Be Ready

When in Doubt, Follow Buffett’s Lead

I am not generally a proponent of homing in on a favorite investor and simply walking in lockstep.

But as I’ve pointed out recently here, and again here, US equities are looking pricey and there seem to be more signs every week that markets might be getting too hot.

This weekend a senior analyst-advisor at the Motley Fool issued a short warning, and I’m paying attention:

When in Doubt, Follow Buffett’s Lead

October 5, 2025, by Buck Hartzell

There are some clear warning signs that we might be late in a bull market cycle. Recently margin loans crossed the $1 trillion mark for the very first time. American companies are on pace to buy back a record $1.2 trillion of their own stock. These buybacks are happening when the P/E of the S&P 500 is over 30, which is well above historical averages. Meanwhile, the ultimate contrarian, Warren Buffett is sitting on a record cash balance of nearly $350 billion.

I think investors should follow Warren Buffett’s lead and build their cash balances. Typically Berkshire holds about 15% to 17% of its total assets in cash. Today, Berkshire has around 30% in cash. I predict that those large cap tech stocks might be in for a rough few years of underwhelming returns.

If we see a correction (generally a market price ‘adjustment’ of -10 to -20%), it could drag on. There are many seemingly extraneous factors here that may not be directly related to corporate earnings or investor expectations. It could get weird! Be ready, people.