2023-08-07 18:30:00
par Niels Saelens
posted on Monday 07 August 2023 at 20:30 •
5 min read
Warren Buffett, the man at the head of the Berkshire Hathaway conglomerate, holds a sum of cash amounting to 147 billion dollars. This is what the quarterly figures reveal.
Why is this important?
Buffett invests a significant portion of his cash in short-term Treasury bills. He is not intimidated by the lowering of the credit rating assigned to the United States by the rating agency Fitch.
News : Berkshire Hathaway released its quarterly figures this past weekend.
These results demonstrate that Buffett has never had so much cash in his hands than in the second quarter of this year. The total is $147 billion.
Investment in treasury bills
Details : More than $120 billion of this cash reserve has been invested by Buffett in short-term Treasury bills. The multibillionaire thus underlines his continued confidence in the American administration, despite the recent reduction of the credit rating by Fitch, now set at AA+, against AAA previously.
He claimed last week in an interview with CNBC that he wasn’t particularly worried about the lower credit rating: “Berkshire bought $10 billion worth of US Treasuries last Monday. This Monday, we bought another 10 billion dollars worth of vouchers. The only question for next Monday is whether we will buy $10 billion of debt securities with a maturity of three or six months,” he said. Berkshire Hathaway has a long history of investing in short-term Treasury bills, giving the investment fund the flexibility to cover insurance losses and have reserves available for purchases. According to Edward Jones analyst Jim Shanahan, it’s no surprise that Buffett is now investing so much in short-term Treasuries. “The yield on these securities is currently quite high,” he noted to the Financial Times. Government debt securities with a maturity of three months currently show a yield of 5.4%. Additionally, Buffett currently seems to be adopting a wait-and-see attitude. Stock markets, especially technology indices, have performed well this year. The S&P 500 has gained 17% since the start of 2023. The economic future remains uncertain. The Fed’s interest rate hikes are starting to impact the real economy. Nevertheless, many experts believe that the United States will avoid a recession. Michael Feroli, chief economist at JP Morgan Chase & Co, is one of them. It forecasts 2.5% growth in US GDP in the third quarter of 2023.
Other results
Zoom : What do Berkshire Hathaway’s quarterly results reveal?
The conglomerate posted a net profit of $35.9 billion, compared with a loss of $43.6 billion a year earlier. Berkshire suffered a loss of more than $53 billion on its investments last year when stock markets fell. Last quarter, it recorded a gain of 26 billion. Berkshire saw its second-quarter operating income rise from $9.4 billion to $10 billion. At the end of six months, operating profit was 18.1 billion, higher than in the first half of 2022, when it was 16.6 billion. Buffett considers operating income to be a better reflection of his company’s performance than net income, which includes paper gains and losses. In the second quarter, Berkshire repurchased about $1.4 billion of its own stock, much less than the $4.4 billion in the first three months of the year.
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