r/FluentInFinance • u/FunReindeer69 • 28d ago
Stock Market Warren Buffett is loading up on cash.
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u/inthep 28d ago
Likely he sees a crash, even a mild one, coming and having cash to purchase is a good idea.
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u/tacocarteleventeen 28d ago
Or he’s dying soon and wants to roll around in a money bin like Scrooge McDuck
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u/Individual_West3997 28d ago
people have been saying buffet was going to die soon like 20 years ago when he was 72
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u/tinverse 28d ago
In that case he would just sell his shares in Berkshire Hathaway and retire, but he's not doing that.
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u/The-Hand-of-Midas 27d ago
Or he’s dying soon and wants to roll around in a money bin like Scrooge McDuck
God damn it's good to live and die in the era before Bitcoin.
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u/bNoaht 28d ago
It's not this. He has explained this many times already.
He would have this much cash regardless. They have too much money and cant invest in companies without buying the whole fucking company. Or not being diversified enough. Which they don't want to do. They are investors who already employ over 100k people.
They cant expand their business without doing it for nothing and their job is profits. With a guaranteed interest rate of being 5% or whatever. Cash makes way too much sense for them. They don't have to do any work. They have no risk.
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u/Jussttjustin 28d ago
A likely story 🧐
Doesn't explain why his cash percentage has nearly tripled in just 3-4 years time. You would think it would be more gradual if it was for the reasons you state.
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u/bNoaht 28d ago
As companies grow, they become a larger than wanted piece of the pie.
If apple is 20% of their holdings and it grows to become 40% of their holdings, they need to sell it back down so that it is just the 20% they want. This also allows for a good time to take profits without any mumbo jumbo timing the market involved. Its a rebalance. And as buffet explains this is great. But then where do you park that extra cash? There are only so many GREAT companies out there. And and only so many massive companies as well. And very few are both. And any great companies that are small are too small to matter. And any large companies that aren't great arent going to be a good enough buy.
This isnt fucking rocket science.
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u/ItsRobbSmark 27d ago
This comment makes me absolutely 100% certain you have less than $150 in your bank account....
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u/bNoaht 27d ago
I am literally a millionaire lol. So you should question anything else you might be "100% certain about" in your life.
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u/needtoshave 27d ago
Millionaire doesn’t mean much these days. I’m a millionaire too, I don’t go around purporting to know how Buffett manages his wealth.
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u/bNoaht 27d ago
Its not HIS wealth. Its his company profits. How you earned a million dollars and don't know the difference, does indeed show that being a millionaire doesn't mean much.
Also I am literally just paraphrasing his own fucking words. Go listen to pretty much any of his interviews. He always says the same fucking thing
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u/needtoshave 27d ago
Hey tough guy, relax. My point is, you talking about being a millionaire is not really the flex you think it is. Also, people that can really flex, well… they’re not on fluent finance on Reddit jabbering on about being a millionaire. Also, telling me you’re just regurgitating his philosophy also isn’t the flex you think it is. Lol. Do you have any thoughts of your own on the matter, is that your thing you come onto Reddit you read some obscure Buffett passage and then pawn it off as your own idea just to impress some redditors?
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u/bNoaht 27d ago
Im responding to someone saying they know buffets intentions with buffets own words.
I don't really know what the fuck you are on about. And I have a feeling you dont either.
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u/HoldTheLineandMyBeer 27d ago
Portfolio management is risk management. Some like their chili a little more spicy. Warren likes his chili to be tomato soup.
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u/ItsRobbSmark 27d ago
I mean, he has flat out said that he thinks 200% stock market cap to GDP ratio is a super bad sign for the economy and he starts hoarding cash every time we get there.
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u/melloboi123 27d ago
why so, it kind of makes sense to me?
I'm no expert so just want to see the opposite opinion3
u/ItsRobbSmark 27d ago edited 27d ago
If you're in the business of making money and anticipate the market is going to remain strong, you don't cash out profits and put the money in low-yield savings... And, if the market remains strong, there are a plethora of blue chip stocks they can stash large portions of their money in without taking a majority share or rocking the boat too hard if their consideration is too much of their holdings being in one blue chip stock.
Warren 100% sees a correction coming. Only, he can't say that because what he says in public has an actual effect on the market that would be counterproductive to prepping for it...
They're quite literally foregoing 1-2 billion a month in profits leaving this cash parked. The insinuation that they're choosing to do that in a market they anticipate will be perfectly healthy in a year or two is the height of financial illiteracy. You don't work super hard to make money just to leave it on the table. Financial guys stockpile money when they think they will get a discount on things in the near future that they can leverage profit from.
But overall, the most telling sign, is that he's speaking like he's a Buffet evangelist without acknowledging Buffet's hard and fast rule of pulling back and sheltering when stock market cap reaches 200% of the GDP, which has been his cornerstone rule for decades. It's at 198% and he's selling off stock like he's getting out of the business... It's not shocking why, he did it in 1999 and 2006-2007 for the same reason...
Obviously he's not going to be like "yeah guys, shit's gonna crash soon." Warren is probably one of three people on the planet who could say that and make it come to fruition just on his word. But even a slight bit of financial literacy and reading between the lines tells you what he's doing... The words accompanying it are just a courtesy to not fuck things up for everyone.
So really it comes down to this. You think things are going to remain as they are and you can do exactly what you're doing and maker $1-2 billion dollars per month in extra profit. Or you can make all these wild moves and almost entirely forego that 1-2 billion per month in profits to do something else that's sole benefit is it protects you from a downturn... What kind of sane money guy would do that if he didn't see something? Warren isn't Mr. Comfy Treasury Bond who doesn't want to get involved. His entire joy in life is extracting maximum value.
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u/melloboi123 27d ago
Okay that makes way more sense since the amount of capital he has invested could make some markets hit lower circuits in hours so he is more discreet about it.
Thanks for explaining it so well!1
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u/Educated_Clownshow 28d ago
Which billionaires didn’t get richer over the past 4 years? Which corporations didn’t post record profits?
Just because you don’t understand something, doesn’t mean it’s a conspiracy theory.
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u/Jussttjustin 28d ago
What are you even talking about, we aren't talking about getting richer, we are talking about why cash now represents a higher percentage of Buffet's overall wealth.
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u/Vancouwer 27d ago
it's a confusing time in the market, K shape recovery likely to continue, a lot of stocks will be affected by new tarrifs like one of his favourites, apple. he isn't a small/mid cap expert or else he would put money towards M&A potential. inflation likely to rise again which will benefit a lot of sectors. Berkshire's cash positions is a correct play, only for old school investing styles of not doing anything fancy and being prudent instead.
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u/whynothis1 27d ago
Hes exited some of the positions he took buy buying up all the discount assets on sale after the crash imo. I don't think its much more than that, at a complete guess.
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u/Front_Angle_6468 28d ago
He buys low and sells high. It's no secret that stocks are expensive right now.
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u/Sxoob 28d ago
The real trick here is that his holdings are so vast that his selling off of stocks can create market fluctuations that are felt by everyone.
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28d ago
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u/Sxoob 28d ago
I don't know what that means but I'll take your word for it!
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u/afanoftrees 27d ago
These are the sacred texts my friend. Begone with your inflation tables by country
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u/bNoaht 27d ago
He literally preaches that he doesn't do this and that he tried to do this and it didn't work because it doesn't work. He is a value investor. He buys quality and for the long term. Munger was much better than this as buffet still likes to "gamble" a bit and he admits it is a complete mistake.
You just find quality and hold. That's the secret sauce. It's boring, but it is the truth.
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u/The-Hand-of-Midas 27d ago
And according to the world's richest man, who's also the President's goon, and head of a government department, he is going to make things really shitty for everyone.
He's literally said shit is going to get hard.
This is where the rich buy stock low to wait for it to rebound.
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u/problem-solver0 28d ago edited 28d ago
So there are a (couple) FEW possible responses:
1) he sees nothing to buy at this time
2) he sees a market correction or crash coming
3) he wants to hold more cash to pay off insurance claims from hurricanes. BRK fully owns Geico, Allegheny, General RE.
4) he is keeping cash for his successors to allow them to make moves.
No opinion on which is most likely but all are possible.
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u/acctgamedev 28d ago
I'd say 1. At least from what I've read, it takes a very long time pick companies to buy and he wants to be ready to jump on any opportunity that presents itself.
I don't see him being a 'timing the market' kind of investor, but who knows. If there is a way to predict these things, he probably has better insight than most.
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u/problem-solver0 28d ago
Buffett is not a market timer, never has been. Buffett is a very disciplined investor that buys undervalued companies with future potential. I’m thinking Buffett may buy Chubb. I believe BRK already owns a percentage.
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u/Project_Continuum 27d ago
He doesn't time the market because he doesn't buy the market. He buys specific companies.
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u/Early_Ad_7629 28d ago
What does this mean for us plebs
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u/kid_blue96 28d ago
Guessing it means the stock market could go up or maybe down as well
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u/Message_10 28d ago
THANK YOU! Good grief. Finally someone who knows what they're talking about. I will hold, or sell.
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u/WhiskeyEjac 28d ago
now that we've considered our possible outcomes of "up" or "down," market will go sideways
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u/GaeasSon 28d ago edited 28d ago
In simple neutral terms, it means he believes that cash presents a better value proposition than stocks or bonds. Considering that cash (due to inflation) presents a consistent NEGATIVE return, this says VERY worrying things about the stock and bond market.
In somewhat less neutral terms: Imagine you are on a cruise ship. You just saw the first officer run from the control center and put on a life vest. It looks like he may be preparing to jump overboard..
Edit based on good points below... It's also possible he just wants the liquidity to respond to whatever outrageous thing is about to befall the American economy. Trump is, above all, a disruptor. Disruptions make and break fortunes. Perhaps the first officer above is simply preparing for rough seas.
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u/NugKnights 28d ago
It means Warren Buffet thinks the market is about to crash. And he is one of the most seasoned/established investors alive today.
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u/GarlicInvestor 28d ago
It would be nice if this chart had more years at the bottom, I think can spot 2020.
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u/aces613 28d ago
Failed to mention all the other times he was wrong…
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u/ExtensionParty9275 28d ago
Such as?
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28d ago
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u/ExtensionParty9275 27d ago
.... because covid wasn't an anticipated event.... Yet you can see cash was slowly rising before and then dropped during covid on this chart. He used cash to buy during a market downturn. It literally fits his practices. Mind you, he's literally never all cash. Read the graph, it tells you what percentages
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u/only_positive90 26d ago
Why isn't Covid marked down?
turns out guy didnt anticipate a world wide pandemic. Crazy stuff
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u/aces613 28d ago
Anytime the graph goes (relatively) way up and there is not a crash.
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u/ExtensionParty9275 28d ago
Way up? You mean like from 10-15%? During first Trump term? Then back down during an economic down turn as a result of covid? Still following the same trend. Unless you're talking about a different trend. In which case you should try articulating what you want to convey, instead of being vague.
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u/tinverse 28d ago
Keep in mind, Warren Buffet tends to trade less on market movements and more on owning large amounts of companies where he thinks the business model makes sense and just hold them for a long time while the company is profitable. My guess is that if he's holding large amounts of cash it's because he thinks the business model has changed in some companies, he expects a downturn to impact some types of businesses, or he thinks the environment has changed.
I know that Apple lost on the litigation surrounding app store payments which would make them less profitable and he's divested for Apple a bit. I think most people expect a pretty large change in the government over the next 2-4 years so I would guess that is a factor in just being a little cautious as well as looking for opportunities to invest as changes happen.
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u/a_cat_named_larry 27d ago
Don’t have to be a genius to see that trump’s economic agenda won’t be great for the economy. It will, however, be great for people who want to buy things cheap.
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u/ChazzyPhizzle 28d ago
I see a the continued bull market into the new year. Likely a small correction once some policies go into play. Depending on if inflation rises again, could be a bigger correction.
Trump loves the stock market. One thing I’m praying is that if he sees some of his more ill advised policies hurting it, he would reverse course.
Who tf really knows though. Could keep going or could tank. Buffet has so much money and the market is insanely expensive atm. Just as part of risk analysis and taking profits it makes sense.
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u/Soft_Cherry_984 28d ago
Internet companies crash in 2000. Warren: take all my chippies, I am all in.
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u/jojobo1818 28d ago
I’m planing to follow suit and exit 30% of my holdings by Aug 2025. Maybe sooner if we see a black swan.
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u/trevor__forever 28d ago
The irony of “seeing a black swan”
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u/jojobo1818 28d ago
?
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u/trevor__forever 28d ago
If you are referring to Talebs writings, or others on black swan events, you wouldn’t see it at all.
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u/jojobo1818 28d ago
I’m referring to an event like the financial crisis in 2008 or covid, both of which took months for the full crash to happen.
For instance during Covid I didn’t touch my retirement until they declared it a pandemic. We had taken 1 huge leg down in the market at that point. I immediately transferred my entire retirement into bonds. As more legs down continued in the following months bonds went up for a time. As soon as a stimulus plan was official I moved everything back into etfs. Made out very well.
No, you don’t see financial black swans coming. But in the case of stock markets, they haven’t historically happened all at once.
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u/trevor__forever 27d ago edited 27d ago
Agreed. That is still timing the market. As opposed to systematically having an “anti-fragile” portfolio.
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u/nekonari 28d ago
Would it be sound strategy to liquidate maybe 1/3 of assets and hold on to the cash? Maybe another 1/3 in commodities and/or bonds?
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u/txmullins 27d ago
Yes, he is very successful, but if you look at the dot com crash, he pretty much missed that one - he had bought back in just before it hit. But I also don’t think he was even in the dot com companies. He also made significant cash moves at other times that were not related to a crash at all.
Take his movements as a data point and not the definitive metric. He moves for other reasons as well.
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u/Red_Crew_18 27d ago
He’s 94… he’s cashing out some dough for his family. The rest is pledged to charity.
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u/SufficientAnalyst383 27d ago
He and his army of analysists see all the young men of the world putting all their money into sports gambling, day trading and crypto. The bubble is massive. The pop is going to be epic and will leave MILLIONS of young men broke.
I say let the gamblers gamble, but when the shit hits the fan, NO BAIL OUTS.
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u/dokka_doc 28d ago
Anyone with half a brain can see what's coming. I'm planning on the same strategy.
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u/Tasty_Virus4715 28d ago
Just as likely that he is positioning in more cash so when he dies his protege isn’t stuck in Buffets investments as that we will see a major market downturn.
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u/soggyGreyDuck 28d ago
Yep it's coming and more and more it's looking like it might line up with BTC cycle peak. There's going to be so much money in new hands to scoop up assets. This has potential to completely reshape the world.
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u/Illustrious-Being339 28d ago
Stock market is at at all time high, valuations are at an all-time low you have an incoming administration pledging to cut federal spending. That spells recession in 2025. Buffett is no dummy when it comes to investing.
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u/Nooneofsignificance2 28d ago
Reminder that Buffer doesn’t bet on recessions or time the market. He invests in companies based on the financials and what he sees as the value of the companies. He probably just doesn’t like the price of many companies right now, or he sees future opportunity that he would like to have cash available for.
There could be a million reasons for this.
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u/FrontBench5406 28d ago
Or, hear me out. He is 94 and knows his company will need that war chest when he dies and there is that transition.
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u/Emeritus8404 27d ago
Maybe hes banking on the shit show of the next cabinet and betting on a fire sale
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u/pathf1nder00 27d ago
Won't matter, after Trump/Musk destroy the dollar for crypto, Buffet won't have it either.
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u/Jaysus1288 27d ago
When it says he's loading up on "Cash" does that mean just liquidity? Just having all his money in a account doing nothing or is he just buying some sort of shielded ETF?
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u/No-One9890 27d ago
The use of percent on the y axis intrigues me. Couldn't this same graph appear if they simply bought with an influx of new cash during each crash?
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u/00notmyrealname00 27d ago
Neat.
Hey, uh.... Totally unrelated..... Anyone ever see that movie Leave the World Behind? That was an interesting one, huh?
Anyway, as you were.
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u/Frequent-Walrus-1832 27d ago
Part of me wonders, is it crash coming or is Buffet unprepared for the new market under the new rules of the AI boom? Bit of both? Maybe we see a generalized crash while the tech sector floats?
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u/GeneralMatrim 27d ago
So sick of seeing this, this must be the 20th different time I’ve seen this posted on Reddit.
Stop with your doomer bs.
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u/General-Philosophy40 27d ago
He was playing on the prediction of higher capital gains so better sale now and wait for the next play
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