Warren Buffett, ever the beacon of market optimism, appears to be positively bullish about where stocks are headed from here.
The Berkshire Hathaway BRK.A, +1.93%[1] boss made that clear in his annual letter to shareholders in which he wrote of the “American Tailwind” and made the case for staying invested in stocks.
“If something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments,” Buffett said in the letter.
But this chart of Buffett’s record cash pile, courtesy of RIA Advisors strategist Lance Roberts, seems to tell a different story — one in which what Buffett is saying looks a whole lot different from what Buffett is actually doing:...
“As the old saying goes: ‘Follow the money,’” Roberts wrote in a post on his Real Investment Advice blog[2]. “If he thinks stocks will outperform bonds why is holding $128 billion in short-term bonds?”While the obvious take is that Buffett is just waiting for a good deal to come along so he can snap it up, another is that he’s not as optimistic as he lets on. Maybe, as Roberts suggests, the answer actually lies in a pair of charts. This one takes a look at the Shiller price-to-earnings ratio, which is currently around 30x, to project 10-year total returns using history as a guide:
