Warren Buffett is buying Alphabet out of neceessity - he already sold most of what he could sell and has way too much cash on hand - he just need to buy 'something' - Alphabet seems like the least overvalued big stock out there.
Berkshire is sitting on nearly $350 billion in cash. One of the ratio's that Buffet uses to measure overvaluation, Wilshire 2000 Market Cap as a % of GDP is at an all time, 220%. Its usually a good indicator of a market top. He's making a few small investments, but he's just waiting until there's more of sell off before heading back in. He's under no pressure to buy anything.
Is he required to buy stock? AFAIK he could just as well hold cash or bonds, and if he believes a bubble pop is imminent (within the next couple months), that would be a responsible move.
Not required of course. This move to finally move some of his cash horde into equities could be a result of the US governments recent announcement that they're ending their quantitative tightening policy. This likely signals a move back to a period of quantitative easing which could cause assets to continue to inflate while the value of the dollar continues to erode.
Basically he could just be trying to protect the value of his dollars by putting them into a very stable company that also has exposure to the upside of AI.
Probably a stupid question, why not buy something like CHF then, if one is concerned about eroding dollar value? Is the thesis that blue chips (if google is one) would rise faster than USD is devalued?
Stocks are going to be better at hedging against inflation than any one specific currency, because they’re able to raise prices. This is something Buffet has talked about which is mildly detailed here: https://www.investopedia.com/how-warren-buffetts-1-rule-can-...
How the dollar erodes, and its effect on other currencies will be unpredictable. Corporations raising prices to offset their rise in costs, is predictable. It’s just a matter of finding those corporations and industries which can do so without losing more sales.
I’d assume the urge to “cash up” here is driven by the idea of trying to sell the top, and buy the resulting bottom. I highly doubt Thiel thinks AI isn’t worth today’s market cap or several multiples of it, in the long term, and that any “bubble burst” will likely be a generational buying opportunity.
That sort of crash is what central banks exist to protect against. That could be something like the Fed stepping in as a buyer of last resort and picking up several trillion dollars of equity, and/or pushing rates to zero again to incentivize private capital to more or less do the same.
A global crash of financial systems is unlikely because it’s cause too much pain for everyone. It unfortunately means we plebs are likely the ones paying to bail it out.
Frankly, I would be happy if riots in the streets happen (if there is a bailout of Big Tech in the first place). What's going on recently with OpenAI publicly, and probably most of the 'AI' players not publicly, is disgusting - it's a bubble, everyone and their mother knows it, and these guys try to save their asses by asking for governement backing before the bubble even pops. Privatize gains, socialize losses...
It's a shame that no more bankers went to jail after 2008, although I find the situation was much more complicated than here.
Oh, don't get me wrong, if and when this happens, I'll join the riots.
And I'm not even anti-AI; I genuinely believe that, as a technology, it is a major advancement that can and should be put to so many good uses. Which is emphatically not what the people in charge are doing.
Always also calmly analyse what is the upside left. Especially if the stock has such huge valuation like Nvidia. My guess is probably not at this point.
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