Why Warren Buffett Is Holding Cash & NOT Buying Stocks

Let's dig deeper into why Warren Buffett is holding $144 billion of cash on him, instead of choosing to invest it...
__________________________________

Warren Buffett has got a gigantic cash pile on his hands, with his investing firm Berkshire Hathaway. As of the latest quarter in 2021 he’s got $144 billion dollars on him, just ripe and ready to deploy.

With all of this cash on him, you might think that he’s buying up stocks left, right and centre. But this is not the case at all, in-fact it’s quite the opposite.

As we can see, he’ barely bought any stocks this year, 5 in the first quarter, and 4 in the second quarter. And these are all extremely small buys, in-fact if you add all the buys up together, they make 1.08% of the entire portfolio. That’s nothing.

Then you look at the stocks that he’s sold, and it seems that he can’t stop unloading the shares that he owns. Added all up in terms of percentage he’s sold 4 times more stocks compared to what he’s bought in 2021…

So the question is why is he doing this. Why is he behaving so unusual compared to most investors who can’t stop buying. Now it’s not the easiest to find out his personal reasons for doing this, because he’s been about as quiet as a church mouse lately.

He conducted one long interview for his shareholders in May 2021, and that’s about all we’ve heard from him. He’s just been keeping it quiet, and making his moves silently tucked away in his office in Omaha.

So why. Why is Buffett holding all of this cash, $144 billion, when he could just put it in the stock market, put it in something simple like an S & P 500 index which has been doing so well recently.

Over to you Warren…

(Audio 1)

If we look back throughout history, it gives us big clues as to why Buffett’s saving up all this cash.

The somewhat comical thing about the 2008 recession, was that while most investors were panicking having the worst time of their lives, Buffett was in heaven. Stock prices were crashing, housing prices were collapsing, everyone basically lost money that year, and Buffett was smiling.

Why?

Because he could buy stocks at unbelievably cheap prices. Everything was on sale. But what was the one thing that Buffett needed if he was to take advantage of this crisis. He needed cash on him. If he didn’t have cash he wouldn’t be able to buy anything.

So in 2007 just before the recession hit, he was saving cash like a madman. He had almost $70 billion in cash, which back then was a lot of money for him. Then when the stock market crash hit, in late 2007 and throughout 2008, what do you think he did with his cash pile? He started deploying his cash and was buying stocks like a madman. Stock prices were just so cheap…

And this ended up working out very well for Buffett over the long-term, since the crisis his stock Berkshire, is up almost 500%, that’s an increase of 6 times in the price of his company…

Right now Buffett is playing the same strategy that he’s played throughout his investing career. Most investors focus on their short-term gains, Buffett focuses on the long-term, and what can we it seems to have worked out for him.

The other thing he also mentioned was that he’s always looking for those big business opportunities that come along very rarely, but when they do come along he needs a lot of cash. He needs $10’s if not $100’s of billions to buy elephant companies.

For example in 1972, Buffett needed a lot of money, at least back in those days to buy see’s candy. He bought the company outright for $25 million dollars, again a lot of money back in the day, but it paid off. In 2020, last year, See’s Candy made $383 million in sales, and $82 million in profit.
So the yearly profit is now more than triple the amount he paid for the business outright. If Buffett had not kept cash on the sidelines, he wouldn’t have been able to buy the business outright, and he wouldn’t have made this money.

Buffett needs the big cash pile for what he calls his “Elephant Gun”, it’s just in case a big business comes along, selling for a bargain, Buffett needs it on hand to snap it up…

___

DISCLAIMER: It's important to note that I am not a financial adviser and you should do your own research when picking stocks to invest in. This video was made for educational and entertainment purposes only. Consult your financial adviser. * Some of the links on this webpage are affiliate links. This means at no additional cost to you, we earn a commission if you click through and make a purchase and/or subscribe. This has no impact on my opinions, facts or style of video.

[jarrodwilkins]

Last week, Warren Buffett talked in BBC news about how investors and traders can make millions. He also recommended an expert Mrs Betty Harris. Wondering if viewers here are familiar with her services

[markj.pierce]

I have been holding for awhile now, the market dynamism is really getting me uncomfortable here, I really need help deciding.

[silverdennis]

reading about people grabbing multi-figures monthly as incomes in investments even in this crazy days in the market, any pointers on how to make substantial progress in earning? would appreciate

[aurorawillow]

A funding in know-how can pay the quality interest. If you already know your manner round finance, you would understand higher than to panic no matter the truth that there can be a market crash. That's why once I keep in mind how a lot in income I've been cap-in, a position to build up from my investments within the alternate market with my monetary representative and the quantity of flexibleness I actually have completed in my portfolio. The handiest issue i see in a marketplace crash is possibility to keep growing my investments.

[XOPOIIIO]

I do not agree that he's intentionally storing cash for crash. He said multiple times that crashes are not predictable, and he's not trying to time the market. The reason he's storing cash is because he doesn't see any good stocks on sale right now. It could be interconnected but it's not the same.

[carlosbryan]

I HAVE INCURRED SO MUCH LOSSES TRADING ON MY OWN...I TRADE WELL ON DEMO BUT I THINK THE REAL MARKET IS MANIPULATED... CAN ANYONE HELP ME OUT OR AT LEAST TELL ME WHAT I'M DOING WRONG ?

[accqpqp]

noted on the point you are making here, but maybe can give us a perspective of what percentage of cash berkshire is holding as compared to their total asset currently and also in 2007 before the crisis, using a percentage of cash over total asset, it would give a better picture of how buffet is positioning his company for the raining gold

[scooterknowles]

<🚀Stay calm, the moon is ours the price is amazing for every early investors for those who got in for the first time otherwise it's just bouncing back to normal price for the rest of us which is good. Those who hold the longest will profit the most, I trade and hold profits keep up the great work! and also Jeffrey A. Hawkins has been doing a great job reviewing all chart, trade and techniques on BTC which has enhance the growth of my portfolio to 16 btc lately., .>

[LoganRoy]

If only you know what the future says, you'll know that indeed cryptocurrency is the future, investing in it now will be the wisest thing to do. Hold!!! And you"'ll thank yourself

[charanthiara]

What about those who says never pardict market or never wait for correction 🤔

[welcomeback]

U have Ray Dalio who says, cash is trash, and recommends don't own any $$ in your portfolio because of inflation. Then u have Buffet who has over 140 billion in cash 💸 to buy stuff like stocks and companies at a discount 🤔

[rosagonzalez]

*When it comes to the world of investing, most people don't know where to start.fortunately, great investors of the past and present can provide us with guidance*

[mattblah]

"have cash so you can by low"
wowwww thanks, Mr Oracle

[AntonioInvests]

I’ll continue to dollar cost average 😎

[freesk]

It is very hard to be in cash right now because of inflation. I think it is more like 10% per year. You have to be really sure that there are going to be big opportunities to buy stocks low coming soon in order to pay 10% per year on your cash. Everything is a gamble these days. Seems like silver is under-priced these days...

[WhateverCrypto]

Solana ethereum cardano, maybee bitcoin (if it will go PoS).

[TheJumpingJake]

I love it when people say ‘your missing out on all these profits’ when in fact there are little or no profits to be made when the market is that over extended. Either DCA in (or out if you’re already in profit), or wait patiently for the market to correct like it has done again and again in the past. I’m no expert but emotional investing will only lose you money.

[bonedar]

because stocks are high. duh. he doesn't buy high sell low he buys low and sells high

[samchaleau]

Inflation cannot last. Either it continues and ruins the market control the US holds, or it stops, crashing markets and forcing a depression.

At that point cash is King.

[markoreaper]

So we cracked Buffett's investment style? 1) Save cash 2) Invest a tiny bit in some low cost fund 3) Find great companies that are at good prices using dcf method 4) If too expensive, wait for the dip and plunge most of your cashpile in it.