after 60 years of slaying the markets legendary
investor Warren Buffett is finally calling it quits he’s leaving his successor with enormous
shoes to fill and more importantly an obscenely large amount of money to invest this cash pile is
so big that some are worried it’s not so much a rainy day fund as preparation for an apocalyptic
market crash so today we take a closer look at Buffett’s mountain of cash and find out whether
there is anything to this intrigue my name is Guy and you’re watching the Coin Bureau at 94 years
old it wasn’t earth shaking news when Warren Buffett announced his intention to step down
as CEO of Barkshire Haway earlier this month you don’t see too many non-aggenarians leading
trillion dollar multinationals nowadays so it was only a matter of time the announcement did
however draw attention to two things namely Buffett’s extraordinary investing career and the
also extraordinary balance sheet that he’s poised to leave behind at Barkshire Haway so firstly
his career warren Buffett is widely considered one of if not the most successful investors
of all time having earned the nickname the Oracle of Omaha for his extraordinary six decade
record of outperforming the US stock market for context Buffett was born in Nebraska in 1930 to
a four-term congressman and investor father so it’s not exactly a rags to rich’s story still if
there was ever someone born with a predisposition to investing in securities well it had to be
Warren Buffett he absorbed himself in the world of capital markets at a very early age loitering
at regional stock brokers and visiting the New York Stock Exchange at the age of 10 he bought his
first stocks at age 11 and by 21 he was employed as an investment salesman at his father’s own
brokerage firm he later started his own investment partnership firm and it was through this company
that he started aggressively buying shares of the ailing textiles manufacturer Barkshshire Haway
from its CEO in the early 1960s after gaining a controlling stake in the company he fired the
CEO later describing the textiles business as the worst investment of his life buffett slowly wound
down the textiles operation replacing it with a much more successful insurance underwriting
business under the same name but above all else Barkshire became under Buffett stewardship
a diversified holdings company so an investment vehicle for acquiring other companies and
reinvesting the profits of one into another and it’s Barkshshire Hathaway the investment vehicle
that Buffett has been riding into the sunset ever since becoming by all accounts the most famous and
successful investor in American history and by the how exceptional Buffett’s investing career has
been we only need to check out the Forbes rich list with a net worth of $154 billion at the time
of making this video Forbes has Buffett pegged as the sixth richest person on Earth and like most
of the other people near the top of Forbes’s rich lists Warren Buffett is an American tycoon and a
household name around the world but alongside the likes of Zuck Musk Bezos and Gates Buffett sticks
out as the only centillionaire and only name among the world’s 10 richest people whose industry is
listed as finance and investing all of his top 10 neighbors are in tech fashion and retail or in
Elon Musk’s case automobiles and well much else besides buffett therefore appears to be peerless
in his field if we move down the Forbes rich list the next name in finance and investing is Michael
Bloomberg in 14th place but he made his fortune from the Bloomberg media business in 23rd place
there’s Binance’s CZ but now we’re getting even further away from Warren Buffett territory in
25th place there’s Jeff Yas founder of SI one of Wall Street’s largest and most successful stock
trading firms his company also makes its money in the stock market albeit in a completely different
way from Buffett’s the closest to a Buffett peer we can find then is Steven Schwarzman co-founder
and CEO of private equity giant Blackstone sitting in 31st place Schwarzman has a poultry net worth
of $44 billion a little more than a quarter of Buffett’s $154 billion this is why we think it’s
fair to say that Buffett is unrivaled in the field of investing this is borne out not only by his
net worth but by his track record over a career spanning more than 60 years his performance
has put the rest of Tradfi to shame and he has actively shamed much of his own industry for
delivering worse returns for clients than a simple stock market index after fees are accounted for
according to the Financial Times about 2thirds of money managers underperform the S&P 500 and the
cohort who outperform tends to change each year in other words very few professionals outperform
the markets for an extended period of time in 2007 Buffett challenged hedge funds to a 10-year
competition to see whether they could generate returns in excess of the S&P 500 over a decade
shortly after the great financial crisis of 2008 nuked the US stock market making Buffett look a
little silly at the time but lo and behold at the end of the 10 years the S&P 500 was outperforming
the hedge funds making his point loud and clear now the reason I’m telling you all this is to
give you a sense of Buffett’s accomplishment he absolutely trounced the S&P 500 for 60 years
straight if you had invested $100 in the S&P 500 in 1960 the returns generated since then
would have turned that $100 into $39,000 now that’s a very long time horizon but it’s still
a pretty great return on your investment right well it is peanuts compared to what you would have
if you’d have given that $100 to Warren Buffett in 1960 because it would now be worth $5.5 million
buffett’s ability to outperform the market year after year not by complex financial engineering
or exotic trading algorithms but by buying stocks when they are undervalued and selling them when
they are overvalued has won him the admiration of Trady Bros the world over the success he
has enjoyed using this no frrills approach to investing has inspired generations of retail
investors to emulate him because unlike the mathematical models that dominate trading on Wall
Street nowadays Buffett’s methods do not involve any technical wizardry that us mere mortals
cannot hope to understand but at the same time when we ask the question what’s his secret the
typical answer is himself as Bloomberg put it quote Buffett himself was the secret source and
if Buffett is simply much better than everyone else at this investing game it kind of pours
cold water on the idea that anyone else can do what he has done and this brings me to the second
thing about Warren Buffett that has caught the world’s attention recently and that’s what he’s
leaving behind at Barkshire Haway when Buffett broke the news of his retirement what he in fact
announced was his successor barkshshire Hathaway vice chairman Greg Ael buffett told the crowd of
Barkshshire shareholders quote “I think the time has arrived where Greg should become the chief
executive officer of the company at year end.” Now this apparently caught everyone in the room
including Abel himself by surprise the board of Barkshire Hathaway later voted unanimously to
formally appoint Abel as Buffett’s successor it’s clear that Buffett and the board trust
that the company will be in good hands under Greg Ael but considering everything we’ve
just said about Warren Buffett’s exceptional lifetime accomplishments Abel is stepping into
some very big shoes we won’t be too shocked if he cannot match his boss’s performance in the
long term and many suspect that this is one of the reasons why Buffett has spent the last year
or so stuffing Barkshshire Hathaway’s coffers with as much cash as physically possible to give
his successor Abel the best possible start as the new CEO of a company in good financial health
good financial health may be understating it a little though at the end of Q1 Barkshire
Hatheraway was sitting on a $347 billion mountain of cash yeah we’re not talking about
dubious unrealized P&L screenshots here that’s $347 billion in realized gains held in USD
and US treasuries barkshire’s cash pile is now bigger than the market capitalization of
all but around the 25 largest companies in the S&P 500 it’s more than the cash reserves of Apple
Microsoft Alphabet Amazon and Nvidia Corp combined and national treasury data cited by Investopedia
and Wikipedia tells us that it’s also bigger than the foreign exchange reserves of for example
the United Kingdom Germany and oh let’s see here the United States and yes you are hearing that
correctly the mind absolutely boggles so as the incoming CEO Greg Ael will be inheriting a company
whose treasury looks like that of a wealthy nation state now Buffett has denied that Barkshire has
been stockpiling cash specifically to give Abel a flying start but intentional or not Abel couldn’t
really be beginning his tenure as CEO under better circumstances not everyone agrees that it’s wise
to store $347 billion in cash though barkshire Hathaway’s balance sheet has drawn the eye of
Michael Sailor who has accused Warren Buffett of destroying $3 billion a month by not investing
in Bitcoin as Sailor explained in an interview late last year quote that $320 billion that is
destroying $32 billion a year they are destroying $3 billion a month in capital because they’re
generating a 3% after tax yield at best and the cost of capital is 15% so take 12% negative
real yield and Buffett himself might even agree with Sailor about the perils of holding too much
cash he once wrote in an article for Forbes quote “The arithmetic makes it plain that inflation is
a far more devastating tax than anything that has been enacted by our legislators the inflation tax
has a fantastic ability to simply consume capital it was precisely this fiat currency risk that
persuaded Michael Sailor to swap USD for BTC as his company’s primary reserve asset back in 2020
and maybe this is why Sailor is confident that if he had an hour alone with Warren Buffett the
Oracle of Omaha would walk away hopelessly orange sailor may also be hopeful because Barkshire
Hathaway actually has some indirect exposure to BTC already this is through a $34 million stake in
Jeffre Financial Group a New York-based investment bank that has deemed BTC a quote critical hedge
against fiat debasement and inflation and holds a position in Black Rockck’s iShares Bitcoin Trust
ETF worth some $85 million however to date Buffett has been immune to Bitcoin’s charms he’s publicly
described Bitcoin as quote rat poison squared and a quote gambling token now this is not all that
surprising as Buffett has always been drawn to boring vanilla investments in industries like
insurance fast food and retail banking his risk tolerance historically ruled out even most tech
stocks which Buffett claims not to understand so by his standards Barkshire’s investments
in Apple and IBM were daring and exotic on the other hand when Sailor made these comments
Buffett had yet to announce that he would step down as Barkshire CEO this has obviously
now changed so maybe Sailor could do us all a favor by sweetalking Greg Ael instead but for the
avoidance of doubt we don’t expect Greg Ael to be any more interested in BTC than his mentor abel is
a Buffett acolyte with a background in corporate management and accounting who also spends his
time pouring over corporate balance sheets his major contribution to Barkshire’s investment and
acquisition empire has been in building up its energy business abel’s public views on Bitcoin are
not known but he is not expected to suddenly take Barkshire in a new pro crypto direction as for a
potential encounter with Michael Sailor Buffett and Barkshire have historically avoided the kind
of leverage financial instruments represented by Sailor’s strategy and this could put Sailor at a
disadvantage as a salesman pitching Bitcoin and most observers expect continuity at Barkshire not
least because Buffett will remain a member of the board so for the moment don’t expect Buffett’s
billions to start pouring into the crypto market anyway with that out of the way let’s turn to why
Barkshire this behemoth of stock market investing would now rather sit on $347 billion worth of
cash rather than stocks for context Barkshshire has been a net seller of stocks since 2022 and
buyer of US Treasury bills you’ll recall that the Federal Reserve began hiking interest rates that
year making cash equivalent assets more attractive but it wasn’t until 2024 that Barkshire started
aggressively dumping stocks including 2thirds of its largest position Apple in which Buffett
had invested $35 billion back in 2016 by the end of 2024 Barkshshire had spent $9 billion on new
stock purchases and made $143 billion by selling its existing holdings this caused the company’s
pile of cash equivalent assets to almost double in the space of a year raising many an eyebrow in
the investing world some have interpreted this as a warning sign and speculate that Barkser’s cash
hoarding has been preparing for some black swan event be it a US recession or some other great
misfortune that Buffett is expecting after all Buffett is famous for pulling off big bets during
once in a generation market crashes like when he bought up a sizable position in Goldman Sachs at
a huge discount during the great financial crisis of 2008 buffett is now the poster child or poster
pensioner I suppose for buying when the markets are fearful and selling when they are greedy and
by Buffett’s good old value investing standard the US stock market has been getting very greedy
indeed with the average price toearnings ratio of the S&P 500 almost doubling between late 2022 and
early 2025 last year the ratio rose from 26 times earnings to 30 times earnings far overshooting the
historical median of 18 and screaming that the US stock market is tremendously overvalued after a
slight correction in Q1 the ratio is back down to 25 at the time of making this video indicating
that the market is still far from cheap historical charts of the S&P 500 index price toearnings
ratio suggest that when it’s high a major market downturn tends to follow for example in 1987 1992
2002 and 2008 so is Barkshire preparing for a huge market crash that the rest of us can’t see coming
well yes and no when stocks are deemed overpriced it implies that future downside is likely anyone
selling overpriced stocks is therefore de-risking meaning that they’re preparing for the likelihood
of future downside last year fellow billionaires like Jeff Bezos Mark Zuckerberg and Michael
Dell also offloaded billions of dollars worth of shares in their companies selling into greedy
and euphoric markets while their stock prices were soaring they too were in a sense preparing for
prices to come down at some point rather than continue going up in a straight line forever in
late 2023 Buffett even told shareholders that quote “Barkshire can handle financial disasters
of a magnitude beyond any hereto for experienced,” which sounds rather ominous but as far as we’re
concerned none of this is evidence that Buffett or indeed any other billionaire has specific
information about an incoming Black Swan event buffett may be an investing genius but that’s
because he’s prepared to take advantage of great opportunities when they present themselves not
because he knows exactly when an opportunity will present itself what he has made very clear though
is that there’s no attractive opportunity in the US stock market today prices remain stubbornly
high perhaps boyed by the relentless march of retail investors passively DCAing into the S&P
500 come rain or shine at the annual meeting of Barkshire Hathaway shareholders this year Buffett
spoke on the cash pile and the virtue of being patient quote “Our financial condition continues
to hold a lot more cash and treasury bills than I would like but that’s simply a question of
when opportunities occur and if you get real opportunities every 5 or 6 years you know you
have to be patient.” Charlie Mer always pointed out that we made most of our money on about
eight or nine ideas over 50 years now there’s a lesson in this and it’s one that we all know to
be true already the best opportunities come during those rare occasions when highquality assets are
extremely undervalued and you can outperform most other investors if you bet big on those occasions
and then huddle your assets for years on end that is Warren Buffett’s life story and career in a
nutshell most investors just find it very hard to sit on their hands long enough and have so much
dry powder prepared for when such an opportunity comes especially since nobody knows when that
opportunity will come nor what form it will take barkshire on the other hand is now armed to the
teeth with dry powder and the whole world will be watching to see how it is deployed and when under
Greg Abel’s new leadership so best make sure we’re all paying attention and while we’re waiting for
the next disaster that presents Barkshire with some new generational entry why not check out the
latest drama from the top of the US stock market the possibility of the US government breaking up
big tech companies okay that’s all from me for now though as always thank you for watching and
I’ll see you next time this is Guy over and out
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