Buffett’s Berkshire Outpacing the Fed in Short-Term Treasury Bill Holdings

In the ever-turbulent world of stock markets, where volatility is more routine than exception, even the most seasoned investors sometimes make seemingly surprising moves. Ken Fisher, the founder of Fisher Investments, recently delved into this subject on the show ‘Making Money,’ shedding light on some intriguing financial maneuvers.

Among the titans of investment, Warren Buffett’s Berkshire Hathaway has made headlines by amassing an eye-popping reserve of short-term U.S. Treasury bills. The conglomerate’s latest earnings report revealed that it now holds a staggering $234.6 billion in these securities. To put that in perspective, it’s not only a significant leap from the $130 billion Berkshire had at the end of last year, but it also surpasses the $195 billion worth held by the Federal Reserve. Yes, you read that right—the Oracle of Omaha has more T-bills than the Fed.

For the uninitiated, Treasury bills are government-issued securities with maturities ranging from four to fifty-two weeks. Investors in these T-bills earn interest, and here’s the kicker: the proceeds are exempt from state and local taxes. It’s no wonder that these securities are often dubbed as “The safest investment there is,” a sentiment Buffett echoed at Berkshire’s annual meeting in May.

Berkshire Hathaway’s increasing cache of T-bills comes alongside a notable bump in its reserves of cash and cash equivalents—a category that includes Treasurys. As of the last quarter, Berkshire’s reserves have ballooned to a jaw-dropping $277 billion, up from $189 billion in the prior quarter. How did they manage this? In part, by cutting their holdings of Apple stock by about half, bringing it down to $84 billion as of the end of June. Despite this reduction, Apple still reigns as Berkshire’s largest stock investment, dwarfing its $41 billion stake in Bank of America.

Buffett has made it clear that he considers bolstering the company’s cash and cash equivalents a safer bet than diving deeper into the stock market, especially given its current unpredictable landscape. This strategy seems to be paying off, quite literally. The company’s larger holdings of T-bills, which currently boast interest rates ranging from approximately 5.3% for one-month bills to 4.3% for twelve-month bills, contributed to a substantial rise in Berkshire’s interest income. In fact, they saw an increase of $2 billion, or 79%, in the first six months of this year alone.

These strategic moves by Berkshire Hathaway, guided by Buffett’s seasoned hand, underscore a critical point: sometimes, playing it safe can yield spectacular results. While the stock market continues its roller-coaster ride, having a robust reserve of short-term, low-risk investments can act as a financial anchor, providing a stable income stream even in choppy waters.

For those watching these moves from the sidelines, it’s a fascinating case study in risk management and strategic asset allocation. And for Ken Fisher and other market analysts, it’s yet another chapter in the ever-evolving playbook of one of the most renowned investors of our time.