Cash as an asset class…


Buffett article on zerohedge

Whatever moves Warren Buffett (of Berkshire Hathaway) makes, the world notices!  The Man (more a Demi-God) moves markets.   I finally had a chance to read thru the WSJ, weekend edition and lo-and behold, the first page article details Berkshire’s current cash position, a whopping $100 Billion stashed in T-Bills!  He has held this sizable cash position for several quarters.   Usually when Buffett holds this high a cash allocation, he sees few if any bargains in the marketplace (among public AND private companies).  

I’ve previously written about the importance of cash as an asset class within an investor’s own asset allocation.  I want to reiterate that cash is a very important asset.  It provides liquidity, it is a store of dry powder for bargain hunting when needed, AND it provides an adequate hedge as it dampens portfolio volatility.   The cash holdings in my personal portfolio have run as high as 40% at times, and is currently sitting at approximately 19%.   Many Financial Advisers reading this will comment that cash penalizes an investor such as me with “opportunity costs.”  They’ll also mention that there’s a “cash drag” by not participating in the full upside of the markets.  I call B.S. on this way of thinking.  There are times when you should deploy that cash and load up on stocks near bottoms (such as two weeks ago when the market bounces off its 200-day moving average), in an effort to “rebalance” your portfolio with a tilt more toward equities.  I am a risk-averse investor.  Even when I’m “fully invested” I’ll still hold 10% in cash.  I would rather participate in only 60-70% of the market’s upside, to experience only 40-50% of the market’s downside (if that!).  Cash provides me comfort, like a warm bowl of soup as a cold, winter evening meal.  

In conclusion, if T-Bills/Cash are a viable asset class for Warren Buffett, consider emulating him, especially as the market continues it’s upward trajectory.   It may prove prudent to pare down your equity holdings in this current rally to have some cash available on the next sell-off, which will come.  Market volatility is here to stay and it will be on the rise again.  Cash will be a Godsend for many who follow in Buffett’s footsteps…


6 thoughts on “Cash as an asset class…

  1. warren buffets fake news ….old news Search Results
    Billionaires Dumping Stocks, Economist Knows Why |…stocks/…/450265/

    Aug 29, 2012 – A handful of billionaires are quietly dumping their American stocks . . . and fast. Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like .

    1. Hello Don and thanks for commenting. The front page of the weekend edition of WSJ features an article on berkshire’s huge stash of T-Bills, totaling $109 billion.
      I’m aware we’re inundated with fake news everywhere (hence my avoidance of Facebook) but if it makes front page of Wall Street Journal I have to think it’s genuine.
      Regardless, it offers me the opportunity to revisit the importance of cash as a viable and valuable asset class.
      Thanks again for stopping by and please keep visiting.

  2. Mr Fire,

    Does the WSJ article or any other non-fake-news source give an insight into how this huge cash stash is divided? What is the maturity of the $1B T-Bill investment? Are they laddered? How do you approach this investment and how can a neophyte put some cash into T-Bills?

    Also, what is your opinion of some of the high yielding online savings accounts which presently offer up to a 1.8% interest rate?

    Thanks for sharing your approach to this timely method of participating in the “Cash Is King” approach.


    1. Hi Dan,
      If Berkshire’s exact cash allocation was disclosed it would be found in the annual letter to shareholders which would be posted on the company website. Normally t-bills are anywhere from 3-mo’s to one year. The reason Berkshire is in t-bills (and my best guess is it’s mostly t-bills) is because they’re guaranteed against default and there’s no dollar limit like a bank whose insured by FDIC up to $250k.
      A normal investor like yourself should keep cash in a high yielding savings account. My personal favorite and where I keep my cash is:

      The high yield savings rate is 1.60% which is near the very top in savings rates in USA. I started with them a year ago and back then it was 1.30% and it has steadily risen as the FED has increased the discount rate.

      Cash truly is King. I personally don’t mess with t-bills. I do ladder CD’s in increments of 3, 6 & 12 months. As the nearest one matures I roll it into a new either 9 mo. Or 12 mo. CD. I purchase these from Charles Schwab. Any discount broker will offer brokered CD’s. No fees, no commissions. They make a tiny % from the issuing bank but nothing that an investor will notice. Thanks for stopping by and reading my blog. Enjoy! I update each week, usually 2 posts per week. You can follow me and will be notified of new postings. Also, follow me on Twitter @mrfireby2023

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