Buffett’s Cash Hoard: A Reason to be Fearful

Warren Buffett is a man who isn’t short on words of wisdom. One of his more famous quotes on getting rich, is to “be fearful when others are greedy, and be greedy when others are fearful”.

With that in mind, take a look at Berkshire Hathaway’s cash position over the last decade:

As at the end of Q1 2017, Berkshire Hathaway’s cash position was a fraction under $96.5 billion. To put that into perspective, Buffett could buy out every cryptocurrency on the planet, and still have over $10 billion left over. He won’t, because he’s Warren Buffett, and Warren Buffett doesn’t invest in rubbish, but that’s another matter…

What this chart does tell us, is that Buffett practices what he preaches; just before the 2008 Global Financial Crisis, Berkshire’s cash hoard was at an all time high. While the market was getting drunk on a sub-prime mortgage boom, Buffett was hoarding cash, and when the party ended, he jumped in and bought over $20 billion of stocks while everyone else was hungover.

Since then, Buffett has largely chosen to hold cash, with the exception of a few strategic investments. His wallet is now close to $70 billion fatter than it was at the depth of the last crisis, an ominous sign of what’s ahead. With markets currently at all-time highs and volatility at all-time lows, greed is abundant, and as I outline in The Economics of the Economy, a crash is not far away. When it happens, Buffett will be ready to buy-in, big time.