Buffett’s $184B Warning & Market’s 2026 Outlook

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Diary Entry #47
Units of Sleep Lost Over Buffett’s Retirement: 3.
Units of Tea Consumed While Reading Berkshire Hathaway’s 10-K: 12.
Number of Times I’ve Said “But the S&P’s CAPE Ratio!” in Conversation: 5 (and counting).

Warren Buffett, the man who turned a dying textile company into a financial titan, is retiring. In 1965, he inherited what he called a “death march” and pivoted to insurance-a move so clever it makes my morning coffee ritual look like a genius masterclass. Berkshire Hathaway’s Class A shares? They’ve surged over 6,100,000% since he took the helm. Meanwhile, the S&P 500? A humble 46,000%. Buffett’s legacy isn’t just numbers; it’s a lesson in humility, integrity, and occasionally making billions while wearing a polka-dot tie.

But now, the oracle of Omaha is passing the baton. His retirement at year-end 2025 leaves a void-not just in boardrooms, but in the collective psyche of investors everywhere. And yet, his parting gift? A $184 billion warning. Not a cryptic tweet, not a vague sigh, but a seismic shift in Berkshire’s stock-buying habits. Since Q4 2022, they’ve been net sellers, liquidating stakes even as their cash pile hit $382 billion. Why? Because the stock market, dear reader, is trading like it’s 2000 again-except this time, we’re all holding the tech bros’ old smartphones.

Buffett’s $184 Billion “Oops, Maybe Not Now”

Let’s dissect this. For decades, Buffett was a voracious buyer. “It’s hard to think of very many months when we haven’t been a net buyer,” he told CNBC in 2018. But since the bull market began, Berkshire has flipped the script. Net sales of $184 billion, all while sitting on a cash hoard larger than most countries’ GDPs. What’s the subtext here? The market’s valuation is stratospheric. CAPE ratios (yes, that acronym is as fun as a root canal) above 39? That’s 3% of the S&P 500’s history. In other words, we’re in the top percentile of expensive, and Buffett’s not buying. Ever heard of a man who owns a castle saying, “Actually, I’m not selling any of my gold coins”? That’s us.

History’s not kind to markets priced like this. After months with CAPE ratios above 39, the S&P 500’s average return? A modest -4% over the next year. By December 2026, we could be looking at a 4% drop. And if you stretch the timeline to three years? A 30% plunge. It’s like buying a house at the peak of a housing bubble and then wondering why the mortgage payments feel like a tax on your soul.

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So, what’s a trader to do? Panic? Sell everything and invest in tulips? No. But it’s time for a portfolio audit. Sell the stocks you’d cringe to hold during a downturn. Diversify. Or, if you’re feeling particularly unwise, buy meme stocks and hope the AI boom saves you. Just don’t blame me when the market’s next move is less “bull” and more “bear with a grudge.”

S&P 500’s Average Return S&P 500’s Best Return S&P 500’s Worst Return
(4%) 16% (28%)

Final Note: The market’s a fickle lover. Love it, but don’t marry it. And whatever you do, never, ever trust a CAPE ratio after 9 PM. 📉

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2025-12-31 12:42