Berkshire Hathaway ended 2025 holding $373.3 billion in cash and cash equivalents, peaking at $381.7 billion in Q3 before modest deployment trimmed it slightly.
To put that in perspective, the cash pile has grown from around $100 billion when the bull market began in 2023 to close to $400 billion. This wasn't accidental. Berkshire sold $134 billion in equities in 2024 alone, ending that year with cash that had nearly doubled year over year and actually exceeded the value of its stock portfolio.
If one of the best investors of our time is holding cash, waiting for opportunities, it's prudent to pay attention. Although retired, Buffett is still very much paying attention to the markets. During a recent interview the interviewer pointed out recent market declines and poor performance, Buffett shrugged it off as barely a 5% discount.
This is the key insight. Buffett is essentially saying the market has barely dipped, so real bargains haven't arrived yet. His entire strategy is built on buying fear. My take is that he wants to deploy that mountain of cash when companies are genuinely distressed, prices reflect panic rather than fundamentals, and the risk-reward ratio tilts heavily in his favour.
His track record shows a deep aversion to haste and risk. He has no interest in timing the market's bottom, nor does he chase short term rebounds. Instead, he waits for moments when fear drives prices to levels where the risk-reward equation tilts decisively in his favour.
A 5% pullback simply isn't that moment. Think of it like a department store sale, a 5% discount isn't a sale, it's noise. Buffett is waiting for the 50% off rack, and so am I.
The S&P 500's CAPE ratio, a long term valuation measure, recently hit 39.4, the most expensive valuation since October 2000. The index has only been this expensive about 3% of the time in its 68-year history. In other words, even after recent declines, stocks are still historically expensive.
Financial Disclaimer. This content is general in nature and has been prepared without taking into account your personal objectives, financial situation, or needs. It does not constitute financial product advice under the Corporations Act 2001 (Cth). Before acting on any information contained in this post, you should consider whether it is appropriate for your circumstances and, if necessary, seek independent financial advice. References to specific companies, markets, prediction tools, or investment strategies are for informational and educational purposes only and do not constitute a recommendation to buy, hold, or sell any financial product. Past events and probabilistic frameworks discussed are not reliable indicators of future performance.