Hey all,
I’ve been thinking reading a lot on Warren Buffett lately to get some good wisdom as we are near the peak of the market, and who better to learn from than the GOAT of investing himself.
I care about the same basic things you do: keeping our family secure, making money work for us instead of against us, finding our edges and highest risk to rewards opportunities, and avoiding panic when the market gets noisy. When someone like Warren Buffett does something unusual — like building the biggest cash pile he’s ever had — it’s not a secret code but it’s a useful signal. It tells us about prices, opportunities, and risk in the economy. I’ll explain what Buffett did, why he might have done it, how it ties into big-picture cycles (including the 18.6-year real estate rhythm), and how you can turn that into simple actions you can actually use.
WHAT DID BUFFETT DO AND WHY IS IT BIG?
Last year, Warren Buffett and Berkshire Hathaway have built an enormous cash pile: about $347 billion. That cash is roughly 30% of Berkshire’s assets — the largest share on record. Buffett’s cash levels have spiked before big problems: around 2000 (dotcom), 2006–2008 (housing and financial crisis), and 2021–2022 (market top and correction).
Buffett says he is not trying to predict recessions. He looks for great businesses at reasonable prices, and if he can’t find them, he holds cash.
Cash is not glamorous, but it’s power. When prices fall, cash lets you buy bargains.
And what Warren Buffett is doing is reflective of today’s valuations. Right now, the market looks expensive by many measures, including his own favorite — the Buffett Indicator (total market cap divided by GDP)
Source: Buffettindicator.net
Today the Buffett Indicator is around 200%: the stock market’s total value is about twice US GDP.
Historically, that’s very high — the last similar highs were around the dotcom peak. High values mean future returns may be lower and big corrections are more likely.
But remember: High valuations can stay high longer than we expect. They are not a timing tool. They’re a caution light, not a countdown clock.
VALUE INVESTING PRINCIPLES — BACK TO BASICS
I believe in simple ideas that work over time, because they protect you when people panic and they reward patience.
Principles I follow:
Buy businesses, not tickers: Look for companies that earn money year after year and have an advantage that keeps competitors away — a “moat.”
Buy at a discount: Don’t pay too much. A good business at a high price can be a bad investment.
Margin of safety: Leave room between what you pay and what the business is worth so unexpected problems don’t wipe you out.
Think long term: The market is noisy day-to-day, but quality compounds over years.
Buffett and Benjamin Graham taught:
Focus on intrinsic value: estimate how much the business will earn in the future and pay significantly less than that estimate.
Be fearful when others are greedy, and greedy when others are fearful.
Don’t overtrade. Patience beats excitement.
HOW BUFFETT’S CASH FITS THESE PRINCIPLES
When Buffett holds cash, he isn’t saying the economy will collapse next week. He’s saying businesses are expensive relative to what they earn, so it’s better to wait.
Cash also gives him optionality. If prices fall, he can buy wonderful businesses cheaply. Historically, high cash has helped Berkshire avoid big losses and profit much later.
