Buffett spends a lot of cash, others are greedy and I fear?

Warren Buffett has a famous saying: "When others are greedy, I am afraid; when others are afraid, I am greedy."

There is no doubt that this is an era of greed. The three major U.S. stock indexes continue to set new historical highs. Investors are passionate. The highs of the stock market are overwhelmed by investors' great enthusiasm. Everyone is making money, and even buying stocks with their eyes closed can lie down and win.

Irrational prosperity?

The recent earnings season shows that the overall profitability of US companies is very strong, and we will not list them here. The rise in US stocks is supported by strong earnings reports, and it is not unreasonable. However, some recent signs also indicate that blind optimism is fermenting.

For example, an absurd scene performed by a cryptocurrency called squid. A "Three Noes" cryptocurrency that relied on the popularity of the online drama "Squid Game", the price soared more than 2,300 times in a week, reaching a maximum of 2,861.80 US dollars, and then fell to 0.0008 US dollars in just 5 minutes, which was almost cleared.

For another example, Tesla, which is highly sought after by investors, has increased its market value by hundreds of billions of dollars in a short period of time, simply because Hertz "may" sign a purchase agreement of one hundred thousand taels of cars with it.

Of course, these events have often occurred in history, which is not new, but it is undeniable that the enthusiasm of investors is really unprecedented.

However, when most people are intoxicated in the US stock market's surging Changhong bull market, there are also a small number of people who "everyone is drunk and I am alone" seem very alternative and even ridiculous.

Buffett hoards huge amounts of cash

Buffett’s wealth mainly comes from Berkshire Hathaway, which he controls. It has invested in outstanding global companies. It has experienced several crises and has never seen an annual loss. The snowball is getting bigger and bigger, and it has achieved amazing wealth accumulation. The total assets have reached $873.7 billion.

Last Saturday, Berkshire Hathaway (NYSE:BRKa) announced its latest earnings report. The financial report shows that Berkshire Hathaway’s operating profit in the third quarter was US$6.47 billion, an increase of 18% over the same period last year; net profit was US$10.34 billion, or US$6882 per share, a year-on-year decrease of 66%.

In addition, most notably, as of September 30, Berkshire Hathaway’s cash reserves reached a record of 149.2 billion U.S. dollars, higher than the 144.1 billion U.S. dollars at the end of the second quarter and 145.4 billion U.S. dollars at the end of the first quarter. Dollar.

It is not difficult to understand that its net profit has fallen by 66%, because a large amount of cash has not been invested, which has missed this wave of US stocks.

Buffett has not made any remarks about being bearish on the U.S. stock market. We don't know whether he "stepped short" this time or because the stocks on the market are too expensive, and there is no stock to buy, so he has no choice but to repurchase his own stock.

Berkshire Hathaway repurchased $7.6 billion in stocks in the third quarter, surpassing a total of $6 billion in stock repurchases in the second quarter, and was the third highest share repurchase since Buffett changed his investment strategy in 2018 level.

Is the valuation of U.S. stocks too high?

The valuations of the three major U.S. stock indexes are already in a relatively high position. In particular, the cyclically adjusted P/E ratio of the US Standard & Poor's 500 Index is 38 times. This is very close to the historical record of 44 times in 2000. And that was before the dot-com bubble burst and the stock market (especially technology stocks) plummeted.

Some investment banks on Wall Street have also begun to talk about a bubble in U.S. stocks.

Bank of America strategists said that the era of abundant liquidity is coming to an end, and US stocks will not stay at record highs for too long.

Morgan Stanley expects a sharp consolidation with a decline of up to 20%.

Despirito, BlackRock's chief investment officer in the United States, said, "I don't think this situation can last for a long time. Now we are entering a new stage of more normalized returns."

Bernstein, a well-known market strategist and investor, said that at least for now, most areas of the US stock market and virtual currency market have now bubbled.

However, after all, there are still a small number of unfavorable U.S. stocks who believe that U.S. stocks are overvalued, and more investment banks believe that U.S. stocks will usher in one of the best Christmas seasons ever.