<p>WWWD? What will Warren do? Everyone knows the legendary investor Warren Buffett from Berkshire Hathaway (NYSE: BRK.A, NYSE: BRK.B). No one since JP Morgan has taken advantage of more crises than the 89-year-old Sage of Omaha.
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We know he’s got ready. Berkshire Hathaway had $ 128 billion in cash at the end of 2019. Most were locked in U.S. government bills and notes.
With new bills now earning less than 1% and 10% of the workforce suddenly unemployed, this seems like a perfect opportunity.
Nothing so far for BRK.B stock
The only public step so far has been to raise even more money. Specifically, Buffett has borrowed the yen and the euro. Since government securities there have a negative interest rate, he can literally get cash for nothing.
Berkshires 13F for the last quarter of 2019 shows that they are buying shares in Kroger (NYSE: KR) and Biogen (NASDAQ: BIIB). These companies are doing well. But Berkshire also bought shares in RH (NYSE: RH), the merchants formerly known as Restoration Hardware; General Motors (NYSE: GM); and Occidental Petroleum (NYSE: OXY), which have been beaten. To this you can also add losses in portfolio stocks, such as Apple (NASDAQ: AAPL), American Airlines (NYSE: AAL), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC) and American Express (NYSE: AXP )). Berkshire also owns a lot of Amazon.Com (NASDAQ: AMZN).
There are rumors that Buffett revolves around all the hardest hit sectors – airlines, hotels, casinos. These companies are currently virtually out of operation. But he has not yet struck.
Instead, he relaxes in his Omaha home and drinks Coca-Cola (NYSE: KO), which is 20% less this year. He does good deeds, like helping Goldman Sachs (NYSE: GS) get the masks needed for Mt. Sinai Hospital in New York.
One reason Buffett can continue to hold cash is that Berkshire Hathaway is mostly an insurance company.
As the latest annual report shows, Berkshire owns GEICO, as well as some of the largest insurance and reinsurance businesses in the world.
It also owns tools, railways and several industrial companies that are hard hit by the virus. Some of its companies, such as McLane Co., which distributes food, are significant. Others like Benjamin Moore and Shaw Industries, which makes paints and rugs, are not. All in all, it’s a rough collection for these tough times. Berkshire shares are down a quarter for the year. It may need cash to keep its own devices afloat.
We need Warren
Like many companies, Berkshire-Hathaway had to cancel its annual meeting. But the world is waiting to hear from Buffett anyway. For the most part, it waits to see him pull the trigger on a deal.
Instead, he waits for the panic to reach a peak and then takes premium assets at dividend prices. That was what he did during the great recession. He advised rescuing banks and later received about 10% of Bank of America at a fantastic discount.
This is what you can expect this time, a dirt in companies that would otherwise go out of business. These offers, when they come, will mark the highlight of the current bear market.
Warren Buffett turns 90 in August. His longtime business partner, Charlie Munger, is even older. His reported successors, insurance chief Ajit Jain and energy chief Greg Abel, are not investors.
Ted Wechsler holds the title of Investment Manager for Berkshire. Another potential CEO is Todd Combs, who now runs GEICO. Nor has a high public profile.
While waiting for Buffett to save us this time, ask who will save us next time?
Dana Blankenhorn has been a finance and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available in the Amazon Kindle store. Write him on firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. At the time of writing, he owned shares in WFC, AAPL and AMZN.