Berkshire will forever remain a financial fortress. In managing, I will make expensive mistakes of commission and will also miss many opportunities, some of which should have been obvious to me. At times, our stock will tumble as investors flee from equities. But I will never risk getting caught short of cash.
In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own. The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects.
That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities. We continue, nevertheless, to hope for an elephant-sized acquisition. Even at our ages of 88 and 95 – I’m the young one – that prospect is what causes my heart and Charlie’s to beat faster. (Just writing about the possibility of a huge purchase has caused my pulse rate to soar.)
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Buffett suggests he is thinking about buying back shares because they do not see suitable opportunities for their cash in the public markets. That is a testament to the fact that valuations are high by many historical standards and liquidity is not as abundant as it was earlier in this bull market. It is also a reflection of the fact that he is aware of the risks to a number of Berkshire business from competition and obsolescence and that there is a risk perception of the conglomerate’s fortunes will sour.