HomeBusinessWarren Buffett is building the Noah's Ark of rainy day funds. This...

Warren Buffett is building the Noah’s Ark of rainy day funds. This is why he has collected over $300 billion.

Warren Buffett, the CEO of Berkshire Hathaway, has built up a record pile of cash.REUTERS/Rick Wilking
  • Warren Buffett has grown Berkshire Hathaway’s cash pile to more than $300 billion – an all-time high.

  • The famed investor has halted share buybacks and scaled back major holdings such as Apple and Bank of America.

  • The 94-year-old Buffett is facing a cheap drought and may be preparing to hand over control of Berkshire.

Warren Buffett has been selling stocks and stockpiling cash at a breakneck pace, fueling speculation about why the world’s top stock picker is pulling his money out of the market.

Berkshire Hathaway roughly tripled its pile of cash, government bonds and other liquid assets to a record $325 billion in the two years to September 30 (or $310 billion after subtracting almost $15 billion in debt for government bond purchases).

The conglomerate’s cash hoard now exceeds Berkshire’s total market value just over a decade ago. It accounted for at least 27% of Berkshire’s $1.15 trillion in assets at the end of the quarter – its largest share in many years.

A major reason for the rising cash pile is the lack of attractive things to buy. Buffett is a value investor who specializes in finding bargains, and they’ve become rare finds in recent years.

“I’ve heard every speculative idea imaginable, from accumulating capital for a doomsday scenario to planning a massive cash dividend,” says Lawrence Cunningham, director of the University of Delaware’s Weinberg Center on Corporate Governance and author of several books on Buffett and Berkshire, told Business Insider about the reason for the pile of money in Berkshire.

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“Both seem far-fetched,” he said. “The most likely cause of Berkshire’s cash build-up is the lack of attractive capital deployment opportunities.”

Cunningham said stocks have risen to record highs, private company valuations have risen, Berkshire companies like Geico and See’s Candies can only deploy so much money, and Berkshire’s Class A shares have risen to record levels of approximately $700,000.

The total value of the U.S. stock market reached a record high of $58.13 trillion on Monday, an unprecedented 198.1% of U.S. GDP last quarter, data from Wilshire Indexes showed.

This metric is known as the ‘Buffett Indicator’ because the investor once referred to it as an excellent benchmark for valuations. Buffett said it should have been a “very strong warning sign” when the measure peaked during the dot-com bubble, and that buying shares when it approaches 200% is “playing with fire.”

The elevated level of the Wilshire 5000 makes “this stock market the most overvalued in history – even higher than at the height of the tech bubble in 2001-2002,” Paul Dietrich, chief investment strategist at B. Riley Wealth Management, told BI.

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