No. of Recommendations: 1
I am posting this in the hope someone can help me.
I'm trying to figure out how I feel about the cash/cash equivalents position. My rough thinking is that given circumstances, there clearly bounds. Here are a few of them, assuming a perfect view of the future:
* If there was going to be a severe financial crisis next year and multiple high quality companies in distress and substantially below their fair value, I would expect Berkshire to take advantage of its credit rating, lever up, and borrow more cash.
* If there was not going to be a pullback for a "long time" I'd expect the cash position to be put to work, down to about $100B or less
* If available market returns were zero, I'd expect buybacks to offer the best return (dividends wouldn't benefit anyone in that case)
* Past a certain point, a buyback turns into a going private transaction. I don't think that could happen for any less than $3T, and even then I think this is essentially impossible.
I don't want details, and I didn't watch today. But Buffet had 5 decades of earned trust for his instincts. I like Abel and trust him, but it's just not feasible to close that gap (at least in my remaining investing lifetime).
I think a large cash position is defensible and desirable, but it is starting to a bit lacking in direction and purpose. Somewhere between $100B and $3T is the right number. The buybacks appear to be a shift in this direction and I appreciate the signal. But I do wonder how much I would return, retain, and invest if I were in Abel's shoes.
My thinking on the matter could be off, too. "The more, the better, and take advantage of opportunities as they present themselves" is certainly a fair approach.
