The Wait

Warren Buffett has said he is waiting for a larger move to the downside. He has $340 billion in cash. He is 94.

The financial community has treated this primarily as a mystery. The man with more cash than most countries have GDP is waiting for something bigger. Nobody has specified bigger than what, exactly.

The history is somewhat clarifying. He waited through 1987. He waited through 2000. He bought things in 2008 while everyone else was leaving. He waited through 2020. Each time, waiting appeared to be correct. (The technical term for this, in investing, is "being right." It is also the main outcome investors hope for. These two facts are related, though the relationship is rarely discussed at cocktail parties.)

The math of $340 billion requires particular conditions. To put $340 billion to work at a discount requires a discount large enough to absorb $340 billion. The last opportunity of that scale presented itself in 2008, when the U.S. banking system was briefly available for purchase at reduced rates. He bought Bank of America. Bank of America is still here. He is still here. These outcomes are generally regarded as connected.

The current "larger move" he is waiting for is, by arithmetic, required to be historically exceptional. Not larger than last week's pullback. Not larger than a correction. Larger than almost anything the modern financial system has ever produced. He is waiting for this with apparent comfort, from a position of $340 billion in cash, at age 94, in what appears to be good health.

The other investors also waiting have less to wait with. At $340 billion, waiting is a strategy with a formal name and documented success. Below $340 billion, waiting is typically called something else. (The something else varies depending on the account balance and the calendar quarter.)

He will deploy when he believes the conditions are right. He has believed this before and been correct. He will be 94 when he does it. He is 94 now. The conditions are not yet right. He is aware of this. He does not appear troubled by it.

The plan is: wait. The timeline is: unspecified. The threshold required: unprecedented. The man executing the plan: 94, comfortable, $340 billion in cash, reading the newspaper.

This is called patience. It has worked. He is waiting for it to work again.