Warren Buffett is building cash as the market soars
If Warren Buffett is selling, should you be buying?
It’s worth considering, as Berkshire Hathaway, the company run by the world’s greatest value investor, has been building a massive $325 billion pile of cash as the stock market soars.
This isn’t a big mystery. The cash build can be explained by the simple fact that Buffett, age 94, and the whippersnappers who do most of the daily trading at his shop are value investors.
It means they try to buy stocks when they are cheap — that is, undervalued, essentially when they have low price-to-earnings ratios.
And it has become abundantly clear that US stocks sure ain’t cheap at the moment, and there are few bargains to be had. That doesn’t mean the market is going to crash. Stocks can stay overvalued for a long time.
But if you happen to have a few hundred billion on your hands, and short-term Treasury bills are paying 4.50% annualized, why not stuff $325 billion into them, generating about $15 billion a year in risk-free returns? Sounds good to me.
This piece was updated to correct “millions” to “billions” in final paragraph.
This isn’t a big mystery. The cash build can be explained by the simple fact that Buffett, age 94, and the whippersnappers who do most of the daily trading at his shop are value investors.
It means they try to buy stocks when they are cheap — that is, undervalued, essentially when they have low price-to-earnings ratios.
And it has become abundantly clear that US stocks sure ain’t cheap at the moment, and there are few bargains to be had. That doesn’t mean the market is going to crash. Stocks can stay overvalued for a long time.
But if you happen to have a few hundred billion on your hands, and short-term Treasury bills are paying 4.50% annualized, why not stuff $325 billion into them, generating about $15 billion a year in risk-free returns? Sounds good to me.
This piece was updated to correct “millions” to “billions” in final paragraph.
