Omaha is currently experiencing an odd silence. The kind that permeates a room when a significant person declines to speak, not the kind that results from a sluggish news cycle. Sitting on about $180 billion in cash, 95-year-old Warren Buffett continues to walk the halls of Berkshire Hathaway’s modest Kiewit Plaza headquarters. Additionally, he isn’t moving it for reasons he hasn’t fully explained.
Eyebrows are raised just by the number. It exceeds the market capitalization of several Fortune 500 companies, the GDP of the majority of nations, and the amount that most hedge funds could hope to reach in ten years. Nevertheless, Buffett has only provided fragments in his recent letters and infrequent public appearances. This is a line. That’s a baseball metaphor. He stated to shareholders that he would rather “swing at pitches he likes,” which sounds nice until you consider that he hasn’t made any significant swings in nearly two years.
He may be preparing for a decline, according to some analysts. Some think he just can’t find anything worth purchasing at the current prices. There is weight to both interpretations, but neither seems comprehensive. After seven decades of investing, Buffett may be reading the market with the same intuition that led him to sell airline stocks just weeks before a pandemic devastated the sector. This could be a messier reality.
You can practically feel the tension beneath the courteous applause when you walk into Berkshire’s annual meeting in May. At microphones, shareholders form a line. They politely inquire about succession, energy holdings, and insurance reserves. The question that has been hanging over the entire day is then asked, usually near the end. Why so much money? Buffett grinned, spoke softly, and continued. Charlie Munger used to deal with these situations more sharply before he passed away. Greg Abel is now the only person standing next to him, nodding cautiously and uttering few words.
Naturally, Berkshire’s size plays a role in the narrative. You can’t simply purchase a mid-cap stock and call it a day when you’re in charge of a company valued at more than $1 trillion. The universe of companies big enough, affordable enough, and comprehensible enough to comply with Buffett’s regulations has drastically shrunk, and he must allocate capital in chunks that affect markets. He seems to have outgrown his own playbook as you watch this play out.
However, the silence cannot be explained by size. Even when his choices appeared strange, Buffett has always been generous with his reasoning. Something else is suggested by the fact that he refuses to provide further details at this time and allows the money pile to increase without any context. Perhaps exercise caution. Perhaps dissatisfaction with the available options. Perhaps a warning he doesn’t want to say aloud because he is still aware of the consequences of his words.
The similarities to 1969, when Buffett ended his partnership because he couldn’t find value anywhere, are difficult to ignore. He gave the money back. Soon after, the market crashed. No one knows yet whether history is simply echoing or rhyming. It’s evident that the man who made a name for himself by making purchases is now well-known for not doing so.