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Everyone turning to another trending ticker on Yahoo Finance this morning. Let's talk a little Berkshire Hathaway, out with quarterly results over the weekend. The company's cash pile grew to a record 325.2 billion dollars in the third quarter as the buffet led firm trim stakes and several big names including Apple and Bank of America. The moves are turning heads on Wall Street and we want to dig into the investment thesis behind the man, the legend that is billionaire Warren Buffett. Here with more is Cole Smith, CEO of Smith Capital Management, investment advisor with seven and a half billion dollars in AUM assets under management. Cole, good to have you back on the program with us. So let's just go into the pillars of the Berkshire Hathaway and and the Buffett mindset for investors out there.

Yeah, uh, thanks for having me. I I I think one of the things missed in this season, you know, we we Buffett used to talk a lot about the idea of your circle of competence. Okay? In other words, what are the kind of things that you can understand? Circle of competencies can grow over time, but they just can't do it overnight. And I find it really interesting. We're in this very narrow equity market as many of us know and you talked to a lot of these investors who are involved in this market and they will tell you straight up that they're very focused on certain industries or companies, things of that nature. Um, look at what Buffett's doing. I mean, his largest purchase this year in the Berkshire portfolio has really been obviously, uh, Occidental Petroleum. And his biggest sale is a technology company, obviously Apple. And what do those have to do with each other? The answer is almost nothing outside of probably economic growth, um, that obviously play into both of their futures. So I point that out because I think one of the things that's really lost on investors is Buffett is practicing a lifetime of learning and what that allows you to do is over seasons of your career as an investor, you can grow your circle of competence by learning and learning and learning and watching other businesses. And I find it very interesting that Wall Street's so focused on so few companies and yet at the same time, that's not what Buffett's interested in.

Cole, with this in mind and the buying and selling habits because he and Berkshire Hathaway have been more of net sellers as we've been discussing with some of our guests over the course of this year. With that in mind, investors always try to figure out, okay, where could he potentially be selling or trimming his position more next? Because that'll give us some inclination to know where that next move in the stock price and the shareholder value might also be eroded as a result if they do make a selling position. So or at least advance further a selling position. Where do you think that could be?

Yeah.

Yeah.

Sure. Well, you got remember there's really the tale of two Berkshires going on here where you have call it Buffett size investments of $10 billion or greater. And like he said in the Berkshire meeting last year, there are no opportunities. So isn't funny that Wall Street says gaga and it's hard to find anyone saying anything bad about the forward view of the S&P 500 and the in these magnificent companies. And yet at the same time, Buffett's saying, listen, there are no opportunities that are big and liquid of $10 billion. Now, below that, let let's look at what Todd and Ted have been doing. If you look at, um, you know, what Ted's been doing more recently, Ted's out buying serious XM, right, which is a satellite radio business. Now, why? Because it's not a $10 billion opportunity. And I think that really exposes what's going on in the market is below the surface of the mega caps and the big companies out there, you have someone like, uh, you know, Weshler who is out producing, you know, interesting investments in interesting businesses, but they're not big enough to move the cash of Berkshire Hathaway. And I think how you should think about the cash is it's really a proxy of insurance. You get paid almost 5% on the cash. You can sit there and earn that. And what they're effectively saying, Buffett's saying is he thinks that's a much better pre-tax return than the S&P 500 is or a lot of his big cap $10 billion plus ideas. And and I if I'm an individual investor, I'm an investor like a freshman like myself, you have to stop and say, wait, what does he know that I don't? And what I love about it is very few people care about what Buffett's doing with his capital. They're kind of shocked. And in many cases, they should be horrified at what they're doing with their own.

Okay. And so just lastly, and and just for the sake of conversation, where do you believe that dry powder could or should be put to work? If you were having the ear of Buffett and said, hey, maybe you should think about this as a long-term investment thesis, you know, where would you be looking at?

Yeah. This looks like 1972 to us. Uh, you had the nifty 50 back then. We have the magnificent seven. And what it took was a 40% bear market from 72 to 74 with an oil shock on the way. Uh, the oil embargo took place in 73 and we had a president resign and disgrace in 74. Um, that's when Buffett was out buying the Washington Post. And when they asked Warren, you know, what did he feel like at the bottom in 74? He said, I feel like an oversexed man in a harem. In other words, there were just so many incredible opportunities that he couldn't believe in. Now he didn't have to put $10 billion to work. That's probably what's going to produce his outcome to finally be interested in big opportunities again would be a very nasty bare market, okay? Now I say that because I think the big lie is that that has to come on the back of a bad economy. You can't find a bad economy and we don't think we're going to find a bad economy because government spending is so prevalent. But that is very divorced from what the valuations the stock market is. And Buffett's a lot more interested in the prices he's paying for the businesses, not what the economic outlook of the US economy is. And people are offiscating and conflating that. I want to add one more thing if I can off the buffet. Remember Buffett owns Clayton Holmes. That's one of the largest home producer in America. And what your guests said earlier about what we need to do on this market, they need to leave the housing business alone because ultimately, if you go out to get a 7 to 8% mortgage and you're that 38 year old in a 25% tax bracket, that's almost a 9 to 10% pre-tax return. I think that's going to stop stocks. I think Buffett would think that's going to stop stocks too. And the reality is that might be the best marginal investment opportunity for a 38 year old millennial buying a first home is paying off their mortgage quicker, not taking risk in stocks.

All right, Cole Smith who's the CEO of Smith Capital Management. Cole, thanks so much for taking the time here with us today.

Thank you.