Buffett hoards cash, individuals’ holdings hit 14-year low

C&J Wealth Advisors are big fans of the long-term strategic value that cash offers investors when it is deployed at advantageous prices. As markets continue to make new highs, it’s natural that more individual investors want to participate in these gains and disdain the role that cash plays within their investment portfolio. As this article illustrates, Warren Buffett is doing the opposite and letting cash accumulate to all-time highs. Investors should look beyond the fact that cash is earning nothing today and recognize that it holds future value when it’s invested intelligently. The hardest part in holding cash is maintaining the patience & discipline to wait until an opportunity arises.

Scott Smith
C&J Wealth Advisors
Article Credits: CNBC Business News | James Saft; a Reuters columnist. The opinions expressed are his own.

Buffett hoards cash, individuals’ holdings hit 14-year low

cash in portfoliosIndividual investors have been cutting back on cash in portfolios, the exact reverse of what Warren Buffett has been doing at Berkshire Hathaway.

Who do you think has got it right?

Cash at Berkshire Hathaway stood at just over $55 billion as of June 30, an all-time high and two and a half times the level he’s in the past said he likes to keep on tap to meet extraordinary claims at his insurance businesses. That’s also up more than 50 percent from a year ago.

Buffett’s green pile is in sharp contrast to individual investors, who’ve cut cash in portfolios to 15.8 percent, a 14-year low, according to the July asset allocation survey from the American Association of Individual Investors.

To be sure, businesses and individuals hold cash for different reasons, but Buffett has used Berkshire, in part, as an investment vehicle through which we can interpret his views on markets, or at least the prices of some assets in them.

Berkshire, of course, has some difficulties in putting cash to work not faced by your average dentist or lawyer, in that it tends to make very large investments and as such may need to be more patient than smaller fry. So it is quite possible Berkshire Hathaway is waiting for the right acquisition to come along.

It is also similarly possible that Buffett is not happy with the prices, and is biding his time against a day when prices have been marked down. One thing not influencing Berkshire is tax policy, as all of its cash is generated in the U.S., making it not one of the legion of corporations holding money offshore to avoid a repatriation tax.

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