Buffett’s cash warning has reached critical levels as Berkshire Hathaway holds $344.1 billion in cash and short-term investments right now. This unprecedented Buffett cash warning signals severe market overvaluation, and the legendary investor is choosing to sell stocks rather than buy them. Wall Street sentiment has actually shifted as Buffett’s stock buying strategy has turned entirely defensive, and this represents roughly 28% of Berkshire Hathaway’s total market capitalization at the time of writing.
Buffett Cash Warning Signals Market Overvaluation And Wall Street Sentiment Shift
Record Cash Position Reflects Extreme Caution
The Buffett cash warning became undeniable when Berkshire Hathaway reported its third-quarter results. Over the past two years, the company sold a net $133.2 billion in stocks, building a massive cash hoard that starkly contrasts with the $13 billion it held in 2018. Berkshire has fully shifted from buying to selling stocks, slashing its positions in Apple and Bank of America.
Over the past three decades, Berkshire Hathaway stock has outperformed the S&P 500 by more than 3 to 1, but even with this track record, Buffett is holding back. The cash pile was built primarily through aggressive stock selling rather than just through operating earnings alone.
Buffett stated during the annual meeting:
“We’d love to spend it, but we won’t spend it unless we think we’re doing something that has very little risk and can make us a lot of money.”
This Buffett cash alert shows his perception that it is currently difficult to find good investments in the market since it is overvalued. The S&P 500 is also trading at a forward earnings multiple of around 22 times, which is much high than the historical average of say 15.5 times. Berkshire Hathaway has sold 67.2% of its Apple since late 2023 and has also sold Bank of America by 23% in 2024.
Also Read: [Related Article Title]
Why Buffett Refuses to Deploy Capital
Wall Street sentiment has grown increasingly nervous as Buffett continues accumulating cash. He noted that current tax rates influenced his selling decision, and he stated:
“Current tax rates are very historical by historical standards.”
The legendary investor also explained the challenge of finding suitable opportunities right now:
“There are not many companies that we can be comfortable putting $10 billion, $20 billion, or $30 billion into.”
This Buffett cash warning suggests that Berkshire Hathaway will remain on the sidelines until market overvaluation corrects itself. His stock buying strategy has historically proven prescient before major downturns, and the current $344 billion war chest actually positions him to capitalize when Wall Street sentiment finally shifts toward fear rather than greed. Along with the cash reserves, Berkshire’s operating businesses continue generating steady earnings from insurance operations, BNSF Railway, and some energy holdings.
