Just caught something that's been bugging me about the market right now. Berkshire Hathaway dropped their latest financials this weekend, and there's a pretty stark message buried in there from Buffett before he stepped back in December.

Here's the thing: Berkshire has been a net seller of stock for 13 straight quarters now. We're talking $187 billion in net sales over that period. Back in 2018, Buffett said it was hard to think of months when they weren't buying. Now? The complete opposite. That's not a small shift.

Obviously Berkshire is massive these days - tangible book value sits around $580 billion, and they've got over $300 billion in cash just sitting there. So yeah, finding investments that actually move the needle is harder. But here's what gets me: even with all that dry powder available, they're still selling more than buying every single quarter. They did pick up positions in UnitedHealth, Alphabet, and The New York Times last year, but it wasn't enough to flip the script. To me, that screams one thing - they think valuations across the board are stretched.

So what does the data actually say? The S&P 500 hit a CAPE ratio of 39.8 back in February. For context, that's basically only happened during the dot-com crash around 2000. We're talking 26 months out of 829 total months since this metric started getting tracked in 1957. Statistically, that's rare.

Here's where it gets interesting. Historically, when the S&P trades at CAPE levels above 39, the returns have been brutal. The data shows the index has dropped around 4% within six months, 20% within two years, and 30% over three years on average. That's not a guarantee of course - earnings could grow faster than expected if AI adoption accelerates - but it's worth taking seriously.

When someone with Buffett's track record and that much money is basically saying 'I can't find anything worth buying,' that's worth paying attention to. The guy's wealth is essentially tied to how well he deploys capital, and right now he's choosing to hold cash instead. That tells you something about where he thinks we are in the cycle.