Following this year’s Berkshire Hathaway annual meeting, I received a thoughtful email from an MOI member, a fund manager and longtime member, that I think deserves a wider airing. It’s the kind of question many of us are quietly wrestling with right now, and I’d like to share my response here, and then invite the community into a deeper discussion on our live member call on June 24.
The Question
His note, paraphrased: Berkshire is sitting on a record cash pile (about $380 billion at the end of Q1, now closer to $397 billion when you include T-bills), and Berkshire is a net seller of stocks. Is Apple really that overvalued, or is Buffett seeing storm clouds? A panelist with access to Buffett reported that Buffett has expressed concern about a large market drop. At the meeting, Buffett reprised his cathedral-and-casino analogy and said more people are headed to the casino; he called zero-day options “straight-up gambling.”
The member’s worry is historical. Does today rhyme with 1969, when Buffett shut his partnership down, sat for four-plus years, and then watched the market crater roughly 50% over 21 months? Or with 1999, when the Nasdaq jumped ~85% on the year, then collapsed 78% from its March 2000 peak while the S&P fell 56%? Liquidity is sloshing around. A large IPO pipeline may drain it. “I don’t like to make macro calls,” he wrote, “but these things are getting my attention.”
It’s a fair question. Here’s how I’m thinking about it.
Yes, the Market Is Richly Valued. The Indicators Aren’t Subtle.
I’ve believed the market has been quite richly valued for some time, and the headline gauges agree.
The Buffett indicator (total US stock market capitalization to GDP) sits at roughly 232% as of May 8, 2026, the highest month-end reading on record. Buffett himself once said 75–90% was reasonable; anything over 120% suggests overvaluation. We are nearly double that ceiling. [source]
The Shiller CAPE is currently in the 39–41x range, depending on the data provider. The long-run average is around 17x. The all-time high was 44.2x at the dot-com peak. [source, source]
Concentration at the top of the S&P 500 is unprecedented. The top ten companies now command roughly 36–40% of the index. The 30-year average is closer to 25%, with prior cycles bottoming near 17%. [source, source]
From that standpoint, I’d probably be holding a lot of cash right now, were it not for one large complication.
The Currency-Debasement Problem
The stock market is quoted in nominal terms. When you short, or sit in cash, in an era where the dollar is being debased and where CPI is likely understating inflation in the real categories consumers actually face, time is not on your side. The market in nominal terms could be meaningfully higher five or ten years from now simply because the unit of measurement itself is shrinking. That’s a tricky call.
I do believe we’re going to see a lot of volatility from here. A 50% drawdown is something I would not rule out. But if you just hold cash at a low yield, you really have to stay in very short-duration instruments, because you do not want to go out on the curve given what’s happening with inflation. You are then holding cash that’s yielding less than true inflation. Think about your own cost of living. It isn’t going up at 3% a year. In my own case, I see high-single-digit increases across the categories that matter. Across technology and digital goods you can argue we’re getting deflation, and I’d agree, but we cannot live on technology alone. The things we actually have to buy are getting more expensive, and that’s being felt most acutely by consumers on the lower end.
So the question isn’t really “Cash or stocks?” It’s: where in the equity market are you being paid to take risk?
Where I Am Actually Deploying Capital
I am finding value in areas that are inflation-protected and neglected (or even hated) by investors at the moment.
