Warren Buffett: Why we hate having a lot of money 💰 Charlie Munger: We don't like having cash 💵

If we have cash, it’s because we haven’t found anything intelligent to do with it that day, in the way of buying into the kind of businesses we like.

And when we can’t find anything for a while, the cash piles up. But that’s not through choice, that’s because we’re failing at what we essentially are trying to do, which is to find things to buy, and —

We make no attempt to guess whether cash is going to be worth more three months from now or six months from now or a year from now.

So it is — you will never see — we don’t have any meetings of any kind anyway at Berkshire, but we would never have an asset allocation meeting.

We would — (laughter) — keep looking. I mean, Charlie’s looking, I’m looking. Some of our managers are looking.

We’re looking for things to buy that meet our tests, and if we showed no cash or short-term securities at year-end, we would love it, because it would mean that we’d found ways to employ the money in ways that we like.

I think I would have to admit that if we have a lot of money around, we are a little dumber than usual. I mean, it tends to make you careless.

And I would say that the best purchases are usually made when you have to sell something to raise the money to get them, because it just raises the bar a little bit that you jump over in the mental decisions.

But we have, I don’t know what we’ll show, but certainly well over a billion dollars of cash around, and that’s not through choice. That is a — you can look at that as an index of failure on the part of your management.
And we will be happy when we can buy businesses, or small pieces of businesses, that use up that money.

we would like to have no cash at all times. We also don’t want to owe a lot of money at any time.

But we — if we have cash around, it’s simply because we haven’t found anything we like to do, and we hope — always hope —- to deploy it as soon as possible.

We never are thinking about whether the market’s going to go down or something of the sort, or whether we might buy something even cheaper. If we like something, we’ll buy it.

And when you see cash on our balance sheet of any size, that’s an acknowledgement by Charlie and me that we have not found anything, in size anyway, attractive at that point. It’s never a policy of ours to hold a lot of cash.

“Companies should either put the cash to good use or distribute it to shareholders.” Can I get your thoughts on this?

WARREN BUFFETT: Well, there are times when we’re awash in cash. And there have been plenty of times when we didn’t have enough cash.

we, obviously, are looking every day for ways to deploy cash.
And we would never have cash around just to have cash. I mean, we would never think that we should have a cash position of X percent. And I — frankly, I think these asset allocation things that tacticians in Wall Street put out, you know, about 60 percent stocks and 30 — we think that’s total nonsense.

So, we want to have all our money — (applause) — working in decent businesses. But sometimes we can’t find them, or sometimes cash comes in (un)expectedly, or sometimes we sell something, and we have more cash around than we would like.

And more cash around than we would like means that we have 10 or 15 cents around. Because we want money employed, but we’ll never employ it just to employ it. And in recent years, we’ve tended to be cash heavy, but not because we wanted cash per se.

You will find us quite unhappy over time if cash just keeps building up. And I think, one way or another, we’ll find ways to use it.

Charlie?

CHARLIE MUNGER: I can’t add anything to that.

We have 16 billion of cash, not because we want 16 billion of cash, or because we expect interest rates to go up, or because we expect equities to go down.

We have 16 billion in cash because we don’t see anything that makes us want to part with that cash where we feel we’re getting enough for our money.

But we would spend it Monday morning on the right sort of business, or even if we could find equities that we liked, or if we could find — like last year we found some junk bonds we liked. We’re not finding them this year at all, because prices have changed dramatically.

If there’s nothing smart to do, cash is the default option.

We don’t like having excess cash around. We like even less doing dumb deals because we do them forever.

I mean, if we make a dumb deal, it just sits there. We don’t resell it three months later by having an IPO of it or something of the sort.

So you’re right to say that we should be very uncomfortable about the fact that we’ve got the cash.

I would say it’s likely, but far from certain, that three years from now we have significantly less cash and, I hope, significantly more earning power.

But the goal of that cash is to be translated into permanent earning power over time.

Neither one of us is — basically likes cash.