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Can someone with more experience explain what does "cash" mean in this context? Is it saying that 100 billion isn't actively invested and is simply being deprec

Can someone with more experience explain what does "cash" mean in this context? Is it saying that 100 billion isn't actively invested and is simply being depreciated by inflation? It's said it's tied up in 'short-term investments' but that's not clear to someone who doesn't have knowledge of this domain.

gizmo 7y ago
Berkshire has almost all of their cash in short term treasury bills. It's a cash equivalent, because you don't want to keep 100bn in a checking account, and it does get hurt by inflation. But that's OK, because making a purchase when the time is right will more than make up for it. Cash is still king, in Buffet's world.
- H8crilA 7y ago
  I'd just add that in addition to that $128B in liquid Treasury securities (which is what "cash" means when we talk about such large amounts) they also have about $103B debt that cancels their net cash-debt position to about $25B. The debt has long maturity, though, so most of the cash can be deployed immediately. Also, Buffett applies something like the Taleb's "barbell method" to his holdings: he never buys high grade corporate bonds. It either has to be something "distressed", a convertible, a preferred stock, warrants, common stock well below intrinsic value, best if they call him and beg him to buy, i.e. something with high potential returns, or "pristine" and boring assets, like govt securities. As he says himself - when things get bad everything freezes. In 2008 even Berkshire couldn't get credit.
  - sunstone 7y ago
    Most of Berkeshire's debt is associated with their utility businesses which have very low risk and low margins because of safe multi-decade contracts.
HenryBemis 7y ago
> $125 billion in cash, cash equivalents[1], and short-term investments[2] in US Treasuries[3] at the end of December [1]: https://www.investopedia.com/terms/c/cashandcashequivalents.asp https://www.investopedia.com/terms/c/cashandcashequivalents.... [2]: https://www.investopedia.com/terms/s/shorterminvestments.asp https://www.investopedia.com/terms/s/shorterminvestments.asp [3]: https://www.investopedia.com/terms/o/off-the-runtreasuries.asp https://www.investopedia.com/terms/o/off-the-runtreasuries.a... Regarding [3] the difference between ON-the vs OFF-the, is that the "on-the-run treasuries have a specific maturity date.
dmurray 7y ago
It generally means invested in instruments that are considered completely safe and completely liquid, such as US Treasury bills. They can make a small return on your investment, but they won't typically beat inflation.
elamje 7y ago
Sure, it’s likely a mixture of cash, short term treasuries, i.e. TBills and a few other things. None are volatile, and short term investments generally exist to protect against inflation, with an easy eject button if you need to convert to cash quickly.
mxschumacher 7y ago
The US government gives out debt of varying duration. Generally speaking, the shorter the duration the lower the interest rate and the higher the liquidity ("ease of conversion to cash"). Treasury bills are is debt with a duration of less than a year and BRK has a lot of those: https://www.investopedia.com/terms/t/treasurybill.asp https://www.investopedia.com/terms/t/treasurybill.asp

gizmo 7y ago

Berkshire has almost all of their cash in short term treasury bills. It's a cash equivalent, because you don't want to keep 100bn in a checking account, and it does get hurt by inflation. But that's OK, because making a purchase when the time is right will more than make up for it. Cash is still king, in Buffet's world.

H8crilA 7y ago
I'd just add that in addition to that $128B in liquid Treasury securities (which is what "cash" means when we talk about such large amounts) they also have about $103B debt that cancels their net cash-debt position to about $25B. The debt has long maturity, though, so most of the cash can be deployed immediately. Also, Buffett applies something like the Taleb's "barbell method" to his holdings: he never buys high grade corporate bonds. It either has to be something "distressed", a convertible, a preferred stock, warrants, common stock well below intrinsic value, best if they call him and beg him to buy, i.e. something with high potential returns, or "pristine" and boring assets, like govt securities. As he says himself - when things get bad everything freezes. In 2008 even Berkshire couldn't get credit.
- sunstone 7y ago
  Most of Berkeshire's debt is associated with their utility businesses which have very low risk and low margins because of safe multi-decade contracts.

HenryBemis 7y ago

> $125 billion in cash, cash equivalents[1], and short-term investments[2] in US Treasuries[3] at the end of December [1]: https://www.investopedia.com/terms/c/cashandcashequivalents.asp https://www.investopedia.com/terms/c/cashandcashequivalents.... [2]: https://www.investopedia.com/terms/s/shorterminvestments.asp https://www.investopedia.com/terms/s/shorterminvestments.asp [3]: https://www.investopedia.com/terms/o/off-the-runtreasuries.asp https://www.investopedia.com/terms/o/off-the-runtreasuries.a... Regarding [3] the difference between ON-the vs OFF-the, is that the "on-the-run treasuries have a specific maturity date.

dmurray 7y ago

It generally means invested in instruments that are considered completely safe and completely liquid, such as US Treasury bills. They can make a small return on your investment, but they won't typically beat inflation.

elamje 7y ago

Sure, it’s likely a mixture of cash, short term treasuries, i.e. TBills and a few other things. None are volatile, and short term investments generally exist to protect against inflation, with an easy eject button if you need to convert to cash quickly.

mxschumacher 7y ago

The US government gives out debt of varying duration. Generally speaking, the shorter the duration the lower the interest rate and the higher the liquidity ("ease of conversion to cash"). Treasury bills are is debt with a duration of less than a year and BRK has a lot of those: https://www.investopedia.com/terms/t/treasurybill.asp https://www.investopedia.com/terms/t/treasurybill.asp