Warren Buffet is Never Wrong.

Warren Buffett's cash pile just hit another all-time high reaching a record $325 billion so today Berkshire Hathaway Warren Buffett's holding company is storing $325 billion worth of cash on the sidelines for a company whose sole purpose is to be allocating Capital to stocks this is a concerningly high allocation to cash and many interpret this as Warren Buffett's way of preparing for a significant market decline that somehow Warren Buffett is aware of a large economic downturn that's on the horizon and that he's hoarding as much cash as possible in preparation for it don't miss our Cyber

Monday discount by the way there's only a few hours left to take advantage of it the next time we're doing a discount like this will be a year from now you can access our entire strategy along with all of the buy and sell alerts we send out to our clients you can see all of our closed trades on our homepage if you're interested don't miss this deal over the last 30 years Burkshire Hathaway has returned about 2100% while the S&P 500 Index has only returned about 800% so Warren Buffett's investment decisions have enabled him to

outperform the S&P 500 on a consistent basis over the last three decades something that 85% of professional money managers are not able to do so yes Warren Buffett's decisions are definitely worth paying attention to but Burkshire Hathaway's cash pile has been growing consistently over the years since 2012 his to total cash pile has consistently been making new all-time highs almost every single quarter since there was a brief exception in 2022 when Warren Buffett reinvested part of his Holdings into the stock market but since then he's been resuming his ramp up in cash allocation now part

of the reason for this is that birkshire haway is not at all the same size it was 20 years ago in 1997 birkshire Hathway's total market capitalization was $50 billion today its market cap is 1 trillion do so we can't just look at the total cash allocation to understand what Warren Buffett is doing we need to look at his cash allocation relative to the size of all of Burkshire Hathaway's Holdings in percentage terms and today that cash allocation stands at about 30% beral Hathaway's total cash Holdings represent about 30% of its total portfolio and we

can see how his cash allocation has evolved over time going back to the 1990s brooksher hathway has indeed never held this much cash relative to the value of their total assets so in other words we've never seen Warren Buffett be invested in the stock market to such a small extent as today which effectively doesn't suggest he believes the stock market looks particularly attractive today but does this mean that he is preparing for some kind of Black Swan event or that he has some foresight into the next recession well the last time that Warren Buffett had

a particularly elevated allocation to cash was between 2004 and 2007 a 3-year period where where his cash allocation stayed quite consistently above 20% soon after the 2008 financial crisis occurred and that's the moment where Warren Buffett finally began to reduce his allocation to cash again and reinvested his Holdings into stocks once the crisis had passed many people point to this episode as a sign that Warren Buffett knew something that others didn't about the US economy but when we look at this episode more closely we see that it's very unlikely this was the case his maximum

cash allocation was reached in December of 2004 three full years before the onset of the financial crisis and as you can also see Warren Buffett was already reducing his cash allocation in 2005 and 2006 before the 2008 recession began this really doesn't make it look like he knew anything about the future of the US economy in fact Warren Buffett has never pretended that he had any foresight into economic Trends in fact he's just simply not a fan of Economics as a profession I can't recall ever us making an acquisition or turning down one based on

macro factors so if he doesn't believe in timing the economy or Market how come he is building so much cash today well if you've read Warren Buffett's Holy Grail investing book The intelligent investor you'll know that Buffett's current cash allocation actually makes a lot of sense and it doesn't at all revolve around predicting what the market is going to do next it does revolve around having more exposure to the stock market when it is cheap and having less exposure to the stock market when it is too expensive today the US Stock Market is expensive to

say the least the S&P 500p ratio which is a metric that Warren Buffett does pay close attention to is currently hovering at levels that have only been seen briefly in 2021 and more importantly in 1999 right here so making the stock market today about as expensive as it's ever been over the last 40 years but it's not just the S&P 5 00 as a whole that's expensive today pretty much every sector across the economy is at historically expensive levels this is a chart of the PE ratio of financial stocks or banking stocks that are again

about as expensive as they've ever been the same thing for industrial stocks and for material stocks that have only been this expensive a handful of times over the last 30 years so almost the entire US Stock Market is expensive today Warren Buffett's philosophy is to buy great businesses at cheap prices so with today's market pricing across pretty much every sector of the economy he's probably having a difficult time finding interesting opportunities on the other hand the yield that you get for holding cash is hovering at around the highest levels of the last 30 years making

it an ideal investment for cautious investors in today's expensive Market in fact this is also an integral part of the intelligent investors philosophy when the yield that you can expect from cash is higher than the yield that you can expect from holding stocks this book suggests that investors should significantly decrease their allocation to stocks and increase their allocation to cash instead and today that's exactly the situation that we are in this is a chart showing us the spread between the S&P 500's earnings yield and the yield that you get on cash and today it's hovering

at some pretty negative levels we've only really seen this happen eight times over the course of the last 60 years and these are the episodes that you see marked here and what is fascinating is that when we look at what these moments correspond to on a chart of the US Stock Market we see that most of these have corresponded almost perfectly to a significant Peak on the S&P 500 and that includes the peak right before the 1987 Black Monday crash this is simply because a high cash yield versus a stock market yield means that investors

are less likely to allocate Capital to the stock market and more likely to store away cash and save up and so this naturally leaves the market more vulnerable to seeing a large drop so how come we haven't seen a peak in the market yet despite this spread being negative for the entirety of 2024 well that's where we once again come across some similarities between today and the late 1990s right here you had a similar combination of an expensive stock market despite a very attractive yield on cash and this environment lasted for multiple years it's only

until the 2001 recession happened that the stock market was brought back down to reality and this set off about a decade of underperformance in US Stocks so a long-term investor who doesn't claim to be able to know what the economy is going to do like Warren Buffett is going to be building cash in this environment regardless of whether a recession is closed by or not but when a decline in the market eventually does come he'll be deploying that cash back into the market we don't have quite the same strategy at Bravo's research we've been riding

this bull market throughout the entirety of 2024 with many many many different trades most of the trades that we initiate on our website we keep for about 1 to 3 months at most so we don't really need a very long-term approach to markets what we care about is whether stocks are trending higher today and the reality is that is still the case but the moment where our indicators are suggesting that the uptrend is beginning to break down we'll be going from net long to net short on stocks if you want to follow our strategy step

by step and get access to all of our trades use the Black Friday discount that we're doing today and get yourself a subscription to our service