As of the end of the second quarter, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) held a record $277 billion in cash, cash equivalents, and U.S. Treasury bills on its balance sheet -- more than double what it held six quarters earlier. The giant conglomerate has also been a net seller of stocks over the past year and a half. Since December 2022, its stock purchases have totaled $21 billion, but its stock sales have exceeded $137 billion.

Those capital allocation decisions could easily be interpreted as a warning from CEO Warren Buffett. He manages most of Berkshire's equity investment portfolio, so record levels of relatively liquid capital imply he's struggling to find stocks worth buying in the current environment.

One logical conclusion is that Buffett believes the stock market could decline sharply in the not-too-distant future. The S 500 (SNPINDEX: ^GSPC) has advanced by 45% since December 2022, which exceeds its historical average by a wide margin, so it's not hard to imagine a correction may be on the horizon. However, investors should be careful in how they interpret Buffett's $277 billion "warning." The situation is more complex than it appears at first glance.

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Source Fool.com