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Be Fearful when others are Greedy and Greedy when others are Fearful

| May 04, 2020

Our title today is one of Warren Buffett’s favorite sayings. Another is ‘you never know who’s swimming naked until the tide goes out.’

We are in the middle of the mother of all low tides right now.

Berkshire Hathaway had their annual shareholders’ meeting over the weekend. As always, there is some good content that comes from the meeting. This one was done virtually, of course – rather than having the typical tens of thousands descend on lovely Omaha. Here are a few of the notable tidbits.

  • Record Cash pile of $137 Billion
  • Repurchased $1.7 Billion of BRK (Berkshire Hathaway) shares
  • No major purchases, because hasn’t seen anything ‘attractive’
  • Sold all shares in airline companies

So, let’s try and put the pieces of the puzzle together. Tons of cash on the balance sheet, sold large positions for large losses in the airlines, his own stock is down nearly 25% from its highs at the beginning of the year (but not enough to buy much more than a rounding error), and he hasn’t seen anything else that looks ‘attractive.’  I think this can all be summed up in one chart. The following chart shows the stock market value compared to the Gross Domestic Product (GDP). Essentially the value of public companies divided by how much the economy produces.


In general, you can classify this valuation technique into five (5) different zones (based on historical valuations).

Throw on top of that 30+ million unemployed at the moment, and many states still shut down (some only beginning to open up in stages), and you have a little bit of uncertainty. State budgets blown up and many needing to borrow money from the Federal Government to pay unemployment benefits.

Needless to say, there are still many questions that need to be answered, so many in fact, that even one of the best investors of all time cannot find anything worth buying right now.

For now, stay healthy and stay safe. Wash your hands often or use hand sanitizer, and limit touching your face, and practice your social distancing.