Warren Buffett’s Berkshire Hathaway has amassed a record $157 billion nest egg in cash and Treasuries, signaling the famed investor is gearing up to strike deals and capitalizing on bargain opportunities amid a potential downturn in the American economy, according to economist Steve Hanke.
Hanke, a professor of applied economics at Johns Hopkins University, noted that Buffett’s cash pile has grown by $50 billion in the past year. This includes a $5 billion net sale of stocks last quarter, and a staggering $44 billion sold in the last four quarters combined.
“This is classic Buffett,” Hanke commented in a recent interview with Markets Insider. “He loves to fish in troubled waters.”
The expert economist emphasized that with the Federal Reserve taking measures to reduce the money supply, Buffett’s anticipation of economic turbulence is well-founded. Hanke also pointed out Buffett’s track record of capitalizing on distressed institutions and generating substantial returns in the process.
Moreover, Berkshire Hathaway logged a substantial $21 billion across five transactions during the financial crisis, including deals with Goldman Sachs, General Electric, Mars, Dow Chemical, and Swiss Re. Last quarter alone, Berkshire earned over $4 billion in interest, dividend, and investment income.
Hanke emphasized that Buffett’s cash reserve places him in an advantageous position to invest in discounted stocks, businesses, and lending opportunities at attractive rates if the economy falters. In the meantime, the high bond yields will allow him to earn a solid return with minimal risk.
Buffett’s cash build-up has also been noted as a potential warning sign for investors, with some commentators interpreting it as indicative of looming trouble in the market. Lee Munson, chief of Portfolio Wealth Advisors, recently urged caution, suggesting that Buffett’s approach does not point to any remarkable opportunities.
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