Berkshire’s Cash Vs Inflation
If we take $200bn dollars (currently around $397.3bn) and take an average 3% inflation in the US.
Is it fair to say that Berkshire’s cash pile while increasing in numbers but is about $6bn dollars worth less due to inflation - per year.
Is this an appropriate way to look at it?
I understand the opportunity cost and other things, but for pure simplicity this is correct?
That means if Berkshire had $200bn cash sitting at 3% average inflation from 2022 to 2026, it means the inflation eroded $30bn dollars worth of value.
Now what Berkshire does to counter this is to buy Treasuries with most of this money and try to beat inflation after taxes.
In 2025, Berkshire earned $13.7bn annual interest (pre taxes) from Treasuries with over $315bn invested in them. At around 4.36% ~ and now 13 week treasuries are giving 3.60%.
This high rate vs lower inflation (comparatively) environment makes it so that Berkshire is in no hurry to spend from the cash pile and wait for that perfect ball to hit a home run.
Of course many of us want them to repurchase shares at scale of $4-5 billion a quarter till you can find a place to put this cash to use.
Assuming we take $147.3 bn on the side for insurance underwriting and potential obligations.
And spend $5bn per quarter for buybacks and buy more if the stock drops without any real impact to the earnings.
You still have around $250bn in 13 week treasuries earning whatever the current rate may be at that time.
(Following is pure speculation)
Unless, they are looking for an ultimate Buyback?
What’s that?
Warren has a clause in his agreement that he wants most of his money donated and spent within 10 years after his death or estate settlement.
That means a buyback of over $150bn in one shot at a fix rate - less likely.
Buyback over $200bn gradually over the 10 years after his estate settlement.
Berkshire spent $78bn in buybacks from 2018 to 2024.
Thanks for reading. Would love your opinion on why aren’t the more aggressive towards buybacks currently. When Greg came out on National TV to say we are starting buybacks and just spending under 0.07% of its cash/cash equivalents.