Great article by Jeff Nielson at sprottmoney.com that highlights Buffett’s equity portfolio is valued at $135 billion. With $100 billion in cash, that means more than a 40% cash component, an unprecedented mountain of cash in the history of Berkshire Hathaway. The question is why?
Here's an excerpt from that article:
Roubaix Capital Outperforms With Small-Cap Stocks; here are their favorites
Roubaix Capital's flagship investment fund declined by 1.19% in the month of September. However, despite this negative monthly performance, the fund returned 15.6% for the year to the end of September, outperforming the S&P 500, which returned just 5.6% over the same period. Roubaix employs a fundamental long/short equity strategy focused on small and mid-cap Read More
Regular readers are familiar with Warren Buffett's activities over the past few years. He has been hoarding dollars – lots and lots of dollars. This was first brought to the attention of readers in August 2014. At that time, Buffett was already hoarding $50 billion.
With U.S. markets already at bubble levels and the rapidly decaying U.S. economy already showing signs of serious strain, the speculation in that initial article was that Buffett was looking forward to an imminent collapse in U.S. markets – and a feeding frenzy with his mountain of vampire dollars. After all, Buffett was already 83 years old, and his hoard of dollars was already the largest of his entire career.
Who knew back then that the bankers would and could continue to pump U.S. markets higher for another three years? Who knew that Warren Buffett would still be alive to see it? Who knew that over the last three years that Buffett's hoard of vampire dollars would swell to $100 billion in size?
How and why could a “long term value investor” like Warren Buffett ever end up with $100 billion investment dollars sitting on the sideline? In a recent article from the Financial Post, Buffett shows that even at age 86 he can tap dance with the best.
The Berkshire chief executive officer spoke at length Saturday about his failure to pounce on opportunities in tech stocks, the challenge of lining up large deals, and his frustration with a cash pile that’s approaching US$100 billion.
“We shouldn’t use your money that way for long periods,” Buffett said of the cash during his meeting in Omaha, Nebraska. “The question is, ‘Are we going to be able to deploy it?’ I would say that history is on our side, but it’d be more fun if the phone would ring.”
Buffett sounds like some coquettish 16 year-old, hoping to be asked to the high-school prom. Buffett's equity portfolio is valued at $135 billion. With $100 billion in cash, that means more than a 40% cash component, an unprecedented mountain of cash in the history of Berkshire Hathaway.
If Berkshire Hathaway wanted to invest a few billion dollars in some large corporation, it's not like Buffett and friends would see any doors slammed in their faces. What's the real reason that Buffett isn't doing more buying? The same article sheds some additional light.
David Rolfe, who manages about US$6.8 billion including Berkshire shares at Wedgewood Partners, said he wasn’t surprised that Buffett is bummed out by the growing cash pile. Stock markets have been rising for years, making it harder to find attractive investments .
“A run-of-the-mill bear market could certainly solve the cash problem” by offering opportunities for Buffett, Rolfe said. [emphasis mine]
It's not that Warren Buffett can't find any companies in which he would like to deploy some of Berkshire Hathaway's (and his own) vampire dollars. It's that Buffett doesn't want to pay bubble prices for these equities.
When you're 83 years old, you don't have long to wait. Apparently, however, the opportunity which Buffett's banker friends promised him was worth waiting for – for at least three more years. The problem is that no “run-of-the-mill bear market” can provide the Oracle of Omaha with enough stellar opportunities to deploy a mountain of cash this large, not in the time Buffett has remaining.
Buffett has named no successor. If he was planning on simply stepping aside and allowing someone fresher/younger to deploy the largest mountain of capital in Berkshire Hathaway history, Buffett has given absolutely no hint of this. On the contrary, all of his public representations indicate that he plans on spending these dollars himself.
When readers were originally warned that the Next Crash was approaching ( November 2014) and told that the most likely time horizon was the spring of 2016, there were several reasons for presenting that prediction. Among them was the Buffett cash hoard.
That prediction was obviously premature. Bubble valuations in U.S. markets have grown even more absurd. The mindless parrots of the Corporate media call it “the Trump rally”, despite the fact that all Trump has done since getting elected is exactly what any sane observers expected. He has continued to shoot off his mouth erratically and already managed to get himself involved in several scandals.
U.S. markets recently rose again for six consecutive sessions. What was the reason given for the sixth day of rising markets?
The S&P 500 and Nasdaq Composite opened at record highs on Thursday after minutes of the Federal Reserve's latest meeting showed policymakers expected the economy to pick up momentum and that they would raise interest rates soon .
The U.S. economy is “so strong” that the Federal Reserve is going to raise interest rates (when have we heard this before?). Higher interest rates are bad for the economy. Higher interest rates are bad for markets.
Back when these manipulated markets were at least being manipulated in a rational manner, the markets would have gone down on such news. Back when the Corporate media at least feigned paying attention to such phenomena, this would have been portrayed as “irrational exuberance”.
Oil prices have generally trended higher over the past year. For more than 30 years; U.S. markets have always gone down when crude oil prices go up. Why? Because higher oil prices are like a tax on the economy, since oil is such an endemic input in modern economies.
This is especially true for the world's premier oil and gas-guzzling economy, the United States. But when oil prices have been going up in recent months, the U.S.'s bubble markets have been going up right along with them. Why? Because higher oil prices are now (supposedly) good for the U.S. economy .
Economy needs higher oil prices: Goldman Sachs
According to the new mythology, the U.S. is “a rising energy superpower”. The energy sector accounts for about 6% of the U.S. economy. So higher oil prices are good for 6% of the U.S. economy, and bad for the other 94%, but the U.S.'s bubble markets go higher anyways – and the mouthpieces of the Corporate media continue yammering their absurd propaganda.
The U.S. is a consumer economy. The U.S. is currently in the midst of the largest wave of retail sector bankruptcies since right after the Crash of '08. What will happen if the Federal Reserve actually does (finally) start raising interest rates with this train-wreck economy? Ka-boom!
The U.S. retail sector is currently going through the largest wave of bankruptcies in seven years because of several years of weak sales in this consumer economy. The U.S.'s bubble markets have continued to go higher and higher and higher all of this time.
The disconnect between U.S. market valuations and the actual fundamentals of the U.S. economy is far, far greater than at any other time in history . Worse than in the Crash of '08. Worse than in the Dot-Com Bubble. Worse than in the Crash of '29.
This is why Warren Buffett is sitting on a $100 billion hoard of vampire dollars. And since Buffett clearly plans on spending those dollars himself, this means that the Mother of All Crashes is coming soon. That's what Buffett's mountain of money is broadcasting to anyone who is paying attention.
The Mother of All Crashes will take down almost all asset classes with it. The one possible exception will be ultra-fraudulent Western bond markets , where no legitimate trading has taken place since at least 2008.
Even though these worthless bonds have already been manipulated to record highs, they will likely be pushed even higher when the Crash arrives. This will be to fuel the equally fraudulent narrative that “investors are fleeing to bonds”.
As readers have also been warned, precious metals will almost certainly get caught up in the wake of this Crash (assisted by all the malicious might the One Bank can summon). So why favor precious metals as our Safe Haven, despite knowing the bankers will attack these markets?
Western currencies are worthless.
Western bonds are worthless, the IOU's of bankrupt nations.
Western equities are at all-time highs.
Western real estate is at an all-time high.
Gold and silver are already at extremely depressed valuations. Beyond this, gold and silver have a 4,000 year track record as a bellwether asset class.
It was because of these factors that gold and silver (and gold and silver mining stocks) rallied far harder and far faster than any other asset classes following the Crash of '08. They will do so again.
The Dow just hit 21,000. The NASDAQ just hit 6,000. The Buffett cash hoard has just hit $100 billion. The only way things could get any more obvious would be to see the vultures already circling in the air.
You can read the full article at sprottmoney.com here.
This article was originally posted at The Acquirer's Multiple.