Added 105 billion USD worth of US bonds in the past six months.
Buffett cut his Apple stock holdings in half and aggressively increased his holdings of US bonds.
According to the half-year report of Berkshire Hathaway, its short-term US bond holdings increased from $129.6 billion at the end of 2023 to $234.6 billion, with a half-year increase of up to $105 billion. It also holds over $42 billion in cash and cash equivalents, including US Treasury bonds that have a maturity of three months or less.
Compared to the Federal Reserve, which held $195.3 billion in short-term US bonds as of July 31, Berkshire Hathaway's holdings in short-term US bonds have exceeded the Federal Reserve.
The Federal Reserve also holds $4.4 trillion in government bonds, including bills, bonds, and securities tied to inflation. During the pandemic, the Federal Reserve was a major buyer of government debt and has always been one of the largest holders of Treasury bonds to maintain market liquidity.
Before this week's global stock market slump, Buffett sold a large amount of stocks, including Apple, in the previous quarter. This move was surprising but also prescient.
Berkshire Hathaway has been selling stocks for seven consecutive quarters, but the pace of selling has accelerated recently. Buffett sold over $75 billion worth of stocks in the second quarter.
Many of Buffett's loyal observers believe that his decision to sell top stocks is a warning sign that the 'Oracle of Omaha' seems to be turning pessimistic about the economy and the market.
Buffett has previously stated that in times of crisis, he would purchase Treasury bills directly at auctions. The government sells Treasury bills with maturities ranging from four to 52 weeks.
In the past two years, thanks to the rise in US Treasury bond yields, Buffett's huge funds have been earning considerable returns. If $200 billion in cash is invested in 3-month US Treasury bonds at around 5% interest, it will generate around $10 billion in annual returns, or $2.5 billion in quarterly returns.
After the COVID-19 pandemic hit the market, the Federal Reserve purchased approximately $5 trillion in US Treasuries and mortgage-backed securities to support the economy. However, since June 2022, the Federal Reserve has been reducing its holdings of assets, a plan widely referred to as quantitative tightening.
Although there are concerns in the market about the size of US debt, Buffett stated at the 2024 annual shareholder meeting that he was not worried about the supply of US Treasuries, but rather the prospects for the budget deficit.
Buffett is confident that US Treasuries will remain acceptable in the foreseeable future, as there is a lack of better investment options in the current market.
Buffett's investment decisions also suggest that he is preparing for potential market changes.