Luxury problems

Berkshire Hathaway’s cash pile — held mostly in US short-term government bonds (T-bills) — has reached a new record of $382bn. That is roughly 35% of Buffett’s holding company market cap, or enough to buy ~6.6x Danone (appropriate benchmark as I’m writing this over breakfast).

Berkshire’s cash position is counter-cyclical by design. Historically, the group has deployed capital only when it sees clear undervaluation. This is the advantage of true long-term capital: the patience to wait for the “fat pitch” — and to strike when prices are depressed and forced sellers dominate.

A good illustration is Berkshire’s crisis-era deals, such as the preferred investment in Goldman Sachs in 2008, executed when liquidity was scarce and terms were attractive.

Notably, Berkshire has also been a net seller of equities for several quarters, and the cash pile has grown so large that finding opportunities that truly “move the needle” is increasingly difficult. A luxury problem — but also a signal of discipline.