When the Oracle of Omaha gets dark-ish on stocks at these prices, he isn’t taken seriously, suddenly. It’s only when he hypes stocks that everyone jumps in behind him.
By Wolf Richter for WOLF STREET.
Treasury bills are now all the rage at Berkshire Hathaway. They have been earning between 5.0% and 5.5% since mid-2023, and Warren Buffett decided they’re a great deal, rather than stocks at current prices, and loaded up on them.
At the end of March, the huge conglomerate held $153 billion in T-bills, up by $24 billion from three months earlier, and up by nearly $50 billion from March 2023, and up by $86 billion from March 2022 ($67 billion), according to BRK’s 10-Q filings. The year 2022 was when T-bills began paying a noticeable interest once again.
If BRK earns an average of 5.3% on its T-bills in the current quarter, that would be about $2.4 billion in interest income with zero risk. By comparison, it reported $15.7 billion in total pre-tax income for Q1. So the income from T-bills matters.
Total T-bills, cash, and cash equivalent jumped to $189 billion, up by $21 billion in three months, and up by $59 billion year-over-year ($130 billion in Q1 2023).
Excluding the amounts held by “Railroad, Utilities and Energy” companies, total T-bills and cash jumped to $182 billion, and Buffett said at the shareholder meeting that it was “a fair assumption” that it would grow to $200 billion by the end of June, and that he was “quite satisfied” with that position. Cash is king.
Converting Apple shares to T-bills.
While loading up on T-bills – of which the government has been issuing a tsunami on a weekly basis – BRK dumped 13% of its stake in Apple in Q1, or about 116 million shares, after having sold about 10 million shares in the prior quarter. Apple remains BRK’s largest stock position, with a value of $135.4 billion on March 31, according to BRK’s 10-Q filing today.
Obviously, Buffett praised Apple and the stock, because BRK was still holding $135.4 billion as of March 31, and he doesn’t want to tank the shares before he can unload more of them.
But he did sell Apple, and bought T-bills with the proceeds, instead of other stocks, and that ballooning pile of interest-earning cash became a topic at the shareholder meeting on Saturday, and he was asked why he wasn’t putting this cash to work – though it’s actually working just fine, producing 5%-plus risk free.
Earning 5%-plus risk free while waiting for bad stuff to happen.
“I don’t think anyone sitting at this table has any idea how to use it [the cash] effectively, and therefore we don’t use it,” Buffett said.
“We’d love to spend it, but we won’t spend it unless we think we’re doing something that has very little risk and can make us a lot of money,” he said.
“We only swing at pitches we like,” he said. And right now, they’re not liking anything other than T-bills.
“As the world gets more sophisticated, complicated and intertwined, more can go wrong,” and the company wants to be able to “act when that happens,” he said. Waiting for a big drop in share prices, to put this cash to work at reasonable price levels?
Obviously…
When Buffett gets unexcited about stocks, dark-ish about their potential, waits for them to drop, dumps a big pile of Apple, and invests in T-bills — and explains why — suddenly no one takes him seriously anymore.
The financial media drag out voices that kindly brush it all off. Just an old folksy guy on his way out. It’s only when he hypes stocks, or a particular stock, that the financial media and the other organs of Wall Street see him as the Oracle of Omaha and jump in behind him. Some things are just funny, without anyone wanting them to be funny.
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