Some off topic posts are okay, but please prefix them 'OT:' in the subject.
- Manlobbi
Halls of Shrewd'm / US Policy❤
No. of Recommendations: 0
I know that Berkshire likes to keep a good amount of cash on hand in case sudden good deals pop up. That's usually about $100B or so. But now there is double that amount (more or less). I wonder if Buffett is doing this purposely because he knows he will soon die (Anyone that age is likely to soon die!) and perhaps there is some reason a bunch of that cash will become necessary, perhaps to buy back most of his shares so the various foundations can hold diversified things instead of only (or mainly) Berkshire stock?
No. of Recommendations: 0
Maybe he is hoarding all that cash as dry powder for whenever the market tanks.
That's what a lot of people are running scared of, a crash.
No. of Recommendations: 3
Maybe he is hoarding all that cash as dry powder for whenever the market tanks.It's possible, but usually he doesn't time markets or macro effects. It really could be as simple as "I can't find anything good to buy right now" or it could be "Getting ready to buy 75 or 100 billion of A shares from foundations".
That's what a lot of people are running scared of, a crash.I don't see too many people running anywhere.
Also, as far as dry powder goes, isn't there many trillions in dry powder sitting in short-term securities out there right now? I see $6.44T in money market funds alone!
https://fred.stlouisfed.org/series/MMMFFAQ027S
No. of Recommendations: 7
Also, as far as dry powder goes, isn't there many trillions in dry powder sitting in short-term securities out there right now? I see $6.44T in money market funds alone!
For every investor who sells those 'dry powder' short-term securities to buy something else, like shares of stock, there has to be another investor who is buying those same short-term securities, and selling another asset. There is no new money coming into the market just because one person sells a bond to someone else.
dtb
No. of Recommendations: 5
There is no new money coming into the market just because one person sells a bond to someone else.
Let's say the person holds a JP MorganChase money market account. And let's say that person transfers $1M in T-bills to cash in a JP Morgan account, because they want to potentially buy something (maybe Berkshire shares) if the market drops suddenly. Now, JPMorganChase is a bank and banks loan money, so they take that $1M, and they use it as [tier 1] capital to lend out $6.6M to other people to invest into things like businesses, real estate, etc. So, let's look at the numbers - the money market fund went down by $1M, the cash account went up by $1M, and a bunch of other people now have $6.6M to invest (along with a $6.6M debt to JPMorganChase).
Another example. Joe bought $1M of Berkshire 15 years ago, so he withdrew $1M from his money market account and paid someone $1M for those shares. Today, those shares are worth about $7M. Joe uses margin against those shares to buy something else (and has an associated margin debit balance at his broker).
Yet another example. The economy swoons and the fed decides to "inject liquidity", so they literally create money out of thin air and buy $9 trillion of treasury bonds, and all that new money begins to flow through the economy.
There's all sorts of new money coming into the market. It's not a zero-sum game. Only options are zero-sum, the sum total of the value to the buyer of an option plus the value to the seller of an option is indeed always zero.
No. of Recommendations: 5
Yet another example. The economy swoons and the fed decides to "inject liquidity", so they literally create money out of thin air and buy $9 trillion of treasury bonds, and all that new money begins to flow through the economy.
oh my god don't get me going again with this nonsense
No. of Recommendations: 8
<Let's say the person holds a JP MorganChase money market account. And let's say that person transfers $1M in T-bills to cash in a JP Morgan account, because they want to potentially buy something (maybe Berkshire shares) if the market drops suddenly. Now, JPMorganChase is a bank and banks loan money, so they take that $1M, and they use it as [tier 1] capital to lend out $6.6M to other people to invest into things like businesses, real estate, etc. So, let's look at the numbers - the money market fund went down by $1M, the cash account went up by $1M, and a bunch of other people now have $6.6M to invest (along with a $6.6M debt to JPMorganChase).
You are correct in affirming that banks can in effect create money, but your examples do not refute my point that money in bonds is not ‘dry powder’ for stock purchases. If I sell $1 million in bonds to buy stocks, then someone else had to buy those $1 million in bonds. If I put my million in a bank that lends out $6.6m, yes, there’s more money sloshing around, except that the guy who bought my $1 million in bonds had to withdraw that from his bank account, so the bank had to shrink the money supply by $6.6 million - it’s a wash.
Your other examples show how banks and the central bank can create money, but this has nothing to do with bond funds and their role as a source of funding for investors, which is what I was responding to. They may be a source of funds for a given investor, but they are indeed zero sum for the overall market.
Regards, DTB
No. of Recommendations: 1
If I sell $1 million in bonds to buy stocks, then someone else had to buy those $1 million in bonds.
Then we can assume that you believe it also works that way the other way around. If someone BUYS $1M in bonds, then someone had to sell $1M of stocks to get the money to buy those bonds. Correct?
Every month, the government SELLS about $180B of new bonds (new meaning over and above all the refunding of old bonds), does this mean that you believe the only way all those bonds are being bought ($1.3 trillion so far in 2024) is if people sell stock to raise the money to buy those bonds?
No. of Recommendations: 2
Every month, the government SELLS about $180B of new bonds (new meaning over and above all the refunding of old bonds), does this mean that you believe the only way all those bonds are being bought ($1.3 trillion so far in 2024) is if people sell stock to raise the money to buy those bonds?
Those bonds are sold to finance deficit spending by the govt. So Govt spends first which creates bank reserves in the private sector. Then the treasury issues bonds. The excess reserves in the private sector are then removed and replaced with interest paying govt bonds. This has nothing to do with stock market transactions.
No. of Recommendations: 1
The excess reserves in the private sector are then removed and replaced with interest paying govt bonds.
The same holds true for equity investments! Some of the "excess reserves" in those accounts get invested into new T-bills (notes/bonds/mortgage/etc), and some of those "excess reserves" in those accounts get invested in stocks. We've come full circle.
