Last Wednesday, a 95-year-old man sat down in Omaha and told CNBC exactly what he thinks of this market.
“It’s tough to find values when everybody is preferring gambling,” Warren Buffett said.
He wasn’t being colorful. He was being literal. Buffett has described the stock market for years as a church with a casino bolted onto the side — and his point last week was that the casino is now where everyone wants to be. One-day options, in his view, aren’t investing and aren’t even speculating. They’re gambling, full stop. And since humans love to gamble, he noted, there’s now more money in cultivating gamblers than in cultivating investors.
Here’s the thing: the data says he’s not exaggerating.
Zero-days-to-expiration options — contracts that live and die within a single trading session — just hit a record 48% of all retail options volume. On the S&P 500 itself, roughly six out of every ten options contracts traded now expire the same day they’re bought. Before 2020, that figure was 10-20%. Retail options volume overall is running at roughly 2.5x its early-2024 level.
And the house is doing exactly what houses do. In Q2, Morgan Stanley’s equity-trading revenue jumped 69% year-over-year. Goldman’s rose 72%. JPMorgan’s climbed 86%. The banks don’t care whether the gamblers win. They collect either way.
Meanwhile, Buffett is sitting on $397 billion in cash — the largest war chest in Berkshire’s history — and in the past year he’s found essentially one thing worth buying at scale (Alphabet, including a $10 billion private placement he initiated personally). One position. From a man managing the largest pool of deployable capital on Earth.
Sixty years in the business, he said, and only about five of those years were truly rich with opportunity. This, clearly, is not one of the five.
The lazy reading of Buffett’s warning is: sell everything, hide in cash, wait for the crash.
That’s not what he said, and it’s not what I’m doing.
Read the quote again. He didn’t say there are no values. He said they’re tough to find — because the gambling crowd distorts prices. And distortion cuts both ways. When speculative flow decides where prices go, some things get bid to absurdity. Other things get abandoned to absurdity.
Think about where the casino actually operates. The top 10 stocks now make up roughly 40% of the entire US market. The 0DTE frenzy runs almost entirely through index products and a handful of mega-cap names. The options flow, the momentum chasing, the prediction-market money, the FOMO — all of it is concentrated in maybe 50 tickers.
Which means the other 2,500+ listed companies are trading in the emptiest room they’ve been in for a decade. No options flow. No momentum crowd. No passive bid worth mentioning. Just prices slowly drifting away from business value — in both directions.
This is the paradox of a gambling market, and it’s the entire reason this newsletter exists: the more speculative the top of the market becomes, the cheaper the ignored parts get — not because their businesses deteriorated, but because nobody is watching.
Buffett can’t exploit this. His problem is size: with $397 billion, anything small enough to be ignored is too small to move his needle. Your problem is the opposite of his. You don’t need an elephant. You need one great business, at one dislocated price, held with real conviction.
For the past six weeks I’ve been working through exactly the pocket of the market described above — profitable, unglamorous, structurally advantaged businesses that the casino has left for dead. Most of what I found was cheap for a reason.
One wasn’t.
Without giving away the name yet, here’s the shape of it:
It has compounded revenue every single year for more than 15 years — through 2008, through COVID, through the 2022 rate shock — and nobody talks about it
Gross margins have expanded in each of the last five years, the signature of genuine pricing power
It trades at a discount of more than 40% to my conservative estimate of intrinsic value — a gap that has only existed twice before in its listed history. Both times, the stock more than doubled within three years
Insiders have been buying in the open market for three consecutive quarters
And the reason it’s cheap has nothing to do with the business — it’s a flow problem, a direct side effect of the index concentration described above. When you see it, you won’t unsee it
This is the largest position I’ve added. I’m sizing it at 20% of my portfolio, and below the paywall I’ll walk you through the full thesis: the business model, the moat, my valuation work line by line, the exact price range I’m buying, where I’d add more, and the two specific risks that would make me sell.
Buffett is waiting for the gamblers to hand him a fat pitch. He’ll probably get one eventually.
I’d rather swing at the one they’re not even looking at.
The full deep-dive — name, ticker, valuation model, entry range, position sizing, and sell triggers — continues below for premium subscribers.
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