Grant's on Warren Buffett's Money Fund
Grant's Interest Rate Observer writes about "Warren Buffett's money fund" in its latest issue. The piece tells us, "As recently as June 30, 2022, Berkshire Hathaway's cash, near cash and Treasury-bill holdings tallied to just 31% of the Berkshire equity portfolio. On June 30, 2024, cash, near cash and bills weighed in at 88% of equities. It's an even bet that September's balance sheet will show more cash, near cash and bills than stocks. If the past were invariably prologue, one might conclude that the greatest equity investor is fast converting his corporate life's work into a money-market fund." It continues, "But the past is not invariably prologue. Nor does past performance guarantee future results. Everyone knows it, yet many ignore it. Just to keep up with the Dows and the Joneses, some of the best-credentialed portfolio managers choose to do 'that which has worked.' They buy high because the market is high. They eschew international diversification because American stocks have excelled. Never mind the time-tested reasons for buying low and spreading out one's country bets: The very opposite is what's ringing the cash register." Grant's writes, "There was a curious alignment of the financial stars on Tues., Sept. 3, when a 9.5% drop in the NVDA share price shaved $279 billion off that world-beating chip maker's market cap. It was a sum, as it happened, that very nearly equaled the size of Berkshire's June 30 Treasury-bill and cash holdings. 'I don't mind at all, under current conditions, building the cash position,' Buffett told the Berkshire Hathaway shareholders at the May 4 annual meeting. 'I think when I look at the alternative of what's available in the equity markets, and I look at the composition of what's going on in the world, we find it [the cash position] quite attractive.'" The article adds, "Buffett hastened to add that Berkshire doesn't own bills for their 5%-plus yield (though, in the second quarter, Berkshire's interest income, at $2.6 billion, handily topped its dividend income, at $1.5 billion). It would own them as readily at 1% as it does at 5%. What commends the Treasury's IOUs to the Omaha stock jockeys is rather their dissimilarity to Apple, Inc., Berkshire's top equity holding (even following sales of 506 million shares in the first and second quarters) and perhaps its all-time greatest investment (up 800% on its initial investment in 2016, according to the Financial Times)."
