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Unknown A
Let's go down to Warren Buffett. We've been really paying attention to this because it could be a signal, some major warning signs in the economy. Let's put this up there on the screen. So a lot of financial news outlets have been taking note of this. Warren Buffett is currently trying to reassure his shareholders over his record amount of cash. The amount of cash is actually so stunning that it's literally. The letter shows a cash pile grew by just $9 billion in this quarter. The cash pile hit has now hit 334 billion at the end of last year, with an additional increase percentage wise. Looking at the entire history of the amount of cash and cash equivalents on the Buffett books, there has never been this high. And it's really interesting because of a question of why. So what Buffett says is that Berkshire shareholders can rest assured we will forever deploy a substantial of their money in equities, mostly American equities, although many of these will have international operations of significance.
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Unknown A
But the reason why he appointed to the amount of cash in his letter Krystal, is that he is saying basically he thinks that there is a massive overprice of assets in the economy. I actually read a book about Buffett. He's an interesting figure, kind of worshiped, sometimes a little bit too much, in my opinion. But the thing is that he's of the old school in terms of analyzing stocks, trying to make sure that the multiples fit with that. Whenever he sees a mispriced, that's when he buys. That style of investment going back over time has obviously made him tremendously wealthy. For him, he sees significant imbalance currently in the economy. Holding cash to be able to buy assets for presumably what he's saying is some sort of crash that's in the future. Now, is he correct? I have no idea. These guys are wrong all the time.
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Unknown A
But obviously he's one of the most successful investors literally in American history. So we should all pay attention. And looking back to all the stuff that he has done previously, whenever he's held cash, he's come out pretty well on top whenever he bets on something being overpriced. And that's kind of the foundation of his entire like stock analysis going back for decades.
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Unknown B
This is the most amount of cash that Berkshire Hathaway has ever held, like quite by a fairly by my margin. So that's something to pay attention to. Something I had noticed before is actually a bunch of billionaires have been dumping stocks. So Bezos has been. Bill Gates has been Zuckerberg. I Believe Ray Dalio, like Alex Karp.
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Unknown A
Sold a huge thing of Palantir.
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Unknown B
A bunch of billionaires are mitigating their risk and exposure to the stock market. And that's I think, something to pay attention to. One of the things, one of the reasons why we cover Deep Seek so extensively is because our stock market is so dependent on this just handful of tech giants. They are responsible for a majority of the growth in our stock market index over the past couple of years. So if their AI projections do not pan out either in terms of their ability to cordon the market or in terms of how impactful AI ends up being, then there could be a massive correction. And so the fact that Deep Seq was developed in China for less money and has a fundamentally sort of different configuration and blew up some of the assumptions undergirding AI development and trajectory in the US Was particularly significant because there is a big question about whether there is a huge AI bubble right now comparable to let's say the like2000.com bubble.
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Unknown B
And you know, I think that's a very real and live possibility. You add to that some of the things we're about to get in like the housing market still sucks, inflation now is going back up, consumer sentiment is falling. You have Trump, who knows what he's going to do in terms of tariffs, the firing, mass firings at the federal government. Like, yes, it's a comparatively small proportion of the, of the overall workforce but can have huge reverberating effects throughout the country. All of these pieces should make you pretty nervous.
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Unknown A
Oh, absolutely. All of the signs are there for some market problems. Put this one up there on the screen. This is from Friday. But just right now when we're looking at the markets as we're recording the show, the S and P is mostly flat today, but the Wall street on Friday had a significant dip. It was almost like 1.7% or so. The reason why I paid attention to that is it came basically on macroeconomic news. So it was concern here over the economy and on tariffs, specifically of the softening of US Consumer demand. I'm actually going to pair that with something really interesting that I just saw this morning. Over 50% right now of consumer spending is by the top 10% of the American of the American income owners, meaning rich people are the literal backbone of the economy right now. That's actually really bad because any change in their consumer behavior means what crash for everybody else.
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Unknown A
Also it's really gross because what it means, I've always pointed this for years, what is like Uber, Instacart and all of these like new companies. What are they all about? Serving the convenience of the wealthy. Right. Airbnb, same thing. Like all of these are about luxury industries where people basically have a mass service class to service the top 10%. That's really bad. More even distribution of consumer spending is what you want in a healthy economy, we don't see that. And then worse is E3, please can we put up on the screen, is that the overall price for home sales remains at an all time high for January and the number of sales continue to drop as most people basically decide not to put their home on the market. You've got high interest rates, you've got high home prices. The median home price of a home sold in January was $396,000, which if you look actually at some of the top 10 metros, the price is roughly around 1 million with a 7% mortgage rate.
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Unknown A
So just think about, you know, like even if you want what, 20% to avoid PMI, and if you're in a major metro area, good luck to you. I mean, who has hundreds of thousands of dollars just sitting around? Not most people. It'd take you a lifetime to be able to even save that up. Not yet alone to save for the mortgage payments that come in the future. So it's very difficult. And this is probably what worries me the most and is, in my opinion the most existential threat to a Trump presidency is some sort of bubble explosion. It could be. I mean, that's the thing about Nvidia. It can still be a phenomenally valuable company and it could still drop by 40%, like just because of how increased the price is now.
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Unknown B
How inflated?
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Unknown A
Yeah, just how, how much is there? Look at Meta Stock, look at Google stock, any of these others over the last five years. It's insane. And then the billions of CapEx that they're spending on AI development, I think if we put all that together with weak consumer spending and then even if you leave tariffs out of this, just the fundamentals right now are bad price hold all time high for homes, lack of credit because mortgage rates are very, very high. Consumer sentiment down. Actually you're seeing an increase in budget stuff, which is not usually a good sign. It means people are tightening their pocketbooks and then complete redistribution, where you have top 10% responsible for more than half of overall consumer spending in the US economy. So that just shows you that if a single thing were to change, like let's say a correction of the stock market by 20% and all those rich People stop spending at least even more of a doom loop that goes through the economy.
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Unknown B
That's exactly right. Yeah. And the last piece we have here is just specifically about consumer sentiment, which we can put up on the screen. This was the write up from cnn. They say it's consumer sentiment plunges over tariff and inflation fears. So we already saw a pullback in consumer sentiment in January. There was another one in February. This is according to the University of Michigan's latest survey release Friday showed it had declined in February for the second consecutive month, down by a STE 10% from January. That was double the decline initially reported earlier this month. And there's a partisan valence to this. So Republicans are still feeling pretty good, but both Democrats and independents experienced a fall in consumer sentiment. So, you know, when you put all these pieces together, it's a pretty perilous, perilous landscape. And you know, you again layer on top of it the austerity push from Elon and Doge and the amount of chaos and uncertainty that's injected into with the federal workforce and all of the ancillary jobs that are connected to the federal government and the federal workforce, all of the services throughout the country, things like the national
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Unknown B
parks, et cetera, that are important to the local economies. And it ends up in a pretty concerning picture for the future.
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Unknown A
That's right. So everybody just pay attention. The economy, I mean, who knows where things could go. But I am the most worried. And what we always talk about here is the concentration of the magnificent seven stocks in the S&P 500 and the difference and just the sheer ability of the indexes right now to crash just as a result of a reduction in the tech market is like a huge threat. Especially if all of those are overvalued. And when there's a market correction and high interest rates, think about that. Money's expensive and people's overall assets are low. It will just lead to a total change in consumer behavior, especially for people at the top. It could have all sorts of crazy impacts. So I'm really worried about. It could also obviously what's the easiest thing to do whenever there's a crash? They fire a bunch of people.
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Unknown A
So then, you know, we have high, we actually have high employment right now, some of the highest ever. But we could have like the worst 1970s scenario of like bad asset prices, high interest rates, high unemployment. It would just be a compl. Not to mention, you know, all the domestic strife and all that stuff. I'm still waiting for America to break. Like, I don't know how long they can take it. I just don't get it. The home price thing is the one I think about the most where I'm like, man, like just, you know, decades, if you're like 47 and you still have been unable to buy a house, what do you do? Like, that would break me personally. So I just have no idea, like, how much longer this whole thing can go on.
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Unknown B
Yeah, if you look at the cost of housing, education, health care, over decades, it just, I mean, it has skyrocketed astronomically. So that the number of hours you have to work at like, you know, an average wage job to be able to afford, afford those things has. I mean, it's just skyrocketed. It's insane compared to what it used to be. And so even as you look at these various indicators of, oh, in this way, America's doing better and Americans are wealthier, et cetera, et cetera. But when you talk about these core staples of a affordable of like a basic middle class life, those are the things that have gone through the roof. And there's really no, you know, no end in sight, no serious attempt being made to deal with housing prices. And that's such a core component, too, of how Americans have traditionally been able to build wealth and stability.
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Unknown B
So that's why we always pay a lot of attention to it. But, yeah, a lot of warning signs here.
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Unknown A
Yep.
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Unknown B
In any case, Luigi Mangione made an appearance in court this week and our own Spencer Snyder was there to talk to some of the protesters who were in and around the courtroom about why they were there and what they were hoping to see from this trial. Let's go ahead and get to that.
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Unknown A
Hey, if you like that video, hit the like button or leave a comment below. It really helps get the show to more people.
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Unknown B
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Unknown A
That's right, get the full show. Help support the future of independent media at breakingpoints.
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Unknown B
Com.