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Steve Hanke says Warren Buffett probably can’t find anything worth buying, is building up a pile of cash, and may be preparing for the storm.
“Mr. Buffett has already cherry-picked U.S.-listed companies, and there is little left to whet his appetite,” a Johns Hopkins University applied economics professor told Business Insider.
Buffett reduced Berkshire Hathaway’s Apple stake last quarter, increasing the company’s cash and Treasury bill pile by $21 billion to a record $189 billion. He predicts the money pile will exceed $200 billion by June, nearly doubling its level. Two years ago.
The prominent investor and Berkshire CEO is not only looking for cheap, high-quality stocks in the market, but also wants to make “elephant-sized acquisitions,” but years of hunting have not paid off. do not have.
“We’re not seeing anything meaningful, anything that moves the needle,” Buffett said at the company’s annual meeting this month, highlighting the lack of attractive purchases.
Mr. Hanke is a former economic adviser to President Ronald Reagan and served as president of Toronto Trust Argentina in 1995, when it was the world’s top market mutual fund.
He pointed out that if Buffett wanted to buy 5% of the stock in a publicly traded company and invest at least $10 billion, it would be limited to a small number of businesses worth more than $200 billion in which Buffett is not yet an investor. .
Hanke also emphasized that Buffett is looking to bet on companies that are attractively valued and almost certain to grow their earnings over the next five years.
“My guess is that no company will fit Mr. Buffett’s size and smell test,” he said.
“Cash is king”
Hanke added that Buffett is also unlikely to invest in the S&P 500 because the benchmark stock index is incredibly expensive by historical standards. The S&P 500’s Shiller P/E has been in the top 95% of monthly measurements since 1881.
“It looks like a risky bet, especially since Mr. Buffett seems to see economic and geopolitical storm clouds looming on the horizon,” he said.
“So cash is king, and given how much Mr. Buffett is paid to hold it, the king never goes hungry.”
At a shareholder meeting this month, Buffett emphasized the appeal of cash at a time when stocks are expensive, global economic growth is slowing and conflicts are escalating overseas.
“If you look at the alternatives to what’s available in the stock market and look at the picture of what’s going on in the world, you see that it’s very attractive,” he said.
a worrying trend
Berkshire’s liquid assets are certainly bring greater profits Starting in 2022, interest rates have been higher than before, thanks to the Federal Reserve’s rate hikes to stem inflation.
Buffett’s company earned $15.6 billion in interest, dividends and other investment income last year, more than double the $7.5 billion in 2021.
Hanke is one of several commentators to point out that Buffett’s bulging cash holdings are a notable and potentially troubling trend for investors.
However, it’s worth noting that the U.S. stock market and economy are rebelling. Crash calls and recession warnings The last few years.
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