Warren Buffett raises Berkshire cash level to record $277 billion after slashing stock holdings

[Ahlevah]

Berkshire Hathaway’s cash pile swelled to a record $276.9 billion last quarter as Warren Buffett sold big chunks in stock holdings including Apple.

The Omaha-based conglomerate’s cash hoard jumped significantly higher from the previous record of $189 billion, set in the first quarter of 2024. The increase came after the Oracle of Omaha sold nearly half of his stake in Tim Cook-led tech giant in the second quarter.

Berkshire has been a seller of stocks for seven quarters straight, but that selling accelerated in the last period with Buffett shedding more than $75 billion in equities in the second quarter. That brings the total of stocks sold in the first half of 2024 to more than $90 billion. The selling by Buffett has continued in the third quarter in some areas with Berkshire trimming its second biggest stake, Bank of America, for 12 consecutive days, filing this week showed.

MSN

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What? He doesn’t seem particularly excited about investing in Joe’s “historic” economy, having liquidated $90 billion worth of stock in the second quarter, including reducing large stakes in core holdings Apple and Bank of America. Anyone think he’s buying AMD or Nvidia on the dip?

 

[multivita-man]

MSN

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What? He doesn’t seem particularly excited about investing in Joe’s “historic” economy, having liquidated $90 billion worth of stock in the second quarter, including reducing large stakes in core holdings Apple and Bank of America. Anyone think he’s buying AMD or Nvidia on the dip?

If he just went with indexes, he would have increased the value of his holdings anywhere from 30-45% from January '21 to now. Every now and again, markets swoon, which I'm sure Buffett knows as well as anyone. It's been a good economy for people with assets and investments - a really good economy, actually. He's likely cutting his risk, probably because it's unclear just how much value there is in AI, which is where there's been the most aggressive growth. He also knows the consumer is beginning to soften some and the labor market loosening.

 

[Threegoofs]

MSN

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What? He doesn’t seem particularly excited about investing in Joe’s “historic” economy, having liquidated $90 billion worth of stock in the second quarter, including reducing large stakes in core holdings Apple and Bank of America. Anyone think he’s buying AMD or Nvidia on the dip?

He’s probably just converting to cash to donate it to Kamala Harris’ campaign.

 

[KingLeo]

If anyone has not watched the documentary (Becoming Warren Buffet) about Buffet on HBO they should.
It is very interesting.

Becoming Warren Buffett (2017) | Watch the Movie on HBO | HBO.com

Watch Becoming Warren Buffett (2017) online at HBO.com. Stream on any device any time. Explore cast information, synopsis and more.

www.hbo.com

 

[Ahlevah]

If he just went with indexes, he would have increased the value of his holdings anywhere from 30-45% from January '21 to now. Every now and again, markets swoon, which I'm sure Buffett knows as well as anyone.

Buffett’s philosophy is not based on investing in indexes. There is a lot of passive money flowing into indexes comprised of companies with higher market caps, so investing in these indexes tends to concentrate one’s exposure to the risk of a decline in those stocks. I mean, it’s great in a bull market, not so great in a stagnant or bear market. Many younger investors, in particular, have never seen a truly trying, extended bear market. I’m talking about one where stocks overall go nowhere or grind lower, inflation adjusted, for a decade or more like they did in the 1970s.

Instead, Buffett’s investment philosophy is centered around buying stakes in businesses according to their underlying value, which in recent years has tended to reflect his expectations concerning their future cash flow versus their cost rather than their breakup value in liquidation. He doesn’t chase fads or pay up for an idea just because it’s trendy. Right now investing in AI is trendy, just as investing in EV and solar power stocks a couple of years ago was trendy. A lot of money can be made on trends, but just as easily it can be lost. Buffett’s idea is to buy low and sell high rather than follow momentum, and the best way to do that, he thinks, is to be patient and wait for the right opportunity. Opportunity in the form of value, it seems, hasn’t arrived yet.

It's been a good economy for people with assets and investments - a really good economy, actually. He's likely cutting his risk, probably because it's unclear just how much value there is in AI, which is where there's been the most aggressive growth. He also knows the consumer is beginning to soften some and the labor market loosening.

Yeah, it’s been a historic party. But as all parties do, it’s likely coming to an end as we find assets inflated to historically-high levels. Access to cheap and plentiful money can keep the punch bowl flowing for an extended period, but eventually there’s an inevitable hangover. In the words of economist Hyman Minsky, “Success breeds a disregard of the possibility of failure.”

 

[multivita-man]

Buffett’s philosophy is not based on investing in indexes.

Understood, but my point is that whatever an individual active investor like Buffett does or doesn't do is no indication of overall market strength. The market is probably cooling off, but it's had a pretty good run any way you slice it. The markets have been at historic highs throughout much of Biden's term. Employment has been at or near decades-high levels during his term as well. People who are comfortably above the median income and who have assets have enjoyed a strong economy. It's people at or below median income who have been struggling. Biden wanted more taxes on the wealthy and more income support through the earned income credit for lower-income families, which would have helped.

 

[Ahlevah]

If he just went with indexes, he would have increased the value of his holdings anywhere from 30-45% from January '21 to now.

One more thing. Owning Berkshire Hathaway stock has trounced the S&P 500 index. If you had bought one share of VOO at its inception in 2010 and held it you would have made 353% on your money. However, investing in BRK.A shares would have grown 453%. For most people, Buffett advises most people to buy an index fund when he probably should be touting his own company’s stock.

 

[multivita-man]

One more thing. Owning Berkshire Hathaway stock has trounced the S&P 500 index.

He's a very good active investor, yes. And?

If you had bought one share of VOO at its inception in 2010 and held it you would have made 353% on your money. However, investing in BRK.A shares would have grown 453%. For most people, Buffett advises most people to buy an index fund when he probably should be touting his own company’s stock.

He advises people to index because he knows that it's generally a bad idea to put all of one's eggs in a single basket, even if that basket out-performs the S&P.

 

[Ahlevah]

Understood, but my point is that whatever an individual active investor like Buffett does or doesn't do is no indication of overall market strength. The market is probably cooling off, but it's had a pretty good run any way you slice it. The markets have been at historic highs throughout much of Biden's term. Employment has been at or near decades-high levels during his term as well. People who are comfortably above the median income and who have assets have enjoyed a strong economy. It's people at or below median income who have been struggling. Biden wanted more taxes on the wealthy and more income support through the earned income credit for lower-income families, which would have helped.

This has been a liquidity-driven market, fueled by cheap Fed money rained down upon the financial system. Asset prices have been artificially inflated because the real cost of capital has been below the inflation rate for an extended period. That dynamic has changed, and we’re beginning to see it reflected not just in the real economy but the financial economy. For example, the Conference Board’s Index of Leading Economic Indicators and the ISM’s PMI have both been flashing caution lights for the last 18 months even as the financial markets defiantly marched ever higher. Now we’re beginning to see cracks in the asset dike. IF the risk is shifting to deflation and economic contraction from inflation and expansion, however anemic, one would think it would be ill-advised to increase taxes.

 

[craig]

MSN

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What? He doesn’t seem particularly excited about investing in Joe’s “historic” economy, having liquidated $90 billion worth of stock in the second quarter, including reducing large stakes in core holdings Apple and Bank of America. Anyone think he’s buying AMD or Nvidia on the dip?

Nope. He is worried about Trump winning the election

 

[Ahlevah]

He's a very good active investor, yes. And?

He’s also a canary telling us stocks are overpriced and likely to underperform going forward based on historical measures of value.

He advises people to index because he knows that it's generally a bad idea to put all of one's eggs in a single basket, even if that basket out-performs the S&P.

The problem is if you buy an index fund in the weighted S&P 500 much of your investment is concentrated in half a dozen companies, all mechanically driven higher based on how much money is forwarded by employers to Vanguard or Fidelity. They buy regardless of the current value of the earnings reflected in the index. It’s been likened to an auction in which some bidders have a paddle and keep raising it until they win whatever item it is they’re bidding on. Some “momentum” bidders also join in on the fun, while “value” bidders like Warren Buffett progressively drop out. At some point the people giving money to the bidders with presumably limitless pockets will take note and move their money to something else at another auction, like one for bonds or T-bills. Most of those people tend to be older and somewhat battle hardened, like me. The younger set is still buying into the “buy the dip” mantra. They said the same thing to Boomers and their parents in 1972 concerning so-called “One Decision” stocks: “Just buy Polaroid and Xerox, put the certificates in a safe deposit box, and forget about them.” After getting pounded by two oil shocks, a couple of major recessions, and brutal bouts of inflation, they finally got back to even, inflation adjusted, at some point in the 1990s, thanks to companies like Walmart.

 

[Ahlevah]

Nope. He is worried about Trump winning the election

A bottom-up investor like Warren Buffett tends to tune out politics when making investment decisions. Besides, whoever is sitting in the Oval Office affects the financial markets only peripherally. For what it’s worth, the major market mover of late is sitting in the Eccles Building, because he and his fellow dons will determine how much liquidity is available as well as its cost.

 

[craig]

A bottom-up investor like Warren Buffett tends to tune out politics when making investment decisions. Besides, whoever is sitting in the Oval Office affects the financial markets only peripherally. For what it’s worth, the major market mover of late is sitting in the Eccles Building, because he and his fellow dons will determine how much liquidity is available as well as its cost.

Trump said he will interfere with the Fed. What do you think that will do to the economy and the market?

 

[multivita-man]

He’s also a canary telling us stocks are overpriced and likely to underperform going forward based on historical measures of value.

Okay, and? That's what a correction is. Corrections happen all the time - about 25 times since 1974.

 

[Ahlevah]

Trump said he will interfere with the Fed. What do you think that will do to the economy and the market?

The role and operations of the Fed are set by law. There isn’t much he can do other than appoint Fed governors who are more to his liking when a vacancy occurs. Except for the Chair and Vice Chair, they all serve 14-year terms, so Trump’s input on the Board would be minimal during a four-year stint in the White House. Otherwise, it’s an independent agency of the federal government, separate from the executive branch.

 

[Ahlevah]

Okay, and? That's what a correction is. Corrections happen all the time - about 25 times since 1974.

I’m not talking about a correction. I’m referring to periods like the one from January, 1973 until August, 1982 when the Dow Jones Industrial Average lost about 70% of its value, inflation adjusted, or the period from the March, 2000 market peak until the S&P 500 got back to even, inflation adjusted, around 2013.

 

[multivita-man]

I’m not talking about a correction. I’m referring to periods like the one from January, 1973 until August, 1982 when the Dow Jones Industrial Average lost about 70% of its value, inflation adjusted, or the period from the March, 2000 market peak until the S&P 500 got back to even, inflation adjusted, around 2013.

There's no evidence of a protracted bear market. The only major index in correction territory at the moment is the NASDAQ, which is tech-heavy and volatile.

 

[Ahlevah]

There's no evidence of a protracted bear market. The only major index in correction territory at the moment is the NASDAQ, which is tech-heavy and volatile.

You are correct. It’s hard to call a bear market before it’s actually occurred. What I know is traditional measures of valuation, such as the so-called Buffett Index and the CAPE Index, with data going back to the latter part of the 19th Century, indicate stocks are richly priced and thus likely to underperform over longer periods than they would if they were priced at more reasonable valuations. Just applying mathematical concepts like mean reversion or regression analysis can give us a hint as to what’s to come. Right now, Newton Analytics’ model based on the yield differential between the fed funds rate and 10-year Treasuries has us at about a 48% chance of entering a bear market over the next 24 months. Will it occur? Who knows? But why take the chance, since there are alternative investments at considerably lower risk that are likely to offer higher returns as rates drop over the next year or so? Honestly, at this particular moment I’d rather buy a levered closed-end bond fund that invests in high-quality corporates or U.S. Treasuries, and that’s exactly what I’m doing.

Bear Market Probability Index - Stock Market | Newton Analytics

Find the current and historical bear market probability of the stock market determined using the treasury yield curve and Bayesian inference.

www.newtonanalytics.com

 

[maxparrish]

MSN

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What? He doesn’t seem particularly excited about investing in Joe’s “historic” economy, having liquidated $90 billion worth of stock in the second quarter, including reducing large stakes in core holdings Apple and Bank of America. Anyone think he’s buying AMD or Nvidia on the dip?

His advice is buy when everyone is selling and sell when everyone is buying. With disappointing numbers, looks like he followed his own advice.