Warren Buffett’s Record High Cash Position Should Scare The Sh*t Out of You

I was surprised to see a $2.15 million listing near our SF Bay Area home go pending immediately, as the listing itself had minimal updating, and the landscaping had not been touched since the Civil War. I also thought that the bald boomer neighbor who runs sprints in the street and works out in his garage every single day with the doors open and the music blasting, right after he blogs, might discourage buyers too, but apparently not.

I was not TOO surprised, though, for this reason: SF Bay Area buyers are flush with newly created asset wealth. The buyers, for example, might have bought $500,000 of Nvidia stock for $14 per share in 2023, and then noticed the price had risen to $127 — and thought “hmmm, our $500,000 just turned into $4.5 million; let’s peel off $2 million and pay cash for a house — and we’ll still be $2 million more liquid than we were in 2023 AND we’ll have a house…”

We see versions of this all the time (it could just be stock options vesting, too). And if it’s not the actual buyers experiencing this, it is often the parents helping their kids who are buying.

The Buffett Indicator Is at an All-Time High

is a ratio that compares the stock market’s total value against America’s GDP. And that ratio is at an all-time high, AND THEN SOME — at over 200% (the total value of the Wilshire 5000 is over twice the size of America’s GDP). The previous two records were in 2007 when the ratio was over 105%, and in 2000, when the ratio came close to 140%.

In a 2001 interview with Fortune magazine, Warren Buffett referred to the indicator as “probably the best single measure of where valuations stand at any given moment.”

Mr. Buffett’s extraordinary track record is a strong reason to pay attention to Mr. Buffett’s metrics.

Buffett’s Cash Position Is at an All-Time High

There is no better proof of Mr. Buffett’s allegiance to his indicator than his record-high cash position — currently approaching $350 billion. Mr. Buffett clearly thinks the market is overvalued, and he’s sitting on billions in cash so he can swoop in to buy up stocks on the cheap after a correction — like we have seen him do many times before.

“But, Jay, You Wrote About This Last Year…”

I did write about this last year and the market has held up. Mr. Buffett, however, often exits the market too early — like we saw when he exited in 2005, only to see stocks rise for two more years. But, sooner or later, he’s always proven right, as we saw in 2008 (after which Mr. Buffett enjoyed extraordinary gains).

My Points

My first point is the same as always: investors might want to keep a bit of dry powder on hand.

My second point is a reminder that a stock market correction could impact high-end real estate values — particularly in places like the SF Bay Area and Austin, TX (see top of blog).

Push/Pull: Falling Stock Prices vs. Falling Interest Rates

If there is a major correction and/or a recession, interest rates will likely fall significantly. This will make homes much more affordable and bring many buyers back into the market — and that will help prop prices up. So, it will be a matter of which forces are stronger — job losses, falling asset prices, and/or falling rates. In most recessions, falling rates are the bigger factor, as home prices usually hold up well (2008 was a rare exception, as a result of overbuilding, horrific lending practices, and too much speculation).

Originally published at on February 27, 2025.