Why is Warren Buffett sitting on $382 Billion of cash?

6 Nov 2025 , 02:24 PM

BERKSHIRE HATHAWAY CASH STASH AT 135% OF ITS PORTFOLIO

You often hear of fund managers holding cash and cash equivalents that is about 10% to 20% of their portfolios. But it is something really surprising when the cash stash of a fund is nearly 135% of the portfolio value. It is all the more surprising because it is happening with the portfolio of one of the greatest equity investors of all time, Warren Buffett. His flagship investment company, Berkshire Hathaway has an equity portfolio valued at $283 Billion as of September 2025, and a cash stash of $382 Billion on that date.

What exactly does this indicate? For the third year in a row, Warren Buffett has been a net seller. The last two occasions when Warren Buffett bought equities aggressively was in the aftermath of the COVID pandemic in 2020 and later after the new age stocks corrected in early 2022. However, since 2022, Buffett has been a net seller in stocks, with sales far exceeding the purchases. That is evident from the fact that between 2020 and 2025, the cash stash of Berkshire Hathaway has grown from $142 Billion to $382 Billion.

IS IT MORE ABOUT THE BUFFETT RATIO?

Over the years, Warren Buffet has always been wary of markets when the Buffett ratio has diverged substantially from the historic averages. The Buffett ratio is a macro view and looks at the market cap as a ratio of the GDP. If you look at the US markets, the GDP stands at around $30.2 Trillion while the market cap stands at $65.5 Trillion. That gives us a Buffett ratio of around 217%. How does this compare with other economies?

If you look at some of the major markets globally; then the Buffett Ratio of UK stands at 94%, while Germany is about 60%. Japan and South Korea are relatively higher at 176% and 121%; but even they are well below the Buffett Ratio of the US. India and China have a Buffett ratio of 129% and 67% respectively. Among the large economies, the US is clearly one of the most expensive markets. That is exactly what is making Warren Buffett wary. Buffett continues to believe “Never bet against America”; but despite his unbridled optimism about US markets, he finds the valuations too expensive for comfort.

CAPE RATIO IS ALSO GIVING WARNING SIGNS FOR BUFFETT

The cyclically adjusted Price to Earnings (CAPE) ratio is one more ratio that rarely gets it wrong in terms of giving a macro signal. The CAPE ratio of the US markets currently stands at 39.5X. That is higher than the CAPE ratio of 39X seen at the peak of the dotcom bubble in 1999 and 2000. The level of 39X on the CAPE ratio is relevant because this level has been exceeded in only 22 months out of the last 826 months. That means; there is a 97% to 98% probability that the markets can correct sharply from these levels. This is over a 70-year period, so the conclusions are likely to be closer to the truth.

What has been the experience in the past when the CAPE ratio has exceeded 39X? The returns have been around -4% in the next 1 year, -20% in the next 2 years, and -30% in the next 3 years. That is what Buffett is worried about and it is evident in the massive cash holdings of Berkshire Hathaway. Remember $382 Billion is a lot of money. It is about 45% of the total equity AUM of FPIs in India and about 7.5% of India’s market cap. That certainly is a lot of money sitting with just one fund in hard cash. And, it is a valuation warning!