- stock market returns were abnormally high for the past 15 years
- Berkshire is sitting on a huge pile of cash, ready to invest
This is a very similar scenario to what people were saying in 1999 - Buffett is done etc. I highly recommend reading his biography - "The Snowball" and especially the preface when they describe the speech he gave in 1999, about stock market levels and valuations. Mind blowing, knowing what happened later.
The beauty of financial 'journalism'. They choose arbitrary points of comparison to fit whatever they are trying to 'sell'. Wonder why 20 years and not the past 21 years or 25 years or 30 years?
> - stock market returns were abnormally high for the past 15 years
Which was expected since we had QE and low rates for much of the past 15 years.
> Mind blowing, knowing what happened later.
Sure. He also said everyone should buy when the markets were collapsing in 2008 ( aka when there is blood on the streets ). And that was great advice as well. But Buffet's problem is that he discounts tech. He famously chose not to invest in microsoft because he didn't understand software and technology.
You either beat the market or you don’t. It’s relative. He could lose money but if he loses less than the broad market, he outperformed.
And sitting on a pile of cash is a negative, a lost opportunity.
That said 20 years is arbitrary, however it’s not an insignificant period of time. It’s two decades!
But my final point is that Buffet isn’t an investor in the way regular people are. He doesn’t passively put his money into companies. He often buys controlling stakes in a company - either taking them over entirely or getting a board set where he can change the way the company operates.
Comparing BH return with your average Joe is like comparing a casual gambler with one who does it professionally and often find edges nobody else has.
More here: https://monevator.com/warren-buffett-passive-investing
Also, I know some "celebrity traders" in Poland who advertise their IKE (think of it like a Polish version of Roth IRA account), where out of 170,000 PLN cash savings over 10-12 years they can get 1,800,000 PLN (for the average return of 37% per year) - how's that for beating the market?
Find another country which will have the same growth for the next 20 years, invest there, and you'll see similar results.
Following is the percentage of periods that earned a positive return in the stock market, for different holding durations:
1 day: 52% 3 months: 61% 1 year: 68% 3 years: 75% 5 years: 80% 10 years: 88% 20 years: 100%
Pandemic market distortion maybe ? Warren and Charlie just getting long in the tooth and slowing down ? Are the up-and-coming managers at BH (are there any ?) calling more of the shots and getting it wrong ?
In its early years, its cash pile was obviously much more modest, and it was easier to find opportunities which would fit Buffett's investment criteria while also moving the needle from an ROI standpoint.
But now that cash pile has grown substantially. It's orders of magnitude harder to find investments which move a $100 billion needle, and Buffett is unwilling to lower his standards such that he can find businesses to spend his cash on.
Hence Berkshire has little other choice but to park its un-deployed assets in relatively low-performing but liquid accounts, ready to invest if needed but otherwise not doing much for the bottom line in the meantime.
TL;DR- Berkshire may be a "victim" of its own success.
I know that's essentially what you were saying, I just wanted to clarify it a bit.
That brings you into alignment with the article.
