Does Warren Buffett Know Something That We Don’t?
November 12th, 2024Via: Wall Street Journal:
When the world’s most-followed investor doesn’t feel comfortable investing, should the rest of us be worried?
Warren Buffett, who has quipped that his favorite holding period for a stock is “forever,” continues to have substantial money at work in American companies. But he has never taken this much off the table either—a whopping $325 billion in cash and equivalents, mostly in the form of Treasury bills.
…
Then there is the even simpler “Buffett Indicator,” which the Oracle of Omaha once called “probably the best single measure of where valuations stand at any given moment.” There are variants on the theme, but it is basically a ratio of all listed stocks to the size of the U.S. economy. Taking the Wilshire 5000 Index as a proxy it is now around 200%, which would leave it more stretched than at the peak of the tech bubble.
With T-bills now yielding more than the prospective return on stocks, it might seem that Buffett has taken as many chips off of the table as possible since there is no upside in risky stocks.
That $325 billion amounts to 32% of Berkshire-Hathaway’s total value, so he is still 68% invested in equities, as of right now.
I wonder how much lower consumer items would be priced if companies didn’t have to pay out dividends in order to keep investment coming in? Or does investment keep companies operating as much as income from sales does?