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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Son of a gun, I have been doing the same thing for months (buying treasuries)! And I’m not the Oracle. I did sell my Apple stock, too (in early 2023)
I’m also not as old as Warren, but not too far away.
You are the “younger” Oracle of Texas.
LOL! Don’t I wish!
Hope you have many fine years of getting much wealthier (without working) ahead of you, like your hero.
Well I’ll be. Please call me the Oracle of San Diego or a future homeless man ( I don’t own RE).
You are a wise one, Oracle of San Diego. Buying RE in this town right now is a fool’s game, and has been for over 2 years at this point. Waiting on the sidelines with you, brighter days ahead for those of us who are patient…
I am joining your club, but I am extremely patient
TOO MUCH BRIGHTER, most likely…….along with the side effects of much more evaporated water and all it’s stored energy.
There is almost nothing worse on a daily basis than trying to sell a house you’re living in. Renting is complete and total freedom. Don’t like the new neighbors? Buh-bye. Want to live in a different part of town? Buh-bye. Want to change jobs on a moment’s notice? Seeya. When you’re owned by a house, you’re in a physical and financial prison.
Own lots of rental properties and feel like taking a vacation… bye tenants. Feel like buying a new car or boat or plane and takkng them for a spin … bye tenants. Feel like buyimg a new vacation house and spending time there… bye tenants.
A lot more people have gotten rich owning real estate than being renters. Convenience has its price and owning a lot of rental property is true financial freedom. The house you live in is just another one of the perks paid for by your tenants.
Long ago,
I remember renting a room at Waldo’s flop house, lying there at night in the dim light, watching as the cockroaches crawled across the ceiling, a small fridge against the wall keeping my beer cold.
So many of my friends are dead and gone…but Im still alive at 65.
Things I do now that I couldn’t do when renting:
-Have pets
-Play loud music
-Drill holes in the walls
-Change oil/work on my car in the driveway
-Let my friends park in the driveway
I could keep going.
Owning a bunch of rental properties in this market is like buying up all the bottled water before the hurricane arrives. Increase the scarcity level of an item and then profit off of the resulting desperation.
I’ve read at least one paper, somewhere, arguing that we’re already past the level of peak technological progress, and by extension peak *real* ROI with high returns in the form of productivity. And that’s even ignoring all of the externalities. But because people are still being forced to invest in *something*, we end up with a bunch of money sloshing around in zero-sum investment schemes like stock (buybacks), T-bills (debt), and housing (crisis).
Matt B. – I often wonder if it’s the case (and always has been) of never enough remunerative real work to go around to adequately support the population increases historically facilitated by human technological advances on the spacecraft (…snake, meet tail…).
may we all find a better day.
@CCCB
“Own lots of rental properties and feel like taking a vacation… bye tenants.”
– – –
“In an egocentric world, a dehumanizing and nature-foiling cultural agenda stretches from childhood to the grave. Interpersonally, other people are seen primarily as objects, as mere extras in one’s own self-important, nonrelational drama or as consumers in the nation’s ever-expanding GNP…in other words, not in terms of their natural qualities but in terms of their social or economic worth.”
–Bill Plotkin, Nature and the Human Soul: Cultivating Wholeness and Community in a Fragmented World, 2008
“There damn little caring for mothers, babies, old people, or anybody physically or economically weak these days.”
–Kurt Vonnegut, A Man Without a Country, 2005
No Bad- kinda sounds like some bright spark in the PRC read Plotkin and had a ‘eureka’ moment…
may we all find a better day.
@91B20 1Cav
Ah, thks for reading. No, not just Plotkin whose writing I find some value in but fault his lack of primary emphasis in character development. Every nation state trips over Heraclitus’s warning about character being destiny, then slips into the Generational Patterns documented by Ibn Khaldun(1377).
There IS variance in severity and in that, actual hope.
Spacecraft just had 11 record high temp months in a row, as of April. Somebody should go look at the large mammal life support systems.
I may be hung up on risk a little too much but I am doing quite well where I am. Longer term homeowner.
Anectdotally, renting has its perils. NOBODY”s parents I went to high school who rented are still there. Many parents who owned a house in the 1970’s and 1980’s are still there. Rents and housing prices went through the roof back then. Landlords gasped in delight and sold their rentals for a 200K windfall and renters were forced out of town. Homeowners still there are happily paying $1500/year property taxes on their $1M houses thanks to Prop 13 and no mortgage because they were in it for the long term. Renters are paying $5K per month for the same house now which still doesn’t cover the mortgage, insurance and property taxes of the landlord who paid $1M with a 7% mortgage.
Landlording has it’s perils also. Many of the foreclosures of 2008-2012 were landlords who couldn’t pay the mortgage with rental income. Housing prices dropped, rent dropped and landlords lost their shirts.
The moral of the story is if you can own a house as an owner or landlord and ride out the down years, you will likely do well.
I could say the same for the stock market.
Never Panic Forcing you to Sell Low is a good approach to life. Plan ahead.
Only the Fed knows what will happen next.
NBay – check, but we know too-many don’t/won’t see or comprehend the ‘Not Available in Stores OR Online’ labels on the support system’s boxes…best.
may we all find a better day.
Hi Anthony: While I never owned Apple, I have been buying tons of six month T-Bills and loving it! Just turned 70 yesterday and finally started social security, too! Thanks Uncle Sam, for the T-Bills and social security payments! But, you know, just in case, I own a crapload of PHYS Sprott Physical Gold Trust.
Congress (with a handfull of exceptions) cares about nothing but the next election. May be the last one for a variety of reasons.
Inflation aside, did Wayfair and your transport selection have just what you NEED….before November, anyway?
Good report. Buffett always one step ahead.
Been doing the same thing as well….have my doubts if either Buffet or myself will be right this time…Maybe this high is the new normal, afterall Buffet had missed out in the last year on the Crypto chain, if he plow a fraction of his money into it, he would be walking away now with soo much more..
Dear Mr. Ikki: Do yourself a favor and read the book “Number Go Up” by Zeke Faux, and then maybe you’ll understand why Warren Buffett, Jamie Dimon, and a lot of other savvy financial guys are a bit skeptical of the “magical world of crypto”.
Those guys are also skeptical of the shiny rocks some people like.
I hear gold is the new T-bill.
Gold doesn’t pay interest.
Gold is up because the Chinese central bank has been buying for 17 straight months and selling US treasuries, thought to be preparing for a Taiwan invasion, although unlikely. Nothing wrong with holding small bars or coins though, easy to buy and sell, far safer than crypto. Tax free if you are clever.
Chimps all still like shiney rocks, and that’s our closest relative.
…problem is they’ll only pay peanuts…
You obviously don’t know a good deal when you see one.
great book !
Apple and Tesla, etc., have the same problem as spurned, cuckolded boyfriends: the object of their love will slowly reject it, meaning bar/block more and more of their products, whatever it promises/ says. Watch! Hard to do well if you lose up to half your customers! Buffet sees the signs.
To be fair to Apple, Buffett still thinks Apple is a great company. At the AGM he made it clear it will always be a top holding of his for a very long time.
He sold some for a few reasons:
1. It has gotten expensive, but not overly so. He just doesn’t see as large of margin of safety there anymore at these prices.
2. He is worried about China. For better or worse, Apple is wedded to China. Apple has been trying to change that and diversify manufacturing to other countries (mostly Vietnam and India), but it has been slow going and much harder than anyone thought. He is also afraid Apple will be used as a pawn in any conflict between the U.S. and China. He is also worried about rule of law in China protecting Apple’s assets and operations there.
3. Taxes. Berkshire has a huge unrealized gain in the Apple holdings. Buffett is afraid of proposed taxes on unrealized gains. Combined with everything else above, trimming Apple seemed prudent to him right now.
“At the AGM he made it clear it will always be a top holding of his for a very long time.”
No, that’s not what he said. He said it’ll likely continue to be his top holding THIS YEAR. Which will be true, even if he continues to dump 13% of it each quarter, because his next holding down is like just a quarter the size of Apple.
“ Buffett Invests in T-bills instead of Stocks, Waits for Bad Stuff to Happen, Cash is King at 5%-plus”
Huh, me too. Twelve years ago. It’s bound to turn soon.
haha that’s how I felt about the housing market…and look at how many eggs I have on my face about that one….I can probably make a giant omelette with all them eggs..
Giant omelette,
The old wagon wheel has put himself out to pasture. Feasting on 5% is like eating bugs, not the fine cuisine he’s used to.
It reminded me of spock, in search of his brain, but instead, its warren in search of a yield.
I’ll join the crowd. All the apocolyptic perma bears on the blogs, newsletters, and podcasts since 2010 influenced me to be way too risk off since say 2013. Sold a bunch of CA rentals 2015-2019 thinking we were late cycle. Thought the stock market was overvalued in 2014! I have not participated like I should have the last 10 yrs.
I have lost hope this cycle in ever getting a big juicy buying opportunity again in stocks or RE. I think the rules have changed. Maybe its the Fed, maybe its all the fiscal, maybe its the tech companies high profit margins, maybe in real estate its that we can’t build enought housing supply and demand from millenials is way stronger than we thought.
“Feasting on 5% is like eating bugs”
I agree. I’m old enough to have seen much better ROR.
Not to complain, I am very grateful for 5% in the safest investment possible. However, you need $1M just to earn $50K/year at 5% before taxes. Depending on your location and lifestyle, $50K/year ($40k/year after Federal, State, and Sales taxes) may require eating bugs a couple of days a week with one bedroom apartments going for $25K/year in many places. It would be hard to retire early even though you are a millionaire.
Buffet still seems to be keeping his balances in mostly stocks.
Over the last 30 years, the S&P 500 earned almost 10%/year on average. During the bad years (ie 2001-2003 (50% loss), and 2008 (40% loss) , you would be eating bugs. A 5% return seems safe for these days.
However, I was too young to participate in the 1981 15% 30 year treasury rates. If it happens again, I’ll go mostly all-in and it should hold me until I pass on. 15% on $1M would be $150K/year. No bugs.
One can dream.
BobE-
Your analysis is dependent on the price of bugs.
Cheers, and Bon Appetit.
BobE: keep in mind that t-bill interest isn’t subject to state income tax. Maybe not a game-changer in your analysis, but it helps.
@ BackRoad
Sounds like capitulation
Grimp….everyone always says that, “capitualtion”… “that’s a sign of the top”. Problem is they have been saying that for 10 yrs.
…the population of Western Fence Lizards around the yard anxiously await Springtime for the bugs’ return…
may we all find a better day.
Love those little guys.
At my off grid house I had a LOT of concrete (how I killed my lower back) and the lizards loved it too.
Bugs had NO CHANCE if they wandered out on to it.
I also witnessed a “courtship chase, several attempts to roll her over, and final mating” on a big slab. (for an addition later)
Just like us, missionary position, and little lizard rear end going up and down.
Cute as hell, never met anyone else who was lucking enough to witness that.
cash wasn’t 5% 12 years ago.
“The financial media drag out voices that kindly brush it all off. Just an old folksy guy on his way out.”
LOL! Kinda like me….
“We only swing at pitches we like,” he said. And right now, they’re not liking anything other than T-bills.
Story of my life is holding back on too many good pitches and striking out. Coulda, shoulda, woulda…
You and I don’t have the insider information that Buffett has. You didn’t miss anything except well marketed bad investments. In bull markets all logic may be ignored for a long time. All you gave up was lottery tickets.
Buffet likes buybacks and dividends (unless he has to pay them).
Wolf: Buffett also kept saying he doesn’t invest in tech he doesn’t understand it (Harvard B review: “Warren stays away from technology companies because he likes investments in which he can predict winners a decade in advance”) only to invest in Apple later. Perhaps by that time, it became a service or financial engineering company with a payout better than ZIRP and now he understands FE is a time bomb that can go off any time!
He also lost a lot in Paramount. It looks like you need to have something written on your head before when you were born for everything (karma)!
I am glad you are not using any PC monitoring software that bit_hes at words such as bo_b, vir_s and so on!
He also hated precious metals and derivatives (“weapons of mass destruction”) until he bought 120 million oz of silver physical and sold futures on it at about 6 bucks and someone scooped it up. (SLV? They started with about 120 million oz.)
Opinions change, be flexible.
Warren also invested in all of the major airlines. He said no way they could all lose money.
A lot of people misunderstand Buffett’s views on tech. What he means by not understanding tech is that he wants a lot of certainty in his investments. He wants to know that even if things do not work out like he planned, it won’t be a total disaster. Cutting edge technology does not have that certainty.
In the early 1900’s there were hundreds, maybe even thousands of car companies. Cars were cutting edge technology at the time. Everybody and their brother were involved in automobiles.
By 1980, there were only really 3 auto companies left (Chevy, Ford, Chrysler). In those intervening decades it was obvious that the automobile industry overall was hugely successful. Lots of money to be made. However depending how a person invested in automobiles in the early 1900’s, an investor could be broke or incredibly wealthy. Even though it was an obvious up and coming industry that was going to generate lots of wealth, early on it was a constantly changing industry where picking winners from losers was really hard.
It is the same with AI right now. There is no doubt AI is going to make huge advances for mankind of the coming decades, and lots of people are going to profit immensely off of thise advances. But the technology is so cutting edge and ever changing that a win today does not equal a win tomorrow. It will be really hard to see who will be the winners decades from now, which is what Buffet is really looking for.
Buffett completely understands the power and wealth generating ability of technology. He completely understood the mass communication power of the internet long before others did, he just didn’t know how to predict who the big winners would be.
Weird fact, Berkshire Hathaway had a website and was selling stuff on it years before Amazon was.
I’m about $15K into TLT20 with an avg cost basis of about $93. I just bought another 20 shares under $90 a couple of days ago. I wish that I had about $5K or so when it got below $83.
Given that there’s at least 25% upside from a recession, I’m happy collecting about $800 in annual dividends for now and then I’ll sell off once we’re knee deep in a recession, whenever that may be.
Unless it’s a nasty recession, I don’t see the FFR dropping below 150-200 basis points.
“Given that there’s at least 25% upside from a recession”
Isn’t that basically a bet on both a recession and QE?
I’m sure it’s just my ignorance, but I don’t get buying the long end of the curve when it’s inverted.
He’s a pivoteer – he’s betting on rate cuts.
That’s the whole point of bond funds like TLT (vs holding the actual bond itself). There’s no pull to par so the fund price is inversely correlated with rates on the 20 year.
Disclaimer: I am short TLT
“He’s a pivoteer – he’s betting on rate cuts.”
That’s what I got out of it as well, but cutting the FFR doesn’t mean the 20 year rate will come down as well. But what the hell do I know? A lot less than Buffet. T-bills at least make sense to me.
Right the 20 year is still lower in yield, so short yields could go down while long yields stay put, thus uninvertimg the curve.
Or more ominously, long yields /rise/ as the bond market loses confidence in the Fed’s inflation fight. I suspect this is an unacknowledged fear of the Fed right now.
I’m also mostly staying out of duration right now. I own some 10 year agency bonds with a 5.98% coupon but that’s it.
I DO believe that there’s upside risk to inflation over the next 6 – 9 months, so I can see the short hedge. But, I’m not in TLT for the next 12 months. I’m waiting on the recession which there will be one at some point.
However, I don’t see the Fed raising the FFR in an election year unless monthly core PCE moves above 4% by June. JPowell can stomach 4% by keeping rates higher through the election. If he pivots, it’s late this year.
I don’t see any real signs of recession risk looming on the horizon. We’re smack dab in the middle of a soft-landing, and it’s been that way for 2-3 quarters now.
I’m looking for one more drop into the 86-87 range to load up on some December calls.
Feeling like we could bottom within a couple weeks after the next CPI report.
Rate cut mania round 3 may be right around the corner unfortunately… Hopefully not here yet but who knows
TLT bulls, explain yourselves please. Why do you think it has more upside?
Because eventually there’s going to be a recession. I just don’t think eventually is two years down the road after 50 basis points rate hikes.
Technicals mostly cause fundamentally i agree that rates should be higher for longer.
I think it’s just a big bounce coming tho but also I don’t know that we get a recession but I think we will get recession fears
But what is the advantage of TLT when its yield is ~100bps lower than 13-week T-bills?
If long rates eventually go up, then your principal goes down. And unlike owning the actual 20 year bond, you can’t recover your principal by waiting till maturity.
If long rates stay the same, then you’ve simply underperformed the risk-free rate of return.
If long rates go down, then your TLT price goes up. But I just don’t see long rates going any lower – 20 years of duration, even with no credit risk, should cost a lot more than 4.5%.
What’s the argument for long rates going back down?
It’s not a long term trade so yield doesn’t matter.
Short term price speculation in a nutshell.
I expect tlt to go back into crash mode after this last hoorah for what it’s worth.
I’m in the same camp since June 23. It’s a toss up from what I read out there. The problem I have is the debt. Treasury borrowing short to pay less can only work so long. I’m sticking with the income tools. No risk.
Here’s a geopolitical gambit that throws a monkey wrench into all planning.
What the US government is doing is everything it can to get the world to dump US treasuries driving them to a dime on the dollar. Retire $30 trillion debt for $3 trillion and then start the whole process all over again.
How many times have I heard a talking head say the Us better be careful or China will dump all it’s US treasuries… just plain silly!
Shrewd Yankee trader!!!
“What the US government is doing is everything it can to get the world to dump US treasuries”
That makes zero sense. The USG is funded by treasuries.
PPS
Notice how USG maintains it’s perfect record of never having defaulted on sovereign debt. That’ll make issuing new paper easy if the yield is high enough.
Yes, we are all Japanese now. Every central bank is and will continue to monetize their government’s debt…
…but is is great to be getting a return of 5+ on the short end after 15+ years of financial repression.
Still, none of this is sustainable, magnificent sand castles everywhere…
hedge accordingly.
FYI,
Berkshire still has 370 billion in equites and still has 87% of an apple stake. yes, he’s waiting for a fat pitch as there are no called strikes in the game of investing. i wouldn’t read too much into what he’s actually doing. And, at least 100 billion is always in T-Bills for Berkshire as that is the amount he indicated in the past he needs to assure liquidity at all times.
He isn’t running for the hills, at least not yet.
Agreed. Let’s not forget, he’s still buying stocks. But also that the size of his investment portfolio limits his ability to invest into many small/illiquid companies.
Look at Ally for an example, less than 0.30% of his portfolio but he owns just under 10% of all the shares outstanding. Ally which by the way, has had two huge fat pitches thrown to people in the last four years making for a great investment opportunity. Once in 2020 and once a year ago during the Silicon Valley Bank crisis.
That’s why I like microcap investing. No competition from institutional investors.
“We’d love to spend it (the cash), 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. I know his job is to make money, which he does quite well, but I think when he makes these kind of statements it would be great if he added in that he’d like to also like to invest in companies that do some overriding good in the world. I guess those types of companies are too risky and won’t make him a lot of money, but a couple of billion invested maybe just a bit more ethically would hardly hurt his quarterly take. Oh I know what people will say about social investing, but it would still be a nice idea to try every once in a while.
Warren buffet has donated $50.7 billion in the past 17 years to the Bill and Melinda Gates foundation (a non-profit). Thats not investing, that’s cold hard cash donations. He actually contributes A LOT to philanthropic causes, far beyond “social investing.”
“…that’s cold hard cash donations.”
No, not “cash.” He donated stock of BRK that he had had for decades and never paid capital gains taxes on because he never sold it, and the donation didn’t trigger a sale, and didn’t trigger the capital gains taxes, and then he got the $50 billion or so tax deduction from the donation, though he’d never paid capital gains taxes on it in the first place. He didn’t pay taxes on it, and then he got the huge tax deduction. That’s what in-kind donations produce. They’re just a huge gigantic tax dodge for billionaires.
Ding, ding, ding, ding, ding!!!!!!!!
Winner, winner!
and folks will say, “Well, what he’s doing is legal.” They fail to understand THAT’S THE PROBLEM.
Warren Buffett and his ilk are symptoms of the disease which has taken over this entire eCONomic system. As these hundred billionaires amass more wealth than ever imaginable, the bottom 50% can’t even afford to put food on the table.
But the government mandates they continue to line Warren Buffett’s pockets via their Geico car insurance payment which has rocketed over 50% in just a few short years, so they can continue to get to that soul-crushing job that doesn’t pay a living wage anymore. Warren Buffett loves this inflation as he preys upon the serfs, picking their financial bones like the vulture he is.
Well. he DID say. “The first Billion is the hardest”. But if one dedicates every moment of their life to ONLY one pursuit, usually newsworthy stuff happens….but not always.
My ex used to work at a state mental hospital (before Reagan threw most of them out on the street) and said most had their own little physical set of movements that made them feel secure, so they just did them all day, every day, till they died.
Buffet should be pitied.
Oh, and pretty sure he had a good head start…..no boot straps needed. Think I’ll go look. the sick old creep up, to see.
Wolf,
Are you seriously suggesting that Buffett’s charitable donations were done for tax reasons?
You are one of the best information sources I know of, but you are clearly way outside your circle of competence on this one.
It should also be noted that Buffett is one of the biggest proponents of getting the ultra wealthy to pay more in taxes.
It should also be noted that many times in the past, Buffett has bragged (as much as Buffett has ever really bragged) about Berkshire being one of the largest taxpayers in America. Buffett is proud to pay taxes.
If you have ever run a fantasy sports league, or even an amateur sports league, there are often heated discussions of what the rules of the league should be. There are some people who will argue for rules that will make the competition more fair, or at least more interesting. However once the rules are decided and the competition starts they will play by the decided rules as ruthlessly as they can.
When it comes to tax discussions, Buffett will often argue for tax rules that go against his best interests. However, when it comes time to play the game under the rules decided upon, he will use them to his advantage in any way he can.
It should also be noted that Buffett has taken a pay package from Berkshire of $100,000 a year for decades. In an age of mediocre CEOs getting multi-hundred million dollar pay packages (or even multi-billion in the case of Musk), Buffett has been paid $100,000 per year with no stock options. He could easily (and justifiably) make more than he ever saves from a charitable tax deduction.
When it comes to regularly donating billions of dollars per year to charity, taxes play absolutely no role in the decision. Thinking otherwise is foolish.
He is not a big believer in dynastic wealth. That is what drives his donations.
Buffett talks a good game, and then he uses every avenue to minimize his taxes. Look, he didn’t make up the tax rules. But he is USING them. Anyone who gets a $40 billion tax deduction from an income that he never paid taxes on clearly has a huge motivation. Obviously, he cannot take this money with him, but he could NOT donate it, but sell the shares, pay taxes on this income instead, and that would be great for all Americans.
Wow, it is amazing just how many people are ignorant of the fact that Buffett has advocating raising taxes on Billionaires for a really long time.
Depth Charge,
If you think Warren Buffett is part of the problem, you are not paying attention. The willful ignorance of you and your “ilk” (your word) are a far bigger problem.
Do better. Your ignorance is literally destroying the country that was the American Dream.
JimL,
Look, you’re buying Buffett’s BS hook line and sinker. If he really wants to pay more taxes, all he has to do is try less hard dodging them. He talks out of both sides of his mouth.
It’s tax savings for us less rich folks also. Especially useful when your parents have gone senile and you can’t find the cost basis. Or you can wait until they die and you get a step up in basis. Learn the rules if you want to play the game well.
How do you define “overriding good”? Or maybe easy to define the opposite or which companies does he invest in that are “bad”.
I’m positive you’ll get different answers to all those questions depending on who you ask.
Great minds….. Been in T-Bills since 8/23
3-6 month T-Bills for me, for the last few years…I’m following the hurd until I hear otherwise.
I went heavy into long term bonds.
Mike-
Your comment put me in mind of a quote by the original Ambrose Bierce (not the WS commenter):
Admiration, n. Our polite recognition of another’s resemblance to ourselves.
— From A. Bierce, The Devil’s Dictionary
Even though I have been investing 30 yrs since the mid 90’s, I have lost all confidence in knowing anything about the future direction of the stock market, housing market or economy. When people ask me I say I have no clue.
This cycle is like Alice & Wonderland or a Salvador Dali painting…where the laws of physics have all been changed. NOTHING makes the S&P fall or fall for long. Unemployment never rises. Real estate never corrects. 16 yrs since we’ve had a normal biz cycle downturn. I have got my butt kicked for 15 yrs now thinking that this market wasn’t real!
Not butt kicked because I lost money as I didn’t, but butt kicked from being too risk off the last 15 yrs. All you had to do was stay in the S&P since 2009 and you are up almost 8X. 8X! That means $2m in 2009 is now $16m doing absolutely nothing! I sold a bunch of CA rentals in 2015, 2018, 2019 that I bought cheap in 2009-2012 thinking the RE market would crash. Didn’t forsee the covid boom of course. And I’ve been renting since. I am a beat down tired bear!
but the rest of the world’s stock and real estate markets haven’t been so steady.
it’s all a confidence game that the governments can fix all of our problems, and that’s why people won’t sell and think every minor drop is a an asset on sale. it takes a change in psychology.
But its a confidence game that has been going on for 15 years now. The run up to the dotcom in 2000 was only about 4-5 yrs….and that whole cycle ’92-‘2000 was only 8-9 yrs. The end of the recession in late 2002 to the recessing in 2008 was only 6 years. End of ’82 recession to ’91 recession was only 9 yrs. Even the run up to 1929 was only maybe 5-6 yrs boom?
This has been a monster long cycle at 15-16 years. Maybe the longest period in American history without a biz cycle downturn (I don’t count covid in 2020 b/c that was due to pandemic shut down)? We have been in a bull market since 2009.
BackRoad,
I would love to get Wolf’s take on this…
Major changes in the economy and society have enabled the government/money printing machine to extinguish the business cycle.
Most of this is likely due to the financialization of just about everything, and if government debt interest rates go up the whole house of cards will collapse…
schadenfreude: pleasure derived by someone from another person’s misfortune
Let’s see if I can raise your spirits.
I define the boomer generational bull market as from 1983 – 2000. In 1985 I had some decent stock gains logged. I was worried about frothiness so decided that I would remain invested until end of 1986. If by then a 10%-15% correction hadn’t happened I would exchange my stock investments for bond investments.
By the end of 1986 I had logged another good year. So I went 100% bond funds. And missed out on 80% of the boomer generational bull market!
BTW, the Millennial generational bull market should start any year now. I made a promise to myself never to miss another generational bull Market!
BackRoad and TulipMania-
Seems like a pretty obvious direct (though lagged) link to irresponsible monetary stimulus and deficit spending, especially since the GFC. The culprits are Congress, and the Federal Reserve System (the latter of which has evolved to serve as financial enabler of deficit spending by the congress that oversees it).
Both will continue, I’m guessing, until it becomes politically feasible for elected officials to act more responsibly and to end chronic deficits.
Problem is, the voting public is woefully (blissfully?) ignorant about economics and finances. Therein lies the allure of Wolfstreet: Econ 2101 for the general public.
RedRaider….one point is that 83-2000 bull market had a decent business cycle recession in 1991. Where unemployment went up significantly, house prices stagnated and fell from 1990 and bottoming in 1997. We haven’t had that yet in this 2009-2024 stock boom.
March 2020 was artifically caused by the gov’t shutting down the economy due to covid, so I do not count that as a biz cycle recession. And it only lasted about a month
John,
Only reason I’m here…….and I hate “transactional” shit and social media (this is my only attempt at it) and “joining” in general. But it’s the “and watch the parking meters” part of Bob Dylan’s advice I pretty much have lived by.
Thought that was a good hidden insult by Obama when asked what the new Prez was like……like saying “very simple minded”.
NBay-
Just watched Subterranian Homesick Blues on YouTube…. twice, cuz I really missed it at my then tender age, and I never did a reverse look on Dylan.
The part about “firehose” particularly caught my ear. “Force” and “authority” come to mind. Like indoctrination in higher education, and fiat money-printing in economics. I’m sure I’m cherry-picking for meaning in the context of my own limited scope of knowledge and experience…
At the risk of sounding condescending, “peace, man.”
Seriously.
It has all the hallmarks of the end whereby fragile asset prices will be subjected to the microspy of the new sherrif in town, risk.
The current environment values risk at zero.
John,
“Hi freak” also works well…was living it up on Haight St spring 66-spring 67…then Polk to Dong Tam…..the drugs were MUCH cheaper there, though.
Later and thanks for having a flexible mind…..pretty rare lately.
“But its a confidence game that has been going on for 15 years now.”
It’s just currency debasement in the form of money-printing. That’s it, nothing super technical. They are destroying the value of the dollar to prop up the most reckless asset price bubble/everything bubble in the history of mankind.
And since inflation has turned around and is going back up, I’m now seeing the land speculation continue. There was a moment in time where finished lots had taken a breather, but people are going hard into them again, expecting more inflation.
The FED needs to raise immediately. They won’t, because they are willfully derelict in their duties, and wholly corrupt.
It is pretty strange to think “they” (air quotes added to show nuttiness), are debating the currency.
Maybe you haven’t been paying attention, but the dollar is pretty strong against the rest of the world.
I was like you but I am now convinced that fed would do all to make sure assets don’t find their true price
Hence I am invested mostly in real estate and stocks as fed would never hurt the rich people.
And now you’re trying to persuade others that the “fed would never hurt the rich people.” That’s your agenda now, you’re talking your book. That’s what you’ve been doing here for the past year or so. And after a while, I started deleting your agenda comments.
It sure appears to be their plan, Wolf. In fact, they openly stated their intentions with QE back when Bernanke first floated the idea – his precious “wealth effect” where they make the rich even richer, and it supposedly trickles down (it never trickled).
The wealth effect doctrine got buried. No one is talking about it anymore. The paper that Yellen wrote about it back when she was President of the San Francisco Fed, got removed from their website. That was an experiment that blew up, and they’re all seeing it now.
But its people spreading ceaselessly this propaganda that are part of the problem, and I’m starting to block them from abusing my site for their agenda.
ONE LAST TIME;
I KNOW/KNEW grew up with rich people (yes, “worked” in and around DC) and they are in PRIVATE EQUITY COMPANIES) maybe some hedge funds, corp raiders…the new bunch like Wolf talks about) mostly and YOU ALL can’t play….even if you had the money. The market, etc, is for the lesser people that maybe “feel wealthy”. Got some here….makes for admirable show and tell….that’s about it.
PS; don’t forget you are on the long term menu……and maybe not just your money.
The Fed will not hesitate to throw stocks and RE under the bus in order to save the Treasury market if it really comes down to it.
There is absolutely no thread to treasury market if you observe the auctions.
Ample demand for 10Y at 4.75% yield.
BTW, the 10Y Yield has been falling consecutively for last few days.
You are making a self fulfilling prophecy. There are people positioned to profit if the Fed hikes and others positioned to profit if the Fed cuts. So some people will get rich no matter what the Fed does and you will never be wrong.
Your entire statement is only valid because right now the S&P is up 8x from 2009. So it seems like that was the right thing to do back then.
In 1999 a lot of people talked about the NASDAQ and how simple and easy it would have been to just put $10k in a tech fund in 1994 and then just sit and get rich. Kicking themselves because they didn’t.
I have no idea what the market is going to do next year or the next but there are no sure things. Ten years from now someone will probably be talking about how “all you had to do was put $X into Y and now you’d be rich”. Gold? Crypto? Farmland?
Gold= Turd
crypto=Turd
Farmland= Limited in quantity; paying a dividend=Apple Pie
Can you see the difference?
Louie-
Sort of ironic that the nutrients in “turds” (especially the bovine variety) are instrumental to the success of productive farmland.
Limited in quantity? All the gold EVER mined would fit in two full- size swimming pools. That was a stat from a few years ago so maybe add 5 %.
Just read a prelim prospectus for a proposed Canuck gold mine. They are all excited about grading of a gram per ton. There is lots of idle farm land. Gold is essential for aero- space. There aren’t many metals that can sit on the salt sea bed for centuries and emerge shining.
Prediction: CNBC will rue the day they started quoting BC on their head line. It will be an Edsel type embarrassment. How many BC transactions are ‘wash trades’, where the same guys just pass it back and forth creating the illusion of a market?
This is me exactly. This market is surreal. People ask me and I’m like, I don’t know what’s going on – I guess stocks go up?
I’ve been ultra conservative and have missed ridiculous growth because, like you said, we’ve never seen a cycle this long.
Not knowing means it is a good time to move $ into short term 5% treasuries while waiting, is it not so?
My quick shot on the dulling of the cycles: services. Harder to saturate them.
Here in Canada the Big 5 banks are offering CDIC insured 5- year GICs at 4 to 5%.
At least it’s better than the stonks and Bit corn. Heck, even gold is struggling to reach new highs.
Tangerine has 5 percent GIC’s for 3, 4 and 5 year terms. This won’t last long maybe 2 weeks at most. This took place yesterday the rate hikes. Scotia Bank is the parent company of Tangerine so millions of dollars in GIC’s are safe for at least the next 5 years. No need to worry about insurance.
That is until the housing bubble bursts, and the government forces banks to use saves monies to bail out the underwater mortgages so that the Brampton slumlord can continue to charge more rent. That’s why we need CDIC.
Howdy Folks. Way to go Squirrels. Bubba said cash was king long ago. So many said ” Don t do that”. You are losing against inflation. Bubba said long ago ” Buy a Starter Home”. So many said ” You can t do that ” they do not exist. Bubba said long ago ” 3 % ers were prisoners . So many said
” I was the prisoner”. HEE HEE. I am having fun during these time.
Are YOU?????? Are you learning yet?????
It sounds like there might be something interesting here, but I am not getting it. Can someone please translate what Debt-Free-Bubba is saying.
…which reminds me, whatever became of Michael Engel?
may we all find a better day.
I was just wondering where he went.
Maybe commenter Home Toad is his re-incarnation?
This gibberish I spew is mine, sent from .. on high.
Damn that girl looks nice. I’m at Taco Bell and the women have me surrounded, might be my toad suave,….
I think D-F-B is a Bot.
Maybe put its post into ChatGPT ans see what pops out?
Howdy Anthony A. Bubba is just an old fool and loves seeing how the young folk view things……Also, like learning about the FED through the lone wolfs teachings…..
People were meant to struggle, suffer, then die.
Doubt they need an antagonist.
Enjoy your retirement…BUBBA
Strolling along country roads with my baby.
Walking hand in hand with the one I love.
That weirdo Neil sedaka. He’s 85 yrs old. I doubt he’s strolling very fast.
Howdy Home Toad. I am enjoying retirement and am in San Fran today. Will take that ride across the Golden Gate Bridge soon and imagine I saw the Lone Wolfs Lair. A new check mark on my bucket list……….
D-F-B …don’t know if you’re planning a 180′ turn upsouth from Mill Valley (starting point of the venerated ‘Sunday Morning Ride’ north on Hwy.1 to Pt.Reyes Station), to return to The City, but that’s the view (fog/traffic permitting) you want, emerging from the Williams (formerly Waldo) tunnel, well-worth the sting of the bridge toll. If not, take the time to go out to Ft. Cronkhite on the Marin Headlands for a likewise spectacular view of the Golden Gate. Rubber side down.
may we all find a better day.
I once had a 3% mortgage.
It wasn’t a prison. It was one of the best forms of wealth generation ever allowed.
Not because of the real estate appreciation either. That was secondary.
It was a cheap, uncallable loan that gave me money to invest and make lots of more money without ever having to worry about it being called.
It was a sad day when I had to give my 3% loan.
Don’t take my word for it. Warren Buffett’s Berkshire Hathaway has nearly $200 billion dollars is cash equivalents sitting around on his balance sheet, yet he still took out billions in cheap loans in yen when he invested in Japan.
The whole point of this is that debt is neither good or bad. It is simply a tool. Like any tool it can be grossly misused and abused, but that doesn’t make it good or bad.
A hammer can be used to kill someone. Crush their skull. That doesn’t mean hammers are useless or evil. I cannot imagine building something without one.
JimL – true enough, but when the monkey with a hammer becomes a monkey with a machine gun? (…apologies to actual monkey cousins, everywhere…). Best-
may we all find a better day.
I’ve read in last few days that Buffet is about to make a big move to the point that he has SEC permission to keep the forming of the ‘conglomerate’ secret, so news doesn’t drive up the price. Lately he has complained of nothing that is ‘big enough to move the needle’ but not overpriced.
A guess if it’s financial, not a RR or steel mills or something, it’s insurance. He probably already has some exposure. Insurance has always been a lure for capital. Note that you pay them first, then they decide whether they’ll pay you. The Life Cos have spent a lot of time in court over the years. Not just as defendants in a particular claim, but for overall practice. But they’ve done pretty well.
Lately some of the bottom feeders in the biz have been offering products on TV that look close to fraud in plain sight. Insurance against car repair, on vehicles up to 20 yrs old?
On Canuck TV, one offers coverage on health care not covered by Medicare or a company, as for the self- employed. Video shows a barber. Incredibly, it claims to cover ‘routine expenses’ which violates the whole rationale of the industry. Who would insure houses if they routinely burnt down?
If Buffet is going into insurance, no doubt it’s nothing as flakey as this. Second guess if it’s not finance, a medical giant perhaps catering to boomers.
Maybe it’s just another fake rumor to drum up excitement about certain stocks? Placed by hedge funds? Happens all the time. Fake buyout rumors are the oldest hat in town.
Buffet is already in insurance and he loves it. Ever hear of a little company called GEICO?
Folks insure houses that routinely get hail damage. They just charge enough to make it worthwhile. In Colorado they’ve also been raising the deductible for wind/hail. Switched when they wanted to raise to 8%, which would buy 3 roofs. Would need a tornado for that to be hit.
Uncle Buffy always gets his daily newspapers delivered a week in advance.
Howdy Shiloh1. I thought I heard he was too cheap to pay for a paper. Maybe he has a deal going on with the delivery boy?
He doesn’t need them delivered. Doesn’t he own a newspaper?
The only reason Buffet isn’t in a money market, is because he has too much money and needs to physically own Treasury stuff.
For me, I like the absolute liquidity of a money market, but the big ongoing question is, what to do when yields go lower.
For the time being, I don’t think that’s a concern, but if circumstances evolve that force short term treasury’s lower, replacing monthly income will be challenging.
In theory, yields probably will stay higher for longer, especially after the election.
There is no alternative, lol.
T-bills are just as liquid as cash. Try selling one sometime. Super easy. And the strong pull to par means rate changes don’t move their prices too much.
Why would Buffett pay a management fee to a money market on $189B? Even at a tiny 10bp fee, that’s $189M. He can hire several people to manage his T-bills and come out ahead.
Plus T-bills are highly liquid. Don’t forget they are the favored form of collateral, so if Buffett doesn’t want to sell billions immediately, he can use them as collateral for a temporary loan til he has enough bills pay out to pay off the loan.
I can still vividly remember seeing Buffett interviewed on one of the CNN investing shows that every public TV (eg. at the gym) seemed to be tuned to back in 1999, and he was patiently explaining why he didn’t like many stocks at the current valuations and the hosts were all but rolling their eyes at the behind the times grandpa who didn’t understand that the internet had changed everything.
I think what struck me most was just how unruffled and unmoved he was by the other people on the panel. He had such ironclad conviction in his investing principles that their arguments and their condescension just seemed to fade away into background noise.
I remember that as well. If Buffet is holding cash, people would do well to pay heed. Stock valuation is out of line and there will inevitably be a reckoning.
The most refreshing thing about Buffet/Munger is they’re unafraid to admit they don’t know it all. Truly anti Duning-Kruger.
Charlie is not afraid, or unafraid, of anything anymore.
Charlie is probably still working from the great beyond. How could his spirit not continue his influence?
Literally?
…by George, I’ve got it! Be sure to have a successful whiskey, etc., named after you and your ‘spirit’ will have influence evermore…(…at least at the bar and in country music…).
may we all find a better day.
Wolf, do you have what the cash/tbills value as a % of his overall portfolio has been the last few years? I’d be curious to know that in addition to the change in $ that was discussed above
I looked up two dates (10-Q SEC filings).
In Q1, 2024, BRK’s total cash (T-bills + cash + cash equivalent) of $189 billion amounted to 17.7% of total assets, including the railroad, the insurance companies, etc., not just stocks. In terms of stocks: BRK had $335 billion in stocks and $189 billion in cash.
In Q3, 2022, for example, when QT started, BRK had total cash of $109 billion (including $76 billion in T-bills), amounting to 8.2% of total assets. BRK had $306 billion in stocks.
So you can see the massive shift, even in relative terms, to cash/T-bills. BRK DOULBED its T-bill holdings over this period, while its stock holdings inched up 9%.
I doubt whether one can read too much into that information. Yes, he has bought stock during that period and yes he has bought a lot of T-Bills during that period, but he has to have some place to put that accumulating cash during that period as he waits for the fat pitch he is always on the alert for. That fat pitch could come along at any time and yes that fat pitch could be the result of a downturn in the market or the economy. In the long run, he is looking for a moderate fast ball right down the middle of the strike zone and he is not in a hurry to swing.
My guess is that BRK is just hedging knowing the market is overpriced. Why not enjoy the best that stocks and T-bills have to offer. BRK probably sets stops or multiple stops on the overvalued stocks that increase with the stock prices and when they trigger, they convert the cash to T-bills.
Sounds like a win-win to me and I would bet a lot of people on this blog are doing the same thing.
Yes, a few of us are probably buying or shorting short term with our “fun” money. That’s the beauty of being small and independent. We can move into and out of stocks way faster then the big guys.
But I would be surprised to learn BRK is buying any stocks long term at this point.
DM: Investment expert warns of rare market phenomenon threatening savings – and its only hit three times in more than a century
The word of caution was provided by private equity fund manager Grant Cardone Sunday, as the Dow wrapped its third positive day in a row. Prior to that growth continuing Monday, the 66-year-old real estate investor said the state of the US stock market is a cause for concern. As proof, the 20-year vet pointed to the history of the also rising S&P’s yield curve, which has been inverted for over 500 days. This has only happened three times in the past century, he said – citing crises in 1929, 1974, and 2009 that came after the invert.
Who knew? I have been doing this for over a year…
“Gold doesn’t pay interest.” – Wolf
The principal amount of a Treasury bond/note, whatever, doesn’t appreciate in price at the rate of inflation, in the long run.
Gold does; so do other “hard” assets.
Moreover, the possession and intrinsic value of hard assets, precious metals in particular are hard to confiscate or destroy.
Do you ever read and try to understand anything before you kneejerk? That was a rhetorical question.
Doc said: “I hear gold is the new T-bill.”
To which I replied: “Gold doesn’t pay interest.”
I said this to point out that there is a fundamental difference between the two, people hold them for different purposes, and they cannot be substituted. Gold is risky, and holders hope for price appreciation, but gold prices have plunged many times in the past, which is where the risk comes from. That’s how risk is defined. T-bills are not risky, and they pay interest, and after they mature, you get 100% of your money back, plus interest. So saying that gold is the new T-bill is nonsense — that’s what I replied to. I understand that Doc’s “gold is the new T-bill” might have been tongue in cheek.
Correct. I’ll only add that gold is also collateral. In some cases it is the preferred collateral. In fact the BIS has made it a tier one asset, which is, in fact a change, as US treasury bills are no longer tier one.
T-bills are also collateral. Excellent collateral too because they’re very liquid, and because prices change little even when yields change because the maturity date is always fairly close, at which point the holder gets face value.
Gold is a pain to trade – markups galore. When you ad in the commissions, it is tough for me to consider. Maybe a gold ETF for a small portion of my portfolio.
I would not follow the mob flooding COSTCO for gold.
Gold doesn’t appreciate at the rate of inflation in the long run either. Unless you are going to cherry pick specific starting and ending points.
Gold’s recent rise has nothing more than the fact that China has recently been dumping treasuries and buying gold in an effort to decouple themselves from the U.S. financial system. They are looking to cause trouble and want to make it hard for the U.S. to respond.
Here is what I find most interesting about goldbugs. Every goldbug I have ever known has a story about some bank manipulation of the price of gold. I don’t know if those manipulation stories are true or not, but if you really think an entity with the vast, but limited resources of a bank can manipulate the price of gold, what do you think a sovereign entity with the vast and unlimited resources of a nation state can do?
I don’t blame China from trying to decouple themselves from the U.S. financial system. It is in their best interests if they are going to get aggressive internationally.
That said, the gold might not be worth nearly as much when China has to unload it to pay for stuff. It wouldn’t be that hard for the U.S. to see to that.
I’m not buffet but the prices are higher than my price per share in my account so no thanks.
No wonder nobody takes him seriously, his performance is stable but subpar for at least decade. Missed bull market in 2020 and still sitting on cash, accumulating more, out of his depth.
Also Buffett plans to buy back Berk shares with some excess cash, but states the stock “isn’t that liquid, so it’s hard to do.” Consequently, disproving any narrative of BIG DROP!
This also goes against his mantra buying back shares at high levels. Makes no sense….
The 2020 rally was gov’t/fed reserve funded. I don’t think anyone could have predicted the lengths both would go to prop up the economy and for how long they would continue to do it. That was not funded by normal economic growth. In the second half of 2019 the economy was actually slowing down, without COVID it’s hard to know what would have happened.
We all saw what happened to the Chinese real estate market. Ponzi’s don’t end well but at some point in time they all end even the U.S. stock market indexes. Anyone who can say the U.S. stock market isn’t a ponzi better look up the definition of the word ponzi.
Buffett still remembers P.T. Barnum and the phrase a fool and his money are soon parted. A sure thing beats putting your money into an oncoming train wreck.
Just wondering if the Mean Reversion Model is likely to hold true now (or is this time ‘different’!
https://www.currentmarketvaluation.com/models/s&p500-mean-reversion.php
Why aren’t more people buying Agency bonds vs T-bills? Granted that agency bonds don’t have the full faith backing of the federal gov’t. But yields are slightly higher than T-bills, and one can lock in for longer durations than T-bills. Agency bonds for Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), and Tennessee Valley Authority (TVA) have similar ratings as T-bills and also like T-bills, are not taxed at state and local levels. Yet nobody talks about them. Why?
Not that mainstream and more difficult to buy? Treasury Direct is pretty darn easy. Stupid people like easy…
It’s easy, concur, but getting the money to invest/ buy these treasuries is the most difficult.
Saving money and staying healthy are most difficult. I think the Japanese are much better at it than Americans. I don’t recall seeing too many fat Japanese. I also hear they are disciplined in saving their money?
A Google search showed Japan has one of the lowest obesity rates at 3.5% and also is clearly the best in saving their money… Hands down, they are also the 4th largest economy in the world.
Japan, the size of California, and their people are indeed, quite exceptional…. In their own honorable “Japanese” way.
Yes, they are also a homogeneous population of educated and well-behaved people. Go ahead, take our Debt:GDP to the same levels, I triple dog dare you!
Yes, American society is nothing like Japan. So what? What does that have to do with buying T-bills versus Agency bonds?
Wonder what their wealth and wage discrepancy is, and their use of disposable income on small vehicles and houses that we can’t have? Single payer health care, too.
Plus they have proven for about 60 years now they are MUCH better engineers (of all types) AND managers than we are.
…what may happen when a society forgets the benefits of an always-difficult general cooperation in favor of the easy buzz from the heady myth-wine of the ‘rugged individual’…
may we all find a better day.
That’s picking up pennies in front of the steamroller.
The guarantee is more valuable than the rate difference indicates.
Yields are not that much higher and they are not quite as liquid. A higher yield is pointless if you give it all back in the spread you pay if you need to sell early.
I don’t want longer dates. I can see the fiscal trajectory the US is on. We’re running $2T deficits when the economy is “booming,” so what will they be if we go into recession while fighting WW3? And there are no adults in the room in DC to improve things.
In 10 years, the six percent you can get on agencies will have not kept pace with inflation (especially when you factor in taxes).
I have some agency bonds. In the last year or so, they are offering them with early call provisions (every three months out). I had one called three weeks after I bought it. They are easy to buy through my brokerage (Schwab) and there are plenty of offerings above 5+%, but the call provisions are hampering the sales would be my guess.
A couple I have that I bought over a year ago, have no call provision.
Mine are callable too, but I doubt they’ll be called unless rates go down significantly.
If rates go up, I’ll take a temporary hit on the mark2market value, but I’m planning on holding till maturity.
I have some Fed Farm and FHLB bonds with 5.98% and 5.75% coupons respectively. They aren’t auctioned that often relative to treasuries, and when you can find them on the secondary market, they’re often trading at a premium to par which negates the higher yield.
I can’t even buy more of the two CUSIPs that I own – they come up as not available in both Schwab and Merrill Lynch.
I’d also guess a lot of folks want to stay out of duration, and agency paper usually has 10+ year maturities at auction.
I believe Farm Credit bonds are callable, so they have additional market risk vs treasury.
In addition to a tiny amount of credit risk due to an implicit vs explicit US guarantee.
The Wall Street hype machine can spin whatever reality they want, but the S&P500 has a price/sales of almost 3 and CAPE of 34. This is mega bubble territory, case closed, end of story. When stocks get back to the long term trend (and it’s a long term trend for a reason) at around-50% then you’ll actually be investing. He knows that all too well.
With perhaps the exception of 2022, juicing the stock market has been priority #1, priority #2, and priority #3 (and #4 & #5) for the Federal Reserve.
The National Bureau of Economic Research published a paper, “The Economics of the Federal Reserve put” (paper number 26894) which found that from the 1980s (since Greenspan’s chairmanship) to the early 2020s, stock market declines (but NOT rallies – note the asymmetry here) have been more highly correlated with policy easing or delayed tightening than inflation, unemployment, or any other macroeconomic variable.
We’re likely in a time of structurally higher stock valuations than 1900-1980. Researchers have cited a variety of factors including the rise of passive investing, increased corporate concentration, etc. But the Federal Reserve Put certainly doesn’t hurt.
Speaking of which, Robert Kaplan, the former FOMC member who resigned in disgrace after making millions in well-timed personal trades during COVID, has just been (re)hired by Goldman Sachs as a senior executive.
The Federal Reserve has NEVER had anything to do with the stock markets and the FOMC couldn’t care less about stock prices.
Are you being sarcastic?
It’s been obvious to any empirical observer that the Fed reacts immediately and very disproportionately to stock market declines of 25% since 1987. On the other hand, they dither and equivocate and wait 18 months to do anything during the most recent instance of very high inflation (2021 to 2023), and if you look carefully at the last 40 years, they have allowed inflation of 3%+ for multiple months on many occasions with no response, and the former Fed chair, Janet Yellen, even openly advocated for letting inflation “run a little hot” for months or even longer relative to their bogus 2% target during Obama administration.
I’ve also read the article and it shows stronger correlation of Fed policy and outlook to stock indices than to inflation. This is quoted from the conclusion:
We study the economic underpinnings of the “Fed put,” that is, the tendency of negative stock market returns to precede monetary policy accommodation by the Federal Reserve. From the mid-1990s, negative intermeeting stock market returns are a strong predictor of updates to the Fed’s expectations of real GDP growth and of subsequent target changes.
Happy1,like most libertarians, you ignore what you find inconvenient.
The stock market has dropped without the FED reacting and lowering rates. Even very recently. That you choose to ignore this does not make it go away.
So “this time is different”…got it!
Indeed.
and the downside to T-Bills might be?
You only make 5.3% APR, while your buddy makes 10,000% in some crypto overnight, and you look very dumb when he tells you about it.
Barron’s: Interest Rates Will Be Higher for Longer, Fed’s Kashkari Says
MW: Fed’s Kashkari doesn’t rule out a Federal Reserve rate hike
He’s also not a voting member until 2026.
Wolf, so what do you think could cause a significant market correction here? Seems like weak economic data makes the market rally because people think rate cuts and strong economic data makes the market rally because there’s no recession. Any dip seems to be viewed as a sale and people buy the dip. It feels like it would take something big….
Seems like the msm, financial media are trying to deceive people into thinking rate cuts will make the market go up. Conspiracy theory, but maybe the big money wealth transfer interests want retail to buy on cuts so they can unload a bunch. I’m opposed to cuts and QE and would use any big surge in the market to sell all my in the red stuff I foolishly bought if it broke even.
Isn’t the funding of fiscal expansion through (T-bill) Treasury auctions with concurrent contraction of the Fed’s balance keeping the system afloat on the “kindness of strangers” vs real economics? I honestly don’t understand why there has not been a massive credit crunch yet in all sectors, with simultaneous expansionary fiscal policy and contractionary monetary policy. It would be great to see an article explaining how contradictory forces of $1 Trillion fiscal expansion with concurrent QT monetary policy contraction has not already resulted in the “money system” imploding. I tried asking an AI chatbot, and couldn’t get a response that explained what was happening without the explanation omitting some intermediate step such as “a miracle occurs here”.
“I honestly don’t understand why there has not been a massive credit crunch yet in all sectors, with simultaneous expansionary fiscal policy and contractionary monetary policy.”
There are still way too many trillions of dollars in the financial system globally to create the situation you describe. Enough GLOBAL QT might get us there a few years from now, but we’re far from it.
Appreciate you are up early and ON THE JOB Wolf!!!
Just ONE reason of many that we, in this case the family we doing OK,,, send you $$, and I sure as heck hope everyone on here does send you $$ for your clear and mostly clear of propaganda reporting on SO many of the financial and economy events of the current era…
Having said that, IMHO, it is MOST important for you and many others on here to understand the vast historical record of ”nations” continuing to DEGRADE their currency, as is now and has been going on since the establishment of the FRB to PROTECT BANKSTERS and others who do no actual work and actually produce nothing, but ride on the backs of the workers who do.
Final statement from my discussion with AI:
“The Takeaway:
A debt buyback during QT doesn’t create significant ” new money” in the traditional sense. It’s more about managing the existing debt and potentially influencing market dynamics. However, the interplay between buybacks, fiscal expansion, and QT creates a complex situation that requires careful mojitoring by the policy makers.”
It kept suggesting that pension funds and commercial banks could buy Treasuries, but I didn’t have the heart to tell it that both of those are struggling with a CRE mess that could make my line of questioning even more “complex”.
I think you need to quit asking AI. It’s just feeding you fluent bullshit.
“Mojitoring” is a nice Freudian slip. Yes, motoring with mojitos does seem like what the current policy makers are doing.
Wolf,
I received a full call on my JPM one year 5.7% from Oct.
Thank you for letting us know!
But 5.7% was a pretty good deal for those 7-8 months you had it.
Good reporting WR and ”John.”
According to the VERY fine print on all the CDs my beloved prefers,,, every one of them can be called…
Not sure about any of the other banks, other than the bricks and mortar bank my dearest prefers…
READ the FINE PRINT folx, in advance if you can…
Only way to know what you are really getting into.
Unless CDs are callable, they cannot be called.
The only exception is if the bank fails and the FDIC takes over. With the bank gone, the original CD contract is gone, and FDIC insurance takes over. In many cases, the CDs are shifted to a different bank, which may or may not honor the original CD contract, such as rate and term. In any case, your principal is protected under FDIC insurance, but the interest rate is not protected.
Interesting, I cannot find a CD at the same rate as the 5.4% CD that just matured.
I have noticed all the 5.3% short term CDs are all callable now, Goldman, WF, etc. I prefer to avoid the smaller banks, even though CDs are FDIC insured, I don’t want to deal with a small bank failure tied to my CDs.
I also cannot seem to find TBills through Fidelity that are in small enough minimum purchase size to buy in my IRA. I cannot buy 100k at a time yet…Many are 500 minimum quantity. So I am sort of locked into CDs.
It seems like higher for longer is where we are and where we will/should stay, but the current short term CD rates through Fidelity don’t reflect the increased potential for a rate increase. Which is where I believe we end up by end of this year, beginning of 25. Rates up, Rate cuts hahaha. Market is Still delusional, and it’s annoying at this point.
Hingham bank in Mass. 5.3%. 3 months. Call protection. Or how about those farmers in the mid west.
Buying Treasuries of any size directly through TD is very simple,
We started with a couple small ones to get a feel for it, and have been at it for the last year or so, almost always at 5%+
I bought some tbills with ~6 weeks remaining at 5.485% this morning through schwab with a min purchase requirement of 1.
Wolf,
A person needs to be very careful when looking at the absolute amount of cash/T-bills Buffett has on the balance sheet. There is no doubt that in itself is a really big number. Huge.
However, when looked at in a historical context, the cash and T-bill equivalents currently on the balance sheet (~$189 billion) is actually a smaller percentage of the balance sheet than it has been many times it has been in the past.
Granted, generally the larger the balance sheet, the less capital (as a percentage) needs to be retained. There are synergies that make fungible cash stretch further. In general, a trillion dollar company probably does not need as much cash as a $500 billion dollar company. So percentage isn’t always the best measurement.
Also, it is clear that Buffett thinks the general stock market is overvalued. No doubt. His words and actions have made that quite clear. Absolutely no doubt. He could spend $100 billion on an investment and not even blink or be worried about cash.
I just wanted to point out that the cash pile, while absurd on it’s own, isn’t that crazy when looked at as a percentage of the company historically.
So I’m just going to repeat my comment from May 7, 12:43 am:
I looked up two dates (10-Q SEC filings).
In Q1, 2024, BRK’s total cash (T-bills + cash + cash equivalent) of $189 billion amounted to 17.7% of total assets, including the railroad, the insurance companies, etc., not just stocks. In terms of stocks: BRK had $335 billion in stocks and $189 billion in cash.
In Q3, 2022, for example, when QT started, BRK had total cash of $109 billion (including $76 billion in T-bills), amounting to 8.2% of total assets. BRK had $306 billion in stocks.
So you can see the massive shift, even in relative terms, to cash/T-bills. BRK DOULBED its T-bill holdings over this period, while its stock holdings inched up 9%.
Nobody Bats 1,000 Yet I’d Say An Avg Annual Return of 23% Ain’t To Shabby
Berkshire Hathaway
Annual Returns
Year
1977 43.82%
1978 18.75%
1979 110.53%
1980 32.81%
1981 31.76%
1982 38.39%
1983 69.03%
1984 -2.67%
1985 93.73%
1986 14.17%
1987 4.61%
1988 59.32%
1989 84.57%
1990 -23.05%
1991 35.58%
1992 29.83%
1993 38.94%
1994 24.96%
1995 57.35%
1996 6.23%
1997 34.90%
1998 52.17%
1999 -19.86%
2000 26.56%
2001 6.48%
2002 -3.77%
2003 15.81%
2004 4.33%
2005 0.82%
2006 24.01%
2007 28.84%
2008 -15.40%
2009 -17.20%
2010 21.42%
2011 -4.73%
2012 16.82%
2013 32.70%
2014 27.04%
2015 -12.48%
2016 23.42%
2017 21.91%
2018 2.17%
2019 11.69%
2020 2.42%
2021 29.57%
2022 4.00%
2023 15.77%
I’m somewhat of a beginner investor and have a basic question. My goal is to eventually put more money into stocks, but I’m reluctant to do so at present prices. If I invest money in short-term T-bills (not funds), is it reasonable to take the money out of T-bills with some principal loss in order to buy into a down stock market?
If your T-bills have just 1-3 months left to run before they mature, your loss for selling them early will be small, if any. If rates dropped since you bought them, you may be able to sell them at a gain.