Written by Bill Hall (moneyandmarkets.com)

...If you are a frequent follower of Warren Buffett, (aka the Oracle of Omaha), you know that he consistently states that he’s not a big fan of holding cash. In fact, in a CNBC interview at this year’s meeting, he went so far as to proclaim, “I hate cash”...Here’s how what he’s saying — and more importantly what he’s not saying — can help us.

On one hand, he’s essentially saying that cash is trash but, on the other hand, look at this:

It shows that Berkshire’s cash hoard stood at about $80 billion at the end of 2016. What’s more, during the shareholder’s meeting and in media interviews afterward, Warren disclosed that his company’s cash holdings had increased to $90 billion and could swell to as much as $150 billion over the next three years if he doesn’t get busy and make some investments.

[That's] astonishing for a man who doesn’t like cash but what’s even more stunning is how large Berkshire’s cash pile is when compared to the value of the company’s stock holdings. According to a chart based on Berkshire’s SEC filings maintained on the web by CNBC, the value of Berkshire’s stock portfolio is approximately $160 billion. That means that, despite their chairman’s public proclamations about his disdain for cash, cash comprises more than one-third of Berkshire Hathaway’s investment portfolio!...

Why the disconnect? What’s going on? Look at the chart below and it will tell you why.

In a nutshell, this chart measures the overall valuation of the U.S. stock market by expressing total stock-market value as a percentage of U.S. GDP. In fact, Buffett called it “probably the best single measure of where valuations stand at any given moment.” Since his statement, it’s become commonly referred to as the “Buffett Indicator” and what it’s currently telling us is that U.S. STOCKS ARE IN EXTREMELY OVERVALUED TERRITORY....This means that Buffett, as the saying goes, “is stuck between a rock and a hard place.”

• To invest Berkshire’s cash at reasonable valuation levels, he needs U.S. stock prices to decline significantly.
• If that happens, the value of stocks in his company’s current portfolio declines substantially and Berkshire Hathaway’s stock price goes down too
• [and,] what’s more, a substantial stock-market decline could damage his reputation as one of the world’s greatest investors just as he is winding down his career. 
• That's why he’s saying Berkshire may consider paying a cash dividend for the first time in its history...He can relieve the pressure from the internal cash buildup while continuing to support his public statement in February that “we are not in bubble territory or anything of the sort” — despite what his self-proclaimed favorite valuation metric is saying. On Wall Street, we call this behavior “talking your book,” which means expressing your opinions based on your portfolio holdings. Since Warren’s book is tilted heavily toward U.S. stocks, of course, he’s not going to publicly say that the stock market is overvalued.

Bottom line: ... I like to follow my grandmother’s sage advice which was: “If you want the truth, watch what people do and not what they say.”