Warren Buffett, the billionaire investor, has accumulated a staggering $157 billion in cash and Treasuries through his company Berkshire Hathaway. This hefty cash pile is seen as a strategic move to position himself to make advantageous acquisitions and strike lucrative deals when the American economy inevitably falters, according to economist Steve Hanke.
The well-respected investor’s Berkshire Hathaway held an unprecedented $157 billion of cash, Treasury bills, and other liquid assets at the end of September, which reflects an increase of nearly $50 billion in just 12 months. One contributing factor to the company’s burgeoning cash pile is the net sale of $5 billion of stocks last quarter, adding to a net offload of $44 billion of stocks over the last four quarters combined.
“This is classic Buffett,” Hanke said in an interview with Markets Insider. “He loves to fish in troubled waters.”
Hanke, a professor of applied economics at Johns Hopkins University, has been teaching students how to value companies like Buffett for decades and has a long history of advising high-profile figures. He believes that Buffett’s cash hoard puts him in an advantageous position to take advantage of distressed financial institutions when the economy takes a downturn.
During the financial crisis, Berkshire deployed $21 billion across five transactions, striking lucrative deals with Goldman Sachs, General Electric, Mars, Dow Chemical, and Swiss Re. Additionally, the company earned over $4 billion in interest, dividends, and investment income in the last quarter, representing a 70% increase from the previous year.
In Hanke’s view, Buffett’s cash buildup will allow him to acquire discounted stocks and businesses, as well as lend money at attractive rates, all while earning a solid return with zero risk thanks to higher bond yields.
Experts and commentators have also signaled Buffett’s substantial cash holdings as a potential warning sign for investors, with Lee Munson of Portfolio Wealth Advisors recently cautioning that Buffett’s actions may indicate trouble ahead.
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