Shares of Warren Buffett’s Berkshire Hathaway have climbed more than 11% this year, ballooning its market cap to $862 billion as the company held its annual shareholder meeting over the weekend. But that’s not all that’s inflating. 

The Omaha, Nebraska, investment conglomerate reported that its cash pile reached a record $189 billion in the first quarter, continuing a trend from this time last year: Warren Buffett & Co. just aren’t into that many companies these days.

Bearish Buffett

The 93-year-old Buffett, who allowed Coca-Cola to slap a caricature of his likeness on cans for free when the soda maker launched Cherry Coke (his favorite) in China in 2017, remains as lighthearted and goofy as ever. 

And business isn’t bad either — Berkshire has outpaced the 8% return of the S&P 500 in 2024, while first-quarter operating profit rose 39% to a record $11.2 billion. 

On the other hand, Berkshire sold just under $20 billion worth of stock and bought only $2.7 billion over the first quarter, which drove the total value of its stock portfolio lower to $336 billion from $354 billion at the end of 2023. In the new world of AI-this-and-that, miracle weight-loss drugs, and peskily high interest rates, Buffett sees a lot of meh, and seems more than happy to let Berkshire’s cash pile up. “I don’t think anyone sitting at this table has any idea how to use it effectively, and therefore we don’t use it,” Buffett said:

• Apple, Berkshire’s biggest holding, is going through a bit of an adjustment phase. The iPhone maker is losing market share in China to local smartphone manufacturers and also canceled plans to release an autonomous electric vehicle. However, its recent earnings report seemed to assure investors the worst was behind it and hinted that it’s about to get bullish on the AI race. 
• Berkshire’s approach to Apple has mostly followed the flux. Between the last two quarters, Berkshire has sold off roughly 13% of its holdings in Apple, reducing its stake to $135 billion. Nevertheless, Buffett continued to praise the tech giant, calling it “an even better business” than American Express or Coca-Cola, and saying it’s “extremely likely” Apple will remain Berkshire’s largest stock position at the end of the year.

Poor Paramount: Berkshire also dumped its entire Paramount Global stake, which amounted to roughly 10% of the company, with Buffett saying it came at a loss without specifying the amount. “It was 100% my decision and we’ve sold it all and we lost quite a bit of money,” Buffett told investors. “I did it all by myself, folks.” Luckily for Berkshire shareholders, that choice came from the same guy whose stock has materially outperformed the S&P 500 during his time at the helm. Imagine trying to explain to your grandkids how cool it once was trekking to Omaha to hear a nonagenarian wax on about companies like Occidental Petroleum and Dairy Queen. 

So this is what they mean by a shell game.

For nearly a decade, oil industry titan Shell sold millions of carbon credits linked to CO2 removal that never actually occurred, according to a Financial Times investigative report published last weekend. It’s just the latest evidence that somewhat discredits the carbon credit economy.

Carbon Capture the Flag

Carbon capture and storage has long been viewed as a potentially powerful, though perhaps limited, tool to combat climate change and lower overall carbon emissions. The problem, in part, is a serious lack of commercial viability. It’s why the Canadian government — and in particular the local government of oil-rich Alberta — spent much of the previous decade offering generous subsidy and incentive plans. 

For instance, Shell, which owns and operates a carbon capture facility in Alberta called Quest, agreed with the Alberta government to register and sell carbon credits that were valued at twice the amount of carbon it actually captured at Quest. After eight years of operation, the 2-for-1 scheme likely resulted in more harm than help, the FT found: 

• The program, which ran from 2015 through 2021 before ultimately being sunsetted in 2022, allowed Shell to register around 5.7 million unearned credits, with credits typically valued at the equivalent of one ton of CO2. Shell then sold most of the “phantom” credits to massive fossil fuel firms like Chevron, ConocoPhillips, Canadian Natural Resources, and Suncor Energy.
• In selling the bunk credits, Shell effectively gave cover to the other energy firms to continue — and in some cases, expand — emissions-creating processes. According to the FT, the recent production boom in Alberta has slowed Canada’s progress toward achieving emission-reduction goals.

The 2-for-1 scheme was “probably not appropriate,” Jonathan Wilkinson, Canada’s Minister of Energy and Natural Resources, told the FT. Greenpeace Canada senior energy strategist Keith Stewart put it more starkly, telling the FT: “Selling emissions credits for reductions that never happened… literally makes climate change worse.”

Captured Audience: Still, carbon capture technologies are likely to become more prevalent. The White House finalized new rules from the Environmental Protection Agency last month designed to limit power plant emissions. Existing coal plants and new natural gas plants will now be required to curb 90% of emissions by 2039, with carbon capture technology recommended as a method of compliance. But challenges remain. The Supreme Court has already struck down two previous attempts to enforce emissions standards on the power sector, one by the Obama administration and another by the Trump administration. At least it’s been nonpartisan. 

After the sugar rush comes the crash. 

Cocoa prices plunged almost 30% in the past week after a rally that pushed prices nearly 80% higher to start the year. And yet prices are still so elevated that chocolate-maker executives see the market as detached from reality. Or as Mondelez CEO Luca Zaramella poetically put it on a recent conference call: “The current market structure does not warrant the current market prices.” 

Hot Chocolate

As with any asset class that starts to look like a bubble, the initial runup seemed legitimate: As a recent JPMorgan report noted, climate change-induced drought has ravaged crops in West Africa, which supplies about 80% of the world’s cocoa. And then add to the mix that the crop is still mostly cultivated by small farmers without resources for proper reinvestment to boost yields. But the wild swing has more to do with who’s betting on prices:

• A JPMorgan commodities strategist noted in the report that non-commercial investors now hold more than 60% of total open interest across futures and options in the New York market, a historical high.
• The runup in prices meant that speculative commodities traders, including those hedging against physical holdings of cocoa, have either had to pay more to meet margin calls (an insurance policy to cover potential losses) or close out their positions. That’s led to a drop in the number of outstanding contracts, which has curbed liquidity in the market, exacerbating price moves beyond what’s explained by simple supply and demand.

Make The World Go Away: Big Chocolate had largely locked in cocoa bean prices before this year’s surge, since hedging the future is an essential part of their strategy. Most companies are now eyeing their plan for 2025, but even Mondelez’s Zaramella suggested that a fundamental correction in prices could be two years out. So go ahead and eat all the chocolate you can now — by next year, it’ll give your budget heartburn.