close to the present — levels," which at the time Buffett was speaking were "virtually unprecedented." "If the two conditions are met," he said, "I think it's not overvalued. And if either of the conditions is breached in an important way, I think it will turn out to be overvalued." The comments were actually a reinforcement of what Buffett had written in his annual letter to shareholders the year before. Anyone who follows the markets knows there are widespread concerns right now that stocks are at peak earnings power. Meanwhile, the Federal Reserve is raising interest rates, and it is not only President Donald Trump blaming it for the recent stock market woes, hedge fund giant Ray Dalio said on Thursday that the Fed is causing asset prices to go down. It would seem that there is good reason to be reminded of Buffett's words about interest rates. In the late '90s, Buffett also provided a rare presentation at the Allen & Co. conference for industry moguls, in which he said that when interest rates are low, companies get too much easy money and there is no place for investors that makes sense but stocks. Ultimately, the problems will surface and no longer support a rising market. Some of today's tech giants would have been good long-term bets regardless, but about many other stocks, Buffett was right. Other than his huge stake in Apple — which certainly fits another Buffett mantra, buying great brands that maintain a competitive moat around their value — the billionaire investor hasn't made a major acquisition in years, even though he is sitting on more than $100 billion in cash. The biggest deal he recently made was to buy back near-$1 billion in shares of his own company's stock, a buyback decision he said would be made only at times when he felt Berkshire was trading below its intrinsic value.

The $4 billion stake in J.P. Morgan revealed on Wednesday isn't massive, but it does add to Buffett's particularly big bet on U.S. banks — taking it up to roughly $80 billion (if his $16 billion American Express stake is included), which is about 15 percent of Berkshire's $530 billion market cap. Berkshire also invested in PNC Financial and added to several other existing bank holdings in its stock portfolio in the most recent quarter, ended Sept. 30. "JPM is undoubtedly one of the best managed banks in the world, even though it may not be trading at rock-bottom valuations," said Neena Mishra, director of ETF research at Zacks Investment Research. Five of Berkshire's 10 top stock holdings are now banks. By a simple measure of stock market value, at a time when investors are questioning values across the board, financials are cheaper than other sectors. The forward price-to-earnings ratio for the S&P 500 is 16.2. For tech it is 17 and consumer discretionary 20.8. Health care, which has been the hottest sector this year, is trading at a forward P/E of 16. Financials are currently trading at a forward P/E of 11.9. Within the financial sector, when you slice the niches even finer, the diversified banks have the lowest forward P/E, at 10.4, according to Yardeni Research. The current financials sector P/E is a discount to its historical average of 13.4, according to CFRA data. It is trading at 0.84x relative to the S&P 500, which is 20 percent below its historical average valuation. Watch: Warren Buffett's in-depth interview reflecting on the financial crisis

Berkshire has been buying stocks beyond banks. In fact, net purchases of stocks through the first nine months of the year were $24.4 billion, more than double what the company bought through June. And Berkshire did also reveal a stake on Wednesday in a technology stock: Oracle. (Oracle is trading at a forward P/E that is lower than many other names in the tech sector.) There are many ties between Buffett and J.P. Morgan. One of his two stock picking lieutenants, Todd Combs, sits on the JP Morgan board; Buffett has long pointed to J.P. Morgan CEO Jamie Dimon's annual letter as the one he thinks everyone should read; he and Dimon have started a new health-care initiative with Jeff Bezos of Amazon. But at a moment in market tumult when the notoriously stingy billionaire is being careful with his massive $100 billion pile of cash, it is worth noting that one thing the bank stocks offer is a relatively inexpensive valuation compared to many other stock sectors.

You don't need to be Buffett to buy all these banks