No. of Recommendations: 23
I believe we’re in the neighborhood of cash/overall assets of the period about 20 years ago. Berkshire had a ballpark market cap of $140 Billion with $40 Billion in cash. So what’s happening? Buffett was positioned well back then for what was coming with the derivatives “weapons of mass destruction”. He KNEW it was coming. The date was unknown.
He profited handsomely when doomsday struck with several super favorable preferred issuances and a few other buys, but he’s said he regrets not “going even more all in”. Dare I say the fragility of the entire system EVEN scared Buffett then…I believe that. Only time in his entire life imo.
Well, here with are with a global system perhaps even more fragile than that period (so says Nassim Taleb of AntiFragile and Black Swan fame). Most money managers under age 40, in Taleb’s words, have “only known 15 years of Disneyland”.
People under 60 have only known a 40+ year straight line Bond Bull market. So Asset allocation hasn’t really mattered to folks under age 60. Bonds have won. Stocks won even more. A 40 year slide from 18% rates to Free money to 4% or so lifted ALL boats.
Now we’re in a massive global leverage/debt bubble, a world where assets have been confiscated by governments, a world with massive mistrust of people who make laws.
Buffett knows something will break in this fragile environment. Those who think who wins next week fixes this—are also in Disneyland..or just pumping their guy.
The big “break” could be in 5 years—it could be next month.
It will cause major dislocations that are likely manageable (my take) but, with a generation of investors with zero experience and NOW SIGNIFICANTLY an internet echo chamber of panic— 25% declines will become 45% declines or perhaps far more —just on sentiment. Buffett and Berkshire are prepared to act. And more aggressively than 2009/2010.
2004-2006 also felt like the wrong time to amass cash, but better to be too early than wrong.
