Warren Buffett has amassed a record amount of cash and is ready to strike attractive deals when the US economy is in turmoil, economist Steve Hanke told Markets Insider.
The famed investor’s Berkshire Hathaway held an unprecedented $157 billion in cash, Treasury bills and other liquid assets at the end of September — an increase of nearly $50 billion in 12 months.
“It’s classic Buffett. He likes to fish in troubled waters,” said Hanke, who is known in Bulgaria as the “Father of the Currency Board.”
“Given the fact that the Federal Reserve is sending the money supply into a contraction not seen since 1933, Buffett correctly predicted that troubled economic waters were brewing,” said the veteran economist and trader.
“Remember, Buffett has made big money over the years by making loans and bailing out troubled financial institutions. And while Buffett waits for the coming economic disruptions and stresses, he’s getting decent money,” Hanke said.
Indeed, Berkshire distributed $21 billion in five transactions in just 18 months during the financial crisis, when Buffett made lucrative deals with Goldman Sachs, General Electric, Mars, Dow Chemical and Swiss Re.
In addition, Berkshire earned more than $4 billion in interest, dividend and investment income last quarter, a 70% increase over last year’s third quarter. A key driver has been the Fed’s hike in the key interest rate from near zero to above 5% since last spring, which has boosted Berkshire’s returns on its government bonds.
According to Hanke, Buffett’s cash puts him in a good position to acquire stocks and businesses at a discount and borrow money at attractive interest rates if the economy crashes — and he’ll earn a solid, zero-risk return while he waits thanks to higher bond yield.
Other commentators also pointed to Buffett’s stance as a warning sign for investors. “I think he sees trouble next year,” Portfolio Wealth Advisors chief Lee Munson said recently.
2023-11-23 06:38:14
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