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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
#72I would rename the title to “The Buffett Indicator shows an overvalued market”. For those curious of its definition (from the article): > 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. That being said, it’s not clear that the Buffet Ind…
The fact the AI emperor wears no clothes seems clear to me at least. The dot-com bubble looked obvious in 1997; it popped in 2000. Anyone shorting in '97-'98 was carried out on a stretcher before being vindicated. In fact 2000-2002 fell in three brutal legs over two years, and anyone who leveraged up after the first 25% leg was destroyed by the next two. My strat is to accumulate cash to buy the drop. The danger with…
Yeah. This is why BRK is in cash equivalents rather than being short.
Buffett has said a number of times that he never is intentionally sitting on the sidelines as a bet that things will go down. He’s simply there because he can’t find value. He’s also said that if he was dealing with millions rather than billions, he could probably find loads of value.
My guess is that is still true today, so the rest of us can probably find deals even in this market.
Re: Berkshire's $397B Bet Against an Overheated Market
#73It’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?
They are one of the best value investors ever to do it. If they see no value, that is actually information about the state of the market.
Re: Berkshire's $397B Bet Against an Overheated Market
#74> 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 seems like of the most outdated and inflexible indicators that's widely used though? Does not account that a much higher proportion of the US economy might be represented in the stock market and that US service companies are generating massive revenue outside of US (in some cases the majority). That wasn't the case 50 years ago.
Re: Berkshire's $397B Bet Against an Overheated Market
#75It’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
Holding cash is a terrible strategy, the US dollar is going to get devalued by the end of the Orange Troll's term due to money printing/bond market repression/trade hijinks.
We're in the pump of a pump and dump by the richest people in the world, who are trying to engineer exit liquidity in a way that doesn't immediately crash the market. They're going to cycle their holdings several times before things go to shit to avoid the brunt of it, we'll be able to see the wave on the horizon. I don't think just the SpaceX dumping will trigger a broader loss of confidence, but Anthropic + OpenAI dumping post IPO will ripple through to the neoclouds, which will ripple through to the semis, and probably tank things. In the short term (pre AI IPO) the market is volatile but pretty safe IMO, so just trade techically.
In the medium-long term I'd hold a mix of mining/industrial equipment/etc stocks in Euros, and Chinese AI/renewables stocks in Renminbi. The Euro stocks are safer and a significant portion of their increased valuation will come from currency shifts, and the Chinese stocks are riskier but have a big upside and are likely to benefit from Renminbi revaluation as China onshores "finishing"/final assembly of products (which much of the world is going to push them to do).
Re: Berkshire's $397B Bet Against an Overheated Market
#76> 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 perhap…
> This is one of the most successful investment companies
It was for a long time. There is not a lot of evidence that's still the case (so far at least but even if the crash comes but its not big enough its not guaranteed they will outperform S&P 500 over a several year period).
Re: Berkshire's $397B Bet Against an Overheated Market
#77Earlier quoted context omitted.
Note that I am not arguing that children is the purpose in life for everyone. For some it is, for others it is not. I believe that the majority of child bearers are "on program" driven by their biological imperatives. I believe that among the voluntary non-children people (of which I am one) there's plenty of values, goals, hopes and aspirations. In fact, for me, life is so rich that that is why I do not want childre…
Yeah, I used to feel life was rich too, and then I very suddenly became aware that it was finite and anything I could possibly do is just leading towards the same fixed point ending. I think mentally healthy humans have ways to avoid thinking about this.
Yeah, like having kids.
Re: Berkshire's $397B Bet Against an Overheated Market
#78Earlier quoted context omitted.
Yeah, I used to feel life was rich too, and then I very suddenly became aware that it was finite and anything I could possibly do is just leading towards the same fixed point ending. I think mentally healthy humans have ways to avoid thinking about this.
Religion, children, and legacy are the ways people cope with this. For the vast, vast majority of human history, 99% of people believed either in an afterlife or reincarnation or something of the sort. Having children, who were molded in your image and expected to take over your life's work, doing the same work you did. Or otherwise leaving an impact in the world, hoping that your legacy would be remembered and to pa…
Why is this downvoted?
It probably doesn't help that every scientific advance gets co-opted to make the rich richer and civilization worse.
I guess the world oscillates between good times and bad times. Those who are born in bad times get to see the world improve drastically and helping that along is a purpose. Those who are unlucky enough to be born in good times get to see everything crumble. At best they can inspire the rebuilding just before dying of old age.
We shouldn't be so sure about the fate of the universe. If you were born after 1980 you probably feel more certain about the eventual fate of the universe than people born in 1940. A lot of scientific advances that enabled us to even predict the universe isn't steady-state are less than 100 years old. They may change, and our predictions accordingly, in the next 100 years. In fact they did change several times. There was the steady state, then the big crunch, then the big rip, then the heat death. We can't be sure about heat death either - dark energy adds more energy into an expanding universe, which may be exploitable forever.
Re: Berkshire's $397B Bet Against an Overheated Market
#79Reminder: Jack Bogle, the man who popularized the index fund, democratized wealth accumulation, and made more millionaires than anyone in history, has a famous saying for those pondering this situation.
“Nobody knows nothing.”
Re: Berkshire's $397B Bet Against an Overheated Market
#80Earlier quoted context omitted.
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
I think China isn't exactly a good example of corruption-free administration...
I took their implication as China is essentially next in line to be the dominant superpower.
(I would say that, within that implication, it would be understood that corruption is not a problem that is being solved in that transfer of power)