Berkshire Hathaway is sitting on a cash stash of $382 billion as of Sep-25. That is 135% its equity portfolio of $280 billion. That is not all. The cash stash has grown from $142 billion to $382 billion between 2020 and 2025. It is 3 years since they have been persistent net sellers in the equity markets. Buffett did buy stocks after the pandemic and then in late 2021 when there was a new-economy value bust. Other than that, they have just put money into safe US treasuries. Buffett may not be betting against America, but he surely does not like the valuations. 

To get a view of the overvaluation of the US markets, one only needs to look at the Buffett ratio, which stands at 220% for the US markets. Buffett Ratio is a ratio of market cap to GDP. Countries like India have a Buffett ratio of above 100, but are still way below that of the US. Then there are economies like China and Germany, where the Buffett ratio is under 70%. That surely raises a big valuation query about the US markets and whether the valuations are divorced from reality. At least, that is what Buffett also believes, and that has made him very cautious! 

Another ratio that is a major concern for Berkshire Hathaway is the CAPE ratio. The Cyclical Adjusted P/E (CAPE) is a smoothened P/E ratio figure. Currently, the CAPE ratio for the US markets stands at 39.5X. One may recollect that during the dotcom boom of 1999 and 2000, the CAPE ratio had gone to 39X, and we all  know what happened after that. In short, the current valuations are crazier than the peak of the dotcom frenzy. History shows that when the CAPE goes to these levels, there is a 97% probability of a sharp correction that extends to 3 years. It is this combination of Buffett ratio and the CAPE ratio that Warren Buffett finds really worrisome, to be buying equities. 

While Warren Buffett does not patently bet against US stories, traders like Burry play it both ways. Recently, Burry took a huge put position of $1.1 billion notional value on two AI stocks; Palantir and NVIDIA. Now, Palantir and NVIDIA are representatives of the AI story, which is the trigger for rich valuations in the US. Burry expects a big crash in both these stocks and he has clarified that these are not hedge positions but naked shorts. One needs to see the huge cash stash of Warren Buffett in the light of these big short positions created by Burry. Just to remind readers; Michael Burry was the same trader who made a fortune betting against sub-prime mortgages in 2007!