I would like to ask Mr Treacy the following question:

Warren Buffet is currently holding relatively high proportion of Berkshire Hathaway holdings in cash. At the last shareholder meeting he cited the reason for not investing at this level as “The range of possibilities on the economic side are still extraordinarily wide,”

Would you consider his comments (and more importantly actions - high cash position) confirming the fact that overall market is still very far off lows that it will eventually reach? Or he holds high proportion of cash in large part due his business model - funding investments with funds generated through insurance (which potentially have high payouts coming due to downturn)? Or perhaps that he plays mainly in private equity hence the investment objectives are not very closely related to indices such as S&P 500 and Nasdaq?

I would very much appreciate your thoughts on this topic. 

Eoin Treacy's view

Thank you for this question which others may also be asking. The facts are Buffett has sold positions in airlines and greatly reduced positions in banks like Goldman Sachs and JPMorgan, insurance companies like Travelers and energy stocks like Philips 66. He boosted his position in PNC Financial Services Group. 

Airlines don’t fit into the Buffett maxim of retaining earnings and there are likely to be bankruptcies in the sector before the remaining companies come out stronger in a recovery. The threat of negative interest rates, and the more urgent consideration of yield curve control, does not suggest banks are going to be among the best performers for some time.

The additional point however is a number of the world’s most successful investors are raising cash. The economic fallouts from the lockdowns is unknowable and some companies are going to have a very difficult time recovering. The number of people out of work will probably halve as lockdowns end but that will still leave millions of people out of work. Raising cash so he can avail of bargains later is Warren Buffett’s hallmark strategy.