Buffett playing 4D chess while the rest of the market plays checkers. The ‘T-bill & Chill’ strategy is a masterclass in patience, getting paid to wait while optionality builds. That $325B isn’t a bet against the market, it’s dry powder for when the fat pitches come.
Just because it is Buffett does mean that it is not market timing. If anyone but Buffett was doing what Berkshire is doing everyone would say, oh sure that is market timing. Waiting for the fat pitch or waiting for the right value is by any reasonable definition market timing.
The nuance here is that by market timing most people would understand the market overall crashing, bear markets, recessions. While Buffett would market time valuation of individual companies which are not always happening in an overall bear market.
That is my overall distinction and understanding at least.
The idea that you cannot time the market comes out of the Efficient Market Hypothesis which believes that it is impossible to forecast future price movements. Thus, any strategy that does try to forecast future price movements is "market timing". Now Buffett may say that he does not time the market, but that is pure sophistry. Buffett is making an implied forecast of future price movements by sitting on cash, even if his reason is that there are no investments that meet his value criteria. The underlying assumption (not stated) is that at some point in the future there will be securities that meet his value criteria. Thus he is making a forecast about future price movements. Thus he is market timing.
Buffett studied under Graham, thus he was well aware that Graham supported the idea of timing the market. In several places in Security Analysis Graham states that if there are no acceptable investments you don't invest.
You can gussy up Buffett sitting on a pile of cash by calling it optionality (or whatever else) but by doing so you miss the real overall thesis. If there is no place to invest then you don't invest - and that is market timing.
Buffett playing 4D chess while the rest of the market plays checkers. The ‘T-bill & Chill’ strategy is a masterclass in patience, getting paid to wait while optionality builds. That $325B isn’t a bet against the market, it’s dry powder for when the fat pitches come.
great way to put it, cheers!
Just because it is Buffett does mean that it is not market timing. If anyone but Buffett was doing what Berkshire is doing everyone would say, oh sure that is market timing. Waiting for the fat pitch or waiting for the right value is by any reasonable definition market timing.
Nice note Neile.
The nuance here is that by market timing most people would understand the market overall crashing, bear markets, recessions. While Buffett would market time valuation of individual companies which are not always happening in an overall bear market.
That is my overall distinction and understanding at least.
The idea that you cannot time the market comes out of the Efficient Market Hypothesis which believes that it is impossible to forecast future price movements. Thus, any strategy that does try to forecast future price movements is "market timing". Now Buffett may say that he does not time the market, but that is pure sophistry. Buffett is making an implied forecast of future price movements by sitting on cash, even if his reason is that there are no investments that meet his value criteria. The underlying assumption (not stated) is that at some point in the future there will be securities that meet his value criteria. Thus he is making a forecast about future price movements. Thus he is market timing.
Buffett studied under Graham, thus he was well aware that Graham supported the idea of timing the market. In several places in Security Analysis Graham states that if there are no acceptable investments you don't invest.
You can gussy up Buffett sitting on a pile of cash by calling it optionality (or whatever else) but by doing so you miss the real overall thesis. If there is no place to invest then you don't invest - and that is market timing.
Great commentary and insight Neile! 100% agree. Thank you!
In the next Berkshire edition I will add more flavor to the topic, cover more bases.
Have a great weekend and enjoy the Berkshire day today :).
Cheers!
Thank You!
thank you!
Great Illustration
thank you!