Avoid making negative or unhelpful posts, and instead focus on providing constructive feedback and ideas that can help to move the discussion forward.
- Manlobbi
Halls of Shrewd'm / US Policy
No. of Recommendations: 8
Warren Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B) is the single largest private holder of U.S. Treasury bills, surpassing even the Federal Reserve’s own holdings. As of the end of the first quarter of 2025, Berkshire controlled about $305 billion in Treasury bills, while the Fed’s holdings had dropped to $195 billion.
Berkshire’s outsized T-bill position now exceeds that of the Federal Reserve, banks, and even many foreign central banks. For investors, this is quite a show of the value of liquidity during uncertain times and the importance of resisting the urge to chase risk when valuations are stretched.
https://stocks.apple.com/AX71ARWv0TQe3YDxUQ18aFg
No. of Recommendations: 35
Speaking of de-risking, here's some fun with numbers. Not solid reasoning, just fun.
Markets were clearly pretty exuberant in the late 1990s, including many of Berkshire's stock holdings. Mr Buffett, hesitant to pay tax on unrealized gains, managed to de-risk by doing the Gen Re merger and instantly turning the portfolio into a bond-heavy one without paying tax on the equity gains. Gen Re turned out to be worth rather less than thought at the time, but it was in several other ways a genius move. The broad US market peaked in March 2000, 1.75 years after Mr Buffett announced that de-risking transaction in June 1998.
Fast forward 26 years...
Berkshire's cash position as a percentage of portfolio size is normally in a range, topping out at about 36% at the highest. The recent serious stock sales and cash raising started in Q2 2024, at the end of which cash was up to 45.5%, continuing to the 51-54% range in recent quarters. I'm not sure which month the de-risking began in a big way, but let's say the middle of that stretch, May 2024. 1.75 years after that would be January 2026 : )
You heard it here first!
For a bit more numerology on that, the smoothed real earnings yield of the S&P 500 at the time of the June 1998 derisking was 2.86%, equating to a P/E on cyclically adjusted earnings of 35. The equivalent figure at the time of the ~May 2024 derisking was about 3.0%, equating to a P/E of 33.4, pretty similar to the 1998 moment. The current level equates to a cyclically adjusted P/E of 37.6.
Jim
No. of Recommendations: 4
> I'm not sure which month the de-risking began in a big way, but let's say the middle of that stretch, May 2024. 1.75 years after that would be January 2026 : )
Solid reasoning or fun, that's the most important thing I've read here in a quite a while.
No. of Recommendations: 1
No. of Recommendations: 3
I love it. We don't get enough fun with numbers type posts. Also, Shiller PE ratio now above 40 for the first time since the dot com era.
No. of Recommendations: 0
How do people treat BRK’s large cash position when thinking about your own asset allocation? Many of us are heavily weighted in BRK.
No. of Recommendations: 0
I don't factor it in. It will moderate the drawdown in BRK or at least the time to recovery
No. of Recommendations: 3
""There are three ways to make a living in this business: be first, be smarter, or cheat. Now, I don't cheat. And although I like to think we have some pretty smart people in this building, it sure is a hell of a lot easier to just be first..."
FC
No. of Recommendations: 1
Thanks, Jim. You write very clearly but often I need to read your posts twice so I understand.
Fun with numbers, indeed.
No. of Recommendations: 20
...but often I need to read your posts twice so I understand.
Be glad it's written down.
You should see the glazed look on the faces of people I speak to in person. Sometimes I make sense, sometimes chicken bubble fraught zombie.
Jim
