Be Fearful When Others Are Greedy
Berkshire Hathaway is sitting on an enormous $276 billion in cash, which accounts for nearly half of its total assets. With this amount of money, Berkshire could buy all the shares of Netflix, AMD, McDonald's, and Airbnb, or even three times the value of Starbucks. However, Berkshire does need to maintain a comfortable cash position to cover any sudden large claims from its insurance business. This cash position has grown steadily from around $100 billion just a decade ago.
Warren Buffett, known for his long-term investment approach and deep understanding of the power of compounding, is currently earning only around a 4.5% yield on this massive cash pile (he said he would do the same even with a 1.5% yield). The reason is simple: he hasn’t found better opportunities in years. This aligns with the historically high Buffett Indicator (the ratio of the total U.S. stock market value to U.S. GDP), a metric Buffett himself coined.
Timing the market is nearly impossible, and even Buffett has admitted this on several occasions (which I can also relate to). Over the past few years, I’ve made some gains in the stock market, but I have no idea when the music will stop. When turmoil arises outside of the U.S., it usually has only a temporary effect on the U.S. stock market. But when the epicenter is within the U.S., the impact can be catastrophic. Major market shocks tend to build over time, allowing most people to prepare, but their onset often feels "sudden." The truth is, the black swan is always in the sky—we just can’t predict exactly when it will land.
Source: macrotrends.net
In the near future, I will face a similar dilemma with half (50%) of my assets sitting in cash, wondering where to allocate them. My initial plan was to invest 25% in BRK.B over the next three months while keeping the remaining 25% in cash. I still have time to think it through before making a final decision.
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