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Berkshire's $397B Bet Against an Overheated Market

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Re: Berkshire's $397B Bet Against an Overheated Market

#61
post #55
post #7

It’s such an odd time investment wise… We have a blooming oil war that could take chunks of the global economy with it, booming and teetering credit levels threatening collapse, the “AI” companies have a lot of tinkerbell magic and impossible returns needed to justify their stocks, major cash rich tech giants are suddenly hands-out pockets-out for big money, and … well: Elon is the worlds richest man/CEO who also sha…

This is their 14th straight quarter of piling cash. Will the same article be written on their 15th, and 16th?

Fall was upon a remote reservation when the Indian tribe asked their new Chief what the coming winter was going to be like. The modern day Chief had never been taught the secrets of the ancients. When he looked at the sky he couldn't tell what the winter was going to be like.

Better safe than sorry, he said to himself and told his tribe that the winter was indeed expected to be cold and that the members of the village should stock up on firewood to be prepared.

After several days, our modern Chief got an idea. He went to the phone booth, called the National Weather Service and asked, "Is the coming winter going to be cold?"

"It looks like this winter is going to be quite cold," the meteorologist at the weather service responded.

So the Chief went back to his people and told them to collect even more firewood in order to be prepared. A week later he called the National Weather Service again. "Does it still look like it is going to be a very cold winter?"

"Yes," the man at National Weather Service again replied, "It's going to be a very cold winter."

The Chief again went back to his people and ordered them to collect every scrap of firewood they could find. Two weeks later the Chief called the National Weather Service again. "Are you absolutely sure that the winter is going to be very cold?"

"Absolutely," the man replied. "It's looking more and more like it is going to be one of the coldest winters ever."

"How can you be so sure?" the Chief asked.

The weatherman replied, "The Indians are collecting firewood like crazy."

Re: Berkshire's $397B Bet Against an Overheated Market

#62
post #53

> Berkshire Hathaway just reported a record $397.4 billion in cash and T-bills, 59% of its investable portfolio. Isn't that just lazy? Even if the market is overheated, there will be opportunities in non-overheated areas/other countries/distressed companies etc? Unless they are sure of a crash and need funds to buy on the cheap.

From 2000-2002, Buffet kept liquidity and ended up buying companies like Moody’s and private businesses.

Re: Berkshire's $397B Bet Against an Overheated Market

#63
post #29

This bubble will never burst. The big investors are feeding a leverage cycle and cannot afford to stop. In addition, corporate nepotism has taken hold - for example, AI firms(the current flavor of software) invest in hardware companies. Hardware companies make money as the AI firms buy their product. Hardware companies then take that money and in vest in AI firms. The 'free market' no longer looks at 'value' to asses…

the thing with leverage is that eventually you have to pay the debt back

in the best case scenario the government backstops it via money printing but that's just distributing the pain to the little guys

the destruction still happens

Re: Berkshire's $397B Bet Against an Overheated Market

#64

> The Buffett Indicator, a ratio that measures the market cap of the entire stock market against the GDP of the United States, has hit a record of ~232%. Historically, anything above ~120% is a signal of the market being overvalued. So nearly 2x over-valued. A market correction would take that to ~0.5x possibly, so a loss (for those getting in now) of 75% is on the cards.

It's been over 120% since 2013. You can spend your entire earning career waiting for a crash

In the aftermarth of 2008 it bottomed out about 70%, similar after the dot-com crash in 2000. Before 1995 those were "bubble peaks"

I'm not convinced "historically" means anything in a globalised world that's very different to 50 years ago

Re: Berkshire's $397B Bet Against an Overheated Market

#66
post #53

> Berkshire Hathaway just reported a record $397.4 billion in cash and T-bills, 59% of its investable portfolio. Isn't that just lazy? Even if the market is overheated, there will be opportunities in non-overheated areas/other countries/distressed companies etc? Unless they are sure of a crash and need funds to buy on the cheap.

You might find some areas to criticize Berkshire Hathaway but I don't see being lazy as one of them. This is one of the most successful investment companies of all time and they got that way by being better than most at judging when the right time to get in and get out of the market, and by putting in the work on researching where/when to buy.

Might there be opportunities they miss? I'm sure there will be, but perhaps finding those is just too risky at the moment, so they've looked at the options and decided not to invest.

Re: Berkshire's $397B Bet Against an Overheated Market

#67
Doom and gloom articles are what make people get out of the market in fear and lose in the long run.

An individual investor isn't in the same stock market as Berkshire. Their investments move prices and they can't just allocate 50K on a XYZ fund. They have to find multi billion single stock investments, and that's a completely different problem than what us poor mortals face.

Re: Berkshire's $397B Bet Against an Overheated Market

#68
post #49

Earlier quoted context omitted.

The thing I worry about is: what happens when an actual set of adults get back into the White House? That could well be the trigger for the crash of all crashes because they might actually bring some reality pins with them, which are the antithesis of the growing, in size and number, fantasy balloons of hot-air the current cough leadership cough is facilitating.

Which will trigger even more wealth transfer to the top .1%, which the 99% will blame on the administration, and put the corrupt lot back in a few years later Eventually though the world moves on and China takes over

China's got its own set of economic problems that they're masking. Their domestic economy is stagnant and they're trying to keep factories pumping out stuff. Since their domestic economy isn't biting, they're flooding the world with exports. This isn't sustainable, especially if and probably when the rest of the world decides that they're done with government backed Chinese companies killing theirs (and you're starting to see that).

Re: Berkshire's $397B Bet Against an Overheated Market

#69
post #7

It’s such an odd time investment wise… We have a blooming oil war that could take chunks of the global economy with it, booming and teetering credit levels threatening collapse, the “AI” companies have a lot of tinkerbell magic and impossible returns needed to justify their stocks, major cash rich tech giants are suddenly hands-out pockets-out for big money, and … well: Elon is the worlds richest man/CEO who also sha…

In a world where Tesla has stayed at "severely overvalued" stock prices for about a decade, with occasional crashes to just "overvalued", I'm not so sure the big AI companies really need returns that justify their stocks. Sam Altman and Dario Amodei are both in their own ways trying to capture that same lighting in a bottle where the company is evaluated solely on the CEO's vision

Yeah. This is the whole “market can stay irrational longer than you can stay solvent” thing. I think there’s almost always a plausible bearish case to be made. Hence: permabears.

Re: Berkshire's $397B Bet Against an Overheated Market

#70
post #8
post #7

It’s such an odd time investment wise… We have a blooming oil war that could take chunks of the global economy with it, booming and teetering credit levels threatening collapse, the “AI” companies have a lot of tinkerbell magic and impossible returns needed to justify their stocks, major cash rich tech giants are suddenly hands-out pockets-out for big money, and … well: Elon is the worlds richest man/CEO who also sha…

How I view the market: Short term: high volatility and uncertainty, feels more like gambling at a casino Medium term: the world is too unstable, best to hold cash Long term: dollar cost averaging and time in the market always win so depending how long your horizon is, it’s a good time as any to invest Longer term: we all die

If short term is high volatility and the medium term is too unstable, why is the VIX as low as it is? Am I missing something, or is the VIX mispriced?
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