Berkshire clearly thinks the risks are on the downside and they act on this thesis. Whether it will prove genious risk management or failure to appreciate the "new normal" will transpire sooner or later.
Buffett had a long term policy to compare discounted cash flow type valuations for stocks bonds and businesses. For example see his 1992 letter https://www.berkshirehathaway.com/letters/1992.html and ^F for "Burr".
So I guess it's more that he think stocks are expensive relative to bonds than a prediction of a crash.
>... the cash position I think, when I look at the alternative of what's available in the equity markets and I look at the composition of what's going on in the world we find it quite attractive.
Well some of the more discerning people have been waiting for the shoe to drop in sheltered asset classes since the major red flags during the pandemic started occurring.
A large number of structural changes were made that fundamentally make the entire monetary system unsound, and these were largely silent changes (Basel III modified, no longer fractional banking reserve/overunity).
I've still got my copies of Benjamin Graham's Intelligent Investor, and Security Analysis by Graham Dodd sitting on my shelf, but nearly everything in those two books is no longer relevant with these changes, I'll still keep them as historical reference though their utility is now gone.
Other changes include preferential treatment of assets/synthetic shares/contracts during clearing for certain parties in the market (paper printing via commodities contracts/options).
Banking in general is in a deflationary concentration super-cycle. New banks can't enter the market, and the liabilities exceed assets for GSIBs/SIFIs. As time progresses, each will collapse chaotically, and when that bubble bursts it takes the markets with it into full deflation.
The petrodollar agreement being abandoned by the Saudi's is what is driving this to occur more rapidly. All the money printed and held by countries abroad is now returning to compete for the same goods. The demand for that pool of currency is much lower now.
The dynamics/indicators are flip-flopping between hyper-inflation Weimar, and great depression (for a couple months now).
This potentially might be a new big debt crises archetype. It appears that inflationary and deflationary pressures are spiking chaotically, labor statistics are being constantly revised (horribly inaccurate), and since action is based on lagging indicators eventually hysteresis results in a misstep hard landing.
You have a chaotic and narrowing safe path that eventually ends, which some argue describes the economic calculation problem.
Ponzi's always exact an unreasonable price. If you are interested in these archetypes, Ray Dalio's Bridgewater Report on Big Debt Crises is useful, though in my opinion he neglects a basic fact that reserve currencies can collapse without a replacement being on-hand and so a beautiful deleveraging is a matter of chance.
The collapse can be slow though, and evidenced by the shrinking number of producers in the market (those not backed by preferential loans/printing press).
Adam Smith's requirement; producers must make a profit in purchasing power or they leave the market. No real market can exist when entities cooperate, and are sustained by a printing press.
I don't think foreign currency reserves of a country that are being actively used are an adequate metric for comparison. The cash tech sits on would be more appropriate. Or even GDP of a country. But foreign exchange reserves of a country can be influenced by a number of factors that are not relevant to this article. Specially since you didn't even mention the country name or it's gdp, it doesn't give us an idea of the scale of the foreign currency reserves. For all I know, the us might as well have that amount of foreign currency because it's mostly using usd anyways. Maybe you could elaborate a little bit, why the scale of foreign currency reserves of a given country can be relevant?
Well, if he told the management of Apple and the Bank of America what to do, I didn't notice. Which is quite plausible, I might very well not. But did you?
It also refers to investing where you don't try to exercise powers, despite having the ability. And if you invest a ten-digit sum, you do have the ability. Money talks.
