Rob Isbitts
5 min read
There it is. Warren Buffett and Charlie Munger’s legacy, quietly hiding in the middle of a list of the top S&P 500 Index ($SPX) components by weight. And with SpaceX (SPCX) just waiting its turn to knock it down another peg. As Tesla (TSLA), Micron (MU), and many others have done over the decades.
I’ve developed a theory that Berkshire Hathaway (BRK.A) (BRK.B) might be one of the best indications we have right now that the stock market is in deep horse manure. Something which, as a racehorse owner, I’ve become quite familiar with.
More News from Barchart
Here’s my take, based on the chart of Berkshire class B shares. Notice anything odd over the past 12 months? What you should notice is that there’s not much going on. The stock is flat. And has not been too volatile either. That massive cash pile that Buffett left his successors with is part of the valuation equation for investors.
My natural curiosity led me back to how this same stock did leading up to the bursting of the dot-com bubble in 2000. Thanks to Barchart’s ability to quickly call up past eras in chart form, I circled the period leading up to the March 2000 stock market top.
My point is not that they are identical, as they are not. But Berkshire’s lagging performance in the AI-driven frenzy today? That DOES mimic the past.
Berkshire also wasn’t a safe haven when the bubble burst 26 years ago. So too do I expect the next crash to be one characterized by a lack of a “counter punch” from non-tech.
That is, industrial, financial, utility, and consumer staple stocks will likely not rally to replace semiconductor and telecom flyers. The result will be a market that caves in from all sides. When? I have no idea. But investors essentially pushing BRK.B out of the mainstream market chatter, along with most non-AI stocks, is very reminiscent of that turn-of-the-century period.
Why that’s just the tip of the iceberg
When hunting for the definitive warning sign of a major market peak, the financial press routinely focuses on the wrong indicators. Analysts pore over speculative momentum charts, margin debt levels, and the over-extended multiples of the current technology darlings. But history shows that the clearest warning signal of a looming distribution phase isn’t found by looking at what people are frantically buying. It is found by looking at what they are actively ignoring.
