Berkshire Hathaway’s massive cash coffer has many wondering if a stock market crash is on the way. Buffett’s isn’t called “the Oracle of Omaha” for nothing; he successfully prepared for the last market crash back in 2008 by storing up excess cash which he later lent out to struggling firms like Goldman Sachs (NYSE:GS) and General Electric (NYSE:GE).
Buffett’s famed patience and eye for a bargain is likely at play here; he often measures the health of the market by looking at its capitalization compared to GDP. Just before the dot-com bubble burst the so-called “Buffett indicator” came in at 146% and in 2007 before the financial crisis hit the figure was 135%. Right now that ratio sits just above 140%.
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Its no coincidence that Buffet is now overweight CASH because his Buffet indicator is showing we're very very close to the top if we are not there yet.
Discipline is key as we can be very tempted due to FOMO.
