Berkshire's historic drawdowns

In a recent interview, Buffett was asked about the market selloff.

His answer was devastating in its simplicity:

"This is nothing."

Markets are down 5-7% and everyone's panicking. Buffett has watched Berkshire drop 50% THREE times.

He doesn't get excited about a 5-6% dip. In his own words: "We aren't in it to make 5 or 6 percent."

These prices aren't even close to cheap.

And the numbers back him up:

Buffett's own favorite indicator - total market cap to GDP - is at 208%.

He once called anything above 120% "playing with fire."

We're nearly DOUBLE that threshold.

At current levels, his model projects roughly 0.4% annual returns over the next 8 years.

Zero point four percent.

You can get 5% in a savings account.

Meanwhile, Moody's AI-driven recession model just hit 49% probability. Every time it's crossed 50% in 80 years of backtesting, a recession followed within 12 months.

And that reading was BEFORE the Iran war shut down the Strait of Hormuz and sent oil above $120.

The IEA calls this the worst energy crisis in history. Worse than 1973. Worse than 1979. We've lost 12 million barrels per day - more than both 1970s oil crises COMBINED.

The S&P is down 7% year to date. The Nasdaq is off 10%. Q1 was the worst quarterly performance in 4 years.

US GDP growth just got revised down from 1.4% to 0.7%. The economy LOST 92,000 jobs last month when economists expected a GAIN of 59,000.

And inflation is creeping higher while the economy slows.

This is the early stage of stagflation.

Buffett sees it. That's why he's been a NET SELLER of stocks for 9 straight quarters. That's why Berkshire is sitting on its largest cash pile in history.

The greatest investor alive is telling you - not with words, but with actions - that this market is overpriced and he'd rather earn 5% in T-bills than own stocks at these valuations.

When has Buffett been this cautious?

Late 1999. Right before the dot-com crash wiped out 49%.

Late 2007. Right before the financial crisis wiped out 57%.

Both times he was mocked for "missing the rally."

Both times he was right.

Now look at what's happening around us:

Oil at $120 with the Strait of Hormuz still closed. Gas above $4 for the first time since 2022. The IEA warns April will be WORSE than March.

This is comparable to the 1970s stagflation era.

And the market is still priced for perfection.

Buffett didn't get rich by buying expensive stocks during geopolitical crises. He got rich by being patient, sitting in cash, and buying when everyone else was panicking.

We're not at the panic stage yet.

We're at the stage right before it.

The smart money isn't buying this dip.

The smart money IS the dip.