Warren Buffett’s Berkshire Hathaway Inc. is sitting on a record-breaking $189 billion in cash, a fact that has fueled speculation about an impending market crash. However, fund manager Chris Bloomstran, who manages the largest position in Berkshire Hathaway at Semper Augustus, believes that the massive cash pile is not a cause for concern.
Bloomstran argues that the cash position is not a reflection of Buffett’s bearishness on the market or a prediction of an imminent crash. He emphasizes that Berkshire Hathaway’s cash reserves, when measured against total assets, are in line with their long-term average. The current 17.5% cash position is close to the 13% average since 1997.
Even when considered against the company’s market valuation, the $189 billion cash reserve is at a relatively normal level, well below its peak of nearly 40% in 2004. Berkshire Hathaway’s large insurance operations require a significant cash reserve, and Bloomstran estimates that roughly half of the cash is readily available for investment.
The company’s recent acquisition of $234.6 billion in short-term U.S. Treasury bills, exceeding the Federal Reserve’s holdings, has further fueled speculation about Buffett’s market insights. However, this move is likely part of a broader strategy, as Berkshire Hathaway has also disclosed significant stock sales, including a reduction in its Apple Inc. holdings. Despite selling over 389 million Apple shares, the company still retains a significant 400 million shares.
This massive cash reserve is not necessarily a sign of a market crash but rather a reflection of Berkshire Hathaway’s long-term investment strategy. The company has a history of making strategic investments, and the cash pile could be deployed at any time to capitalize on opportunities in the market.
