But wait a minute, is that really accurate? Well, not exactly. You see, Bloomberg is using a broad definition of Cash that includes Treasury Bills and other Short-Term Investments that mature in less than three months. But if you look at the actual filings, you'll see that Berkshire Hathaway has only $38.2 billion in Cash and Cash Equivalents, and $105.9 billion in U.S. Treasury Bills.
Why does that matter? Because Treasury Bills are not the same as Cash. They are Debt Instruments issued by the U.S. Government that often pay a low interest rate but are considered Risk-Free. They are also very liquid, meaning they can be easily sold or exchanged for Cash. But they are not Cash.
Cash is the most liquid asset of all, and it has no Interest Rate or implied Risk of Loss. It is also the most flexible asset, because you can use it for anything you want, without any restrictions or penalties. Cash is king, as they say! Or, as Ray Dalio once expressed, "Cash is Trash," because it actually declines in value depending on the speed of Biden-omics and excessive State' Minimum Wage Acts... excuse me, I mean the speed of Inflation.
So why is Berkshire Hathaway holding so much in Treasury Bills instead of Cash? Well, there are a few possible reasons that come to mind. One is that they are simply earning some Interest on their money, even if it's very low. Speculatively, they could be Hedging against their calculation of Market Declines. Then move funds into the Stock Market, after the anticipated declines occur. A third reason is that they are keeping their options open for future Acquisitions or Investments, and they want to have enough liquidity to act quickly when they see an opportunity.
Those are just my thoughts. However, regarding the later, Warren Buffett has often cited his distaste for trying to, "Time the Market". But I doubt there is complete avoidance of such actions. So, one question to consider is, "Has Berkshire Hathaway ever moved money into Treasuries before Market Crashes?". The answer is yes. In fact, Berkshire Hathaway's Treasury Bill holdings increased significantly before the 2008 Financial Crisis and the 2020 Coronavirus Pandemic. Buffett has been known to be cautious and patient when it comes to Investing, and he may have sensed that the market was overvalued and due for a correction. Some Indicators suggest the same conditions now. We can only guess at which Indicators are more prominently weighed.
Whatever the reason, it's clear that Berkshire Hathaway is not sitting on a pile of cash, as some media outlets suggest. They are holding a lot of Short-Term Assets that can be converted into Cash when needed, but they are not Cash. That's an important distinction to make, especially if you are an Investor or a follower of Buffett's moves.
