In November of last year, I wrote a post provocatively titled, “Cash Is Trash – or King,” challenging the prevailing Wall Street consensus that holding large amounts of cash was a failure of imagination—or worse, a sign of cowardice. Eight months later, with equity markets regularly making new highs, despite Trump’s tariff-induced global trade uncertainties on one hand and investor euphoria over artificial intelligence on the other, the second-quarter 2025 earnings report from Berkshire Hathaway adds more weight to the argument that patience is not just a virtue, but a strategy.
On August 2, Berkshire reported Q2 operating earnings of $11.16 billion—a 4% year-over-year decline—attributable primarily to weakness in insurance underwriting. Yet, other wholly owned segments (railroads, energy, manufacturing, and retailing) all posted gains. So why does the tone of the report feel cautious, even defensive?
Because Berkshire—true to form—is playing a long game in a market hooked on immediacy. Investor acronyms, ironic shortcuts themselves, abound: FOMO (fear of missing out) and YOLO (you only live once). Impervious to such distractions, the company held $344.1 billion in cash and equivalents at the end of the quarter, just shy of its all-time high. This marks the 11th consecutive quarter in which Berkshire was a net seller of equities. And notably, the company did not repurchase a single share of its own stock, despite a 10% drop from recent highs.
Longtime observers know Buffett has been waiting, and waiting, and waiting for what he once called an “elephant-sized acquisition.” But elephants aren’t easy to find in this climate—at least not ones that meet the standards of price and permanence Buffett demands. In the meantime, cash continues to pile up. To the impatient, this might look like paralysis. To those who understand risk management, it’s discipline. Perhaps Buffett might offer an acronym of his own: POPO (patience often pays off). In an attempt at a lighthearted aside, if the POPO vowels are pronounced as long u’s, you might chuckle when recalling Nancy Pelosi accusing the president of spouting verbal excrement.
The word—discipline—is what connects Berkshire to another firm whose results are not reported on CNBC but deserve a second look: Palm Valley Capital Management. Full disclosure: I co-founded Palm Valley and remain a principal owner. In fact, Palm Valley manages all of my financial assets. You can find my bio under the ‘People’ tab on their website. This post, then, should be read in light of that potential conflict (some might say “convergence”) of interest.
Still, the comparison is fair. If Berkshire is the venerable giant exercising restraint after decades of compounding, Palm Valley is its scrappy spiritual nephew —an early-stage Berkshire circa 1965. Their flagship mutual fund (PVCMX) ended Q2 with roughly 80% of its assets in cash and equivalents. In today’s market, that positioning makes them outliers, even heretics. Yet, when valuations across sectors reflect not just optimism but exuberance, the prudent investor must ask: what exactly is being priced in?
To be clear, neither Buffett nor Palm Valley’s portfolio managers are calling a market top. That’s a game for traders, not stewards. What they are doing, instead, is managing risk. When prices no longer offer a margin of safety, the correct response is not to “stay fully invested” just to keep up with a benchmark. It is to protect capital until opportunity returns.
There’s a tendency among investors to confuse activity with intelligence. Wall Street’s machine demands motion—trades, rotations, momentum. But as Buffett once quipped, “We don’t get paid for activity, just for being right.” When cheap assets are scarce and uncertainty is high, doing nothing is doing something.
Palm Valley’s July 2025 investor letter spells this out with refreshing candor. Seasoned and sagacious portfolio managers Eric Cinnamond and Jayme Wiggins, in their early 50s and 40s, respectively, reject the narrative that you must “do something” in every market environment. Like Buffett and Ted Williams, they prefer to wait for the sweet spot pitch, even as the insistent crowd screams, “Swing, you bum!”
This quarter’s Berkshire report also carried an unmistakable warning about tariffs. The company stated: “Considerable uncertainty remains as to the ultimate outcome of these events,” referring to trade policy and escalating tensions abroad. The return of Trump to the Oval Office has reintroduced not only volatility but also unpredictability into the global economy. Berkshire rightly acknowledges that such policies could adversely impact most, if not all, of its operating businesses—and its equity portfolio.
This acknowledgment isn’t a political statement—it’s a business judgment. For companies with vast global exposure, such as Berkshire, protectionist policies inject complexity into everything from supply chains to profit margins. The fact that Berkshire raised a red flag, while simultaneously hoarding cash and avoiding buybacks, speaks to the seriousness with which Buffett is viewing the current landscape.
With Warren stepping down as CEO at the end of 2025, the future of Berkshire Hathaway becomes a significant question. Greg Abel, his designated successor, will ensure continuity but also bring his own influence. To be sure, Abel, long seen as the keeper of Berkshire’s industrial heart, isn’t expected to reinvent the wheel. His mandate is stewardship, not reinvention—a fact that should reassure shareholders and inspire imitators alike. The culture of “to win, first you must not lose” investing is deeply ingrained in Berkshire’s DNA.
Palm Valley has fostered this culture from the start, even before growth potential could dilute it. That’s one of the key advantages of being small. Palm Valley can pursue investments that wouldn’t move the needle for Berkshire. Buffett has often expressed regret that his past successes can’t be replicated today—not because he’s lost his edge, but because Berkshire’s sheer size limits its agility. Palm Valley, by contrast, operates in a lively forest teeming with opportunity, where nimble predators can act swiftly. Berkshire, meanwhile, is on safari—scanning the horizon for rare white elephants large enough to matter.
As I wrote in November, cash is a tool—not a verdict. In the right hands, it’s optionality. In the wrong hands, it’s inertia. Buffett and Palm Valley show what it looks like when patience meets prudence. Their refusal to bend to market pressure is not a sign of passivity but of principle.
Whether you’re managing $344 billion or less than $500 million, the mandate is the same: protect capital, wait for value, and act decisively when the odds are in your favor. That’s not being contrarian for contrarian’s sake. It’s being rational in an often irrational world.