The ‘Oracle’ and ‘Superman’ are holding on to their billions. It could be a bad sign for all of us

One is known as the “Oracle of Omaha”, the other as “Superman”. Warren Buffett and Li Ka-shing are the two most revered investors in the West and East. Now that both, in their 90s and just two years apart in age, are hoarding cash, is it an omen of a major financial downturn?

Buffett’s Berkshire Hathaway’s cash pile is already the subject of rampant market speculation. The conglomerate is entering 2025 with $US334 billion ($531 billion), or a record 29 per cent of total assets.

Warren Buffet has a long history of cashing out at the right time. Credit: Bloomberg

CK Hutchison Holdings’s recent corporate actions will only add fuel to the guesswork. The Hong Kong-based conglomerate has been steadily deleveraging since 2020. It held on to cash after selling its European tower assets to Cellnex Telecom for €10 billion ($17.2 billion) that year, and might be debt-free once the controversial $US19 billion sale of most of its ports to a BlackRock-led consortium concludes. CK didn’t announce special dividends at its earnings release last week.

Both have a long history of cashing out at the right time. As my colleague Nir Kaissar wrote, Berkshire’s cash allocation has varied considerably over the years, increasing when US stocks were expensive, while being deployed when markets crashed. Its investments in Bank of America, which dated back to the Global Financial Crisis, have yielded more than $US30 billion in profit.

Li’s sense of when to sell is also a marvel. He divested a controlling stake in the UK mobile-phone operator Orange in 1999 for about $US15 billion, near the peak of the dot-com bubble. In late 2017, the businessman sold a skyscraper in Hong Kong’s central business district for a record $US5.2 billion. Just over a year later, the city’s office real estate sector peaked. Since then, the high-rise has suffered a big turnover; mainland Chinese real estate developers that took over some floors, thinking that they could outsmart the Superman, became distressed and had to do a fire sale.

Hong Kong billionaire Li Ka-shing is not afraid to upset Beijing.Credit: Bloomberg

To be sure, the pair’s cash hoard doesn’t necessarily mean a crash is just around the corner. Given their gigantic holdings, the Oracle and Superman can never exit at the top of the market, even if they could divine the future. Instead, they have to offload when there are still buyers. Nonetheless, keeping their powder dry makes sense because there might be good deals bubbling up, likely after big market corrections.

The much-politicised Hutchison port deal, for one, is curious. Only the two Panama ports were in geopolitical crosshairs, so why is CK selling all of its operations outside Hong Kong and mainland China? Further, Beijing has shown displeasure, going as far as reportedly telling its state-owned firms to hold off on any business collaboration with the Li family. Yet the 96-year-old, who is no longer involved in day-to-day operations but participated in the negotiations, is stubbornly going ahead with this deal. Is it because he expects ports around the world to suffer a structural downturn now that Donald Trump is back in the White House?

For now, the port operations are seeing bumper profits. Earnings before interest and taxes jumped 24 per cent last year. In addition, this business could reap in higher margins with more automation kicking in. Given Li’s track record, it’s not unreasonable to suspect that he’s selling when the financials still look pretty.

In a way, Berkshire’s cash hoard is more benign and easier to understand. Buffett, 94, has explained that most of the company’s money will be deployed in American equities, and we all know the US stock market is expensive, especially when it comes to the legendary investor’s favourite valuation gauge, a ratio of the stock market’s value relative to the size of the US economy.

By comparison, Li’s determination to sell CK’s ports division at a time when economists are still debating whether global trade is over or simply being re-mapped, is worrisome. What does he see?

For investors, it’s time to exercise caution. As for US President Donald Trump, he shouldn’t gloat over the sale of the Panama ports; Li is the real dealmaker here.

Bloomberg

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