#MarketConditions #marketCrush Why Warren Buffett's record $189 billion cash pile isn't the market-crash signal some say it is
Everybody gets exercised, they go hyperbolic about it, but it's not that big of a number.
The implication, according to these commentators, is that the stock market is likely to soon suffer a massive decline because Buffett doesn't see any value in investing his firm's massive cash pile at the current sky-high valuations.
In fact, that couldn't be further from the truth, according to Chris, fund manager of Semper Augustus, which manages about $550 million in assets and counts Berkshire Hathaway as its largest position.
In an interview with Business Insider last month, explained that there's a lot more nuance to Berkshire Hathaway's mountain of cash, and it doesn't reflect the idea that Buffett is bearish on the stock market or that a stock market crash is imminent.Putting Berkshire's cash pile into perspective
Instead of measuring Berkshire Hathaway's cash position on an absolute basis, investors are better off measuring the cash pile as a percentage of Berkshire's total assets.
And at 17.5%, Berkshire Hathaway's current cash position is about in-line with its long-term average when measured against the firm's total assets. Berkshire Hathaway has kept cash on its balance sheet at an average of 13% of assets since 1997.
Another way to look at Berkshire Hathaway's cash position is to measure it against the firm's market valuation, which paints a similar picture. Berkshire Hathaway's $189 billion cash is actually at a pretty normalized level, and well below its peak of nearly 40% in 2004. At the time, the S&P 500 was trading near record highs, Apple was the biggest company in the world, and Berkshire Hathaway's absolute cash pile was at a record. None of those factors — all of which are present today — stopped Buffett from making one of the best investments in Berkshire Hathaway's history.
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