www.foxnews.com/story/0,2933,151542,00.html
search) isn't putting Berkshire Hathaway's money in stocks, can th is be a good time for anyone else to do it? With a track record like that, most i nvestors should want to learn why today is different enough to keep Buff ett on the sidelines.
We don't enjoy sitting on $43 billion of cash equivalents that are earning paltry returns. Instead, we yearn to buy more fractional intere sts similar to those we now own or better still more large businesse s outright. We will do either, however, only when purchases can be made at prices that offer us the prospect of a reasonable return on our inves tment." In other words, Buffett thinks that stocks and the businesses his company might buy are tremendously overvalued. That's another way of saying the markets are pumped up, like a baseball player on steroids, even though they (players and the markets) don't want to admit it.
In fact, Buffett uses baseball imagery throughout his shareholder letter. My hope was to make several mu lti-billion dollar acquisitions that would add new and significant strea ms of earnings to the many we already have. Additional ly, I found very few attractive securities to buy. " In an odd parallel, it turns out that Buffett isn't the only big-time pla yer sitting on cash.
search) ha ve been holding out on investors, too, by not paying out their usual per centage of dividends. In a recent column, Mark Hulbert quotes from the S&P newsletter: "Compani es in the S&P 500 are still sitting on a mountain of cash. We estimate t hat non-financial corporations in the index currently have about $602 bi llion in cash and cash equivalents on their balance sheets." since Berkshire Hathaway isn't included in the S&P 500 inde x, we know that we can add another $43 billion to that $602-billion figu re to get up to a minimum of $645 billion in cash that US companies ar e sitting on. And the reason they have so much cash, according to S&P, i s that S&P 500 companies are paying out only 32 percent of their earning s as dividends. So, even if investors do buy an S&P 500 stock, they won't get the normal share of earnings back in their quarterly dividend checks. That partiall y explains why the current yield for the Dow Industrials at 23 percent (again, according to S&P) is still below the traditional 3-6 percent ran ge of yields. So, let's ask the question again: If Warren Buffett is holding cash, and if corporations are holding cash rather than paying dividends, what's a little old everyday investor supposed to do? Unless you want to watch your portfolio follow the market as it ... well, to put it delicately, as it becomes less overvalued. Notice that Buffett is not investing in real estate, an all-too-tempting alternative for regular folks who have some money they would like to inv est but who don't trust the stock markets. In fact, as the most recent i ssue of The Elliott Wave Financial Forecast points out, many people are "now captivated by the concept of easy wealth through real estate. Acc ording to the National Association of Realtors, a stunning 25 percent of the 77 million homes sold in 2004 were purchased strictly as investmen ts." In the United States, though, even as investors in certain locales contin ue to flip homes at higher prices, some important indicators made tellin g turnarounds in January. Total US home sales dropped dramatically by 97 percent from December 2004 to January 2005 (before revisions), even as median sales prices on new US homes plunged 13% from $229,700 to $1 99,400. That decline in the median sales price is the largest one-month fall in the history of the data, which goes back to 1963. So it looks li ke the real estate market may not provide a safe place to run to in the future.
Bonds may not be swinging for the bleachers this year due to injuries, bu t the Oracle of Omaha's lesson is still useful: Know when to swing at th e markets and know when to lay off and take the intentional walk.
Elliott Wave International, a financial ana lysis company. magazine, a ne wspaper writer and editor, an investor relations executive and a speechw riter for the Federal Reserve Bank of Atlanta. She received her BA in Classics from Stanford University.
|
http://csua.com/feed/