A picture from the Allen & Company conference in Sun Valley a few summers ago shows Warren Buffett approaching a morning session with his hands by his sides and his suit a little loose. He is the type of man who appears to be thinking about something three moves ahead while everyone else is still talking about the weather. This spring, as the market trembled through its worst quarter since 2022 and Berkshire Hathaway’s stock rose while nearly everything else fell, I was reminded of that picture.
Berkshire had about $334 billion in cash and short-term Treasuries by the end of 2024. Buffett took a few paragraphs to defend himself in his February letter to shareholders, but that might be reading too much into it. Almost wearily, he insisted that “the great majority of your money remains in equities” and that people would still prefer to own businesses. When a man is sick of answering the same question at cocktail parties, he might write something like that.
Naturally, the question was: Why so much money? Berkshire’s hoard was about twice as high as its 25-year average at 27% of total assets. It had surreptitiously acquired almost 5% of the whole U.S. Treasury market, which is a genuinely odd fact when you think about it for a moment. A 94-year-old man and his quiet successor run a conglomerate in Omaha that parks enough money in government paper to affect yields.
The tariffs followed. Three days prior to Buffett’s letter, on February 19, the S&P 500 closed at a record. Following Trump’s broad trade announcements in April, the index had given back more than it was willing to acknowledge, corporate guidance was becoming unclear, and consumer confidence was declining. While the overall market was down 11%, Berkshire’s stock was up more than 12% year over year. The contrast is difficult to ignore.
None of it was predicted by Buffett, at least not in writing. In the letter, he made no mention of tariffs. There was no turbulence warning from him. He simply didn’t purchase. He finally referred to tariffs as “an act of war, to some degree” in an interview that aired in March, but by then the money had already arrived. The discipline was prioritized over the commentary. That order is important.
Advait Prasad, a shareholder, posed the obvious question through Becky Quick at the annual meeting in early May: was the cash pile a de-risking move or a runway cleared for the successor, Greg Abel? Buffett dismissed it with a laugh. He added, with that familiar dryness, that he wouldn’t hold off on investing just to make Greg look good and that he would be upset if Greg gained any advantage from what he left behind. Then he revealed something more: if the right opportunity presented itself tomorrow, Berkshire would gladly spend $100 billion. The issue is that the proper things don’t happen in a systematic way. They have never done so.
Observing the rest of the market become aware of this gives the impression that something is changing. For the better part of ten years, Cash had been viewed as a failure—a sign of timidity, of missing the rally. The most astute allocators are now silently raising theirs. Howard Marks has been writing about being cautious. Early trimming was done by Stanley Druckenmiller. Despite their reluctance to acknowledge it, some large endowments have been modifying their liquidity projections.
The best way to put it is in Buffett’s own meandering style. The long-term trend is upward. Nobody can predict what will happen next week. On rare occasions, though, you’ll be inundated with offers that you’ll be happy to have the money for. Maybe next week. It might take five years. Most likely, it won’t be fifty.
It’s difficult to avoid thinking that the elderly man from Omaha has done it once more in the most dull way imaginable as you watch this play out. Not by making any predictions. simply by holding out.
