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> Buffett said investors would instead be much better off investing in U.S. stocks, which in turn are also a far better investment than 10- or 30-year U.S. gove
by whack 9y ago
> Buffett said investors would instead be much better off investing in U.S. stocks, which in turn are also a far better investment than 10- or 30-year U.S. government bonds... He said he would much rather have Berkshire’s pile of cash and equivalents be $30 billion, rather than the $108.6 billion it was at the end of March, but good deals have not emerged.
$100B is a colossal amount of money to have sitting around in the form of cash equivalents. I wonder why he hasn't just put it into the S&P 500, given that he belives the stock market is currently a good investment. Given the index's liquidity, I would think he'll still be able to sell it off quickly, if he needs the cash for an acquisition.
- deleted 9y ago[deleted]
- empath75 9y agoYou can’t just put 100B into vanguard. That kind of money distorts markets.
- kolbe 9y agoS&P tracking ETFs are the most liquid equity instruments, but $100b is large even for them. The largest ETF by assets is SPY, with $250b. 'Liquid' for you or me or even Stevie Cohen isn't even close to the same thing as 'liquid' for Warren Buffett. http://etfdb.com/compare/market-cap/ http://etfdb.com/compare/market-cap/
- whack 9y agoSPY has a daily trading volume of $25B. I would have thought that this would allow someone to liquidate ~$1B every day, without distorting the market. This would have allowed Buffett to raise the cash needed for any acquisitions, in a relatively short period of time. Is there any hard data on how big a trade would have to be, to cause significant price distortion? Speaking of which, it's also common for acquisitions to be carried out using stock, instead of cash. Given that acquirees are open to getting paid in stock, I would have thought they would be open to getting paid in SPY. https://seekingalpha.com/article/4164368-spy-cost-liquidity https://seekingalpha.com/article/4164368-spy-cost-liquidity https://www.investopedia.com/ask/answers/06/macashstockequity.asp https://www.investopedia.com/ask/answers/06/macashstockequit...
- bertjk 9y agoPart of the point of keeping cash around though, is that you don't want your buying power to be correlated with market movements. It is entirely possible/likely that the next good deal that comes up does so in the middle of a market meltdown. Just see the deals he made buying during the 2008 financial crisis.
- thepangolino 9y agoAs you said, $100B is a colossal amount of money. You can't get it in and out of the market like that. SPY, the most traded S&P500 ETF has a market cap of $230B.