Berkshire’s Peculiar Predicament

Now, Berkshire Hathaway (BRKA +0.25%) (BRKB 0.49%)… a company so solid, so dependable, it’s been rather like a particularly grumpy, yet immensely wealthy, tortoise lumbering along for decades. Old Warren Buffett, the chap in charge for an age, built it up from a dusty old textile business into a monstrously large collection of everything from railways to… well, just about everything. He had a knack, you see, for turning pennies into pounds, and pounds into mountains of… you get the idea.

For years, it zoomed ahead of the market, leaving the poor old S&P 500 choking on its dust. Nearly 20% a year, can you believe it? Compared to the S&P’s measly 10%. He’d scoop up companies, tuck them away, and let them burble along, spitting out cash like a contented dragon. That cash, a whopping $320 billion of it (enough to pave a rather long road, I should think), now makes up a hefty 30% of the whole shebang.

But lately, things have been… peculiar. Over the past twelve months, Berkshire’s stock has barely twitched, while the S&P 500 has been doing a rather energetic jig. Why? Three little gremlins, really. First, old Buffett stopped buying back shares, which is a bit like a giant refusing his sweets. It suggested he thought the price was a tad… inflated.

Then, he started selling off some of his best toys – top stocks, you understand – and hoarding cash. A record-breaking $382 billion, enough to buy a small country, perhaps. He seemed to suspect the market was getting a bit overexcited, a bit… bubbly. And finally, the big man himself decided to hang up his boots at the end of 2025. A new era, they said. Some investors, understandably, thought it was time to run for the hills. A bit like rats deserting a sinking ship, really.

Should you wager against the tortoise?

Now, some clever chaps are thinking about betting against Berkshire, using a curious contraption called Direxion’s Daily BRKB Bear 1X Shares (BRKD +0.57%). It’s a sort of reverse mirror, reflecting the opposite of Berkshire’s performance. If Berkshire goes down, this thing goes up. Sounds simple enough, doesn’t it? But be warned! This isn’t a toy for sensible long-term investors. It’s a bit like a firecracker – exciting for a moment, but likely to fizzle out and leave you with a singed eyebrow.

To create this reverse effect, Direxion uses something called “total return swaps” with banks. It’s a rather complicated business, involving promises and payments and a good deal of financial hocus-pocus. If Berkshire’s stock dips 1%, the ETF rises 1%. But if Berkshire climbs 1%, the ETF plummets 1%. A double-edged sword, you see.

This strategy is rather risky because it involves borrowing money – a “synthetic” loan, they call it. And, naturally, you have to pay interest on that loan. That’s why it carries a hefty fee – nearly 1% a year! And, to add insult to injury, the gains aren’t cumulative; they reset every day. A bit like building a sandcastle that gets washed away with the tide.

Berkshire Hathaway is a colossal, diversified beast. It could easily outperform the market for years to come, as long as the new captain, Greg Abel, doesn’t drastically change course. If he does, well, a long-term bet against Berkshire would be a spectacularly foolish investment. A bit like betting on a snail to win the Grand Prix.

What: Direxion BRK.B Bear 1X. Operation: A simple 1:1 inverse (short) of Berkshire. Tie-in: A “bold” contrarian take. Focus on Berkshire’s massive cash pile or potential “post-Buffett” uncertainty.

2026-02-16 23:24

Should you wager against the tortoise?

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