Markets on Edge: Is Warren Buffett Predicting a Major Crash?
Investors eagerly awaited the Oracle of Omaha’s annual letter, hoping for insights into the next moves of his legendary fund.
However, while clear signals were scarce, a veteran Berkshire Hathaway observer uncovered a significant takeaway hidden between the lines.
For decades, Warren Buffett’s annual letter to Berkshire Hathaway investors has been essential reading—not just on Wall Street but across global markets. Everyone searches for clues and data points, and this year’s letter was particularly anticipated.
As Buffett marks 60 years at the helm, investors were looking for guidance on the fund’s post-Buffett era, potential investment opportunities, stock buybacks, dividends, cash reserves, and the role of portfolio managers.
The Cash Pile and Market Opportunities
Analysts, in their search for a “holy grail,” focused on the fund’s massive cash pile at the close of the latest fiscal year. However, Buffett remained tight-lipped about his intentions.
One of Berkshire’s longtime followers, Bill Smead—founder and chairman of Smead Capital Management—offered his interpretation of Buffett’s message.
While Buffett didn’t reveal his hand, Smead believes he is waiting for a major stock market decline before deploying Berkshire’s enormous and growing cash reserves. “Buffett provided little in terms of direct guidance, but he did indicate that he sees ‘nothing compelling’ in terms of investment opportunities,” Smead explained in an interview. “Berkshire continues to build its cash position, and Buffett is prepared for ‘wild swings’ in stock prices.”
“Read between the lines… He’s not interested in buying until we see a significant drop,” Smead added. Having closely followed Buffett and Berkshire Hathaway for four decades, he suggests that Buffett isn’t just bracing for a standard market correction. Instead, he may be anticipating a bear market akin to the dot-com crash of 2000—when the S&P 500 plummeted 49.1%—or the downturns of 2007-2009 and the late 1960s to early 1970s.
Berkshire Would Rather Own Businesses Than Hold Cash
Buffett acknowledged that analysts have paid close attention to Berkshire’s mounting cash reserves, which surged past $300 billion by the end of fiscal 2024. However, he emphasized that the company’s preference remains owning businesses—whether through majority control or by investing in shares of large corporations—over holding cash.
“Despite what some analysts consider an extraordinary cash position, the vast majority of our money remains in equities. That preference will not change,” Buffett wrote. At the same time, Berkshire was a net seller of $134 billion in stocks in 2024, with Buffett previously lamenting the difficulty of finding attractive investment opportunities.
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