The hardest part about investing is the waiting. As Charlie Munger of Berkshire Hathaway said,“The big money is not in the buying and selling but in the waiting. During the month of April, the financial media revealed Berkshire’s asset allocation, and according to the 10-Q documents, since March 2024 liquid assets grew from 153 billion US Dollars to 189 billion US Dollars, representing more than 30% of Berkshire’s portfolio. Financial experts quickly turned to the conclusion, that the Oracle of Omaha is expecting a market crash, and that Warren Buffet has turned exceptionally bearish. The Buffett Indicator, the ratio between the US stock market value and the annualized GDP stands at 204.7% about 2.0 standard deviations above the historical trend line, marking a new record high. According to the statistics laid out, it is obvious that we should take our money and run far away from risky assets. Unfortunately, it is more complicated. First, Warren Buffet is making a lot of money with cash, approximately 2.4 billion dollars per year risk-free. Second, Berkshire Hathaway is facing another issue, which is, that Warren and Charlie preferred to make large bets on a few companies. With over 500 billion US Dollars of assets under management, a highly concentrated portfolio becomes problematic, as a 10% investment equals half of the value of UBS. When Charlie Munger, the vice chairman of Berkshire Hathaway and, in Buffett’s words, the architect of its business philosophy, passed away just before his 100th birthday late last year, it was clear that the world is witnessing the beginning of the end of an era. There is a very high probability that Berkshire’s assets will be managed differently going forward. For the time being, Berkshire’s portfolio will be a 65/35 stock bond portfolio and Warren Buffet can wait. For the rest of the world, performance remains the ultimate pressure cooker for portfolio managers and equity markets remain in pretty good shape. While the US market remains in a corrective pattern, the odds are increasing, that we won’t see a large correction in the next couple of weeks. Valuations remain high, but equity valuations are simply a sentiment indicator, representing investors' willingness to pay for future returns. As the financial community keeps a positive view of the global economy, valuations remain high. While for long-term investors, a buy-and-hold strategy through an equity index may represent from current levels pure insanity, neither valuations nor the Buffet Indicator may be helpful to make investment decisions in a shorter time frame. Maybe valuations rise even further, and the Buffet Indicator will go to even more extreme levels in the next couple of months. As previously mentioned, the technology sector has lost its leadership during the past two months. But as other sectors started to perform well, the overall market remains in good shape. Especially earnings have been the main reason for the market’s resilience which represents a major supportive factor. While Warren can wait, most investors simply can’t.
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