Warren Buffett, the esteemed CEO of Berkshire Hathaway, has expressed his lack of concern regarding the recent Fitch downgrade of the U.S. government’s credit rating. Despite the downgrade, Buffett’s company continues to exhibit confidence in the market by purchasing $10 billion of Treasury bills on a weekly basis.
In an interview with CNBC, Buffett addressed the issue, stating that there are certain matters that people should not worry about, and this downgrade is one such example. However, he did acknowledge that Fitch did raise some valid points.
Furthermore, Buffett dismissed any worries surrounding the U.S. dollar, highlighting its status as the world’s reserve currency. He emphasized that “everyone knows” the importance and strength of the dollar.
When discussing Berkshire Hathaway’s investments, Buffett revealed that his company bought $10 billion in U.S. Treasuries just last Monday and repeated the purchase this Monday. Berkshire acquires Treasury bills through weekly government auctions of 3-month and 6-month bills. Looking ahead, Buffett mentioned that the main decision for the upcoming Monday revolves around whether to invest in $10 billion worth of 3-month or 6-month bills. Berkshire systematically rolls over its expiring T-bills by purchasing new ones at these auctions.
Berkshire Hathaway prides itself on being one of the largest holders of U.S. Treasury bills due to their exceptional security and liquidity. Buffett personally chooses to allocate a significant portion of Berkshire’s $150 billion cash reserves into T-bills, with $104 billion invested in T-bills as of March 31.
While Buffett favors T-bills, he maintains a different stance when it comes to long-term Treasury bonds. Berkshire adopts a balanced “barbell” strategy for its investment portfolio, which consists of both cash reserves and equities. Notably, the equity portfolio holds a total value of approximately $375 billion, with nearly half of that allocation being invested in Apple (AAPL). On the other hand, Berkshire held only $23 billion worth of bonds as of March 31.
In response to the Fitch downgrade, which lowered the U.S. government’s credit rating to double-A-plus from triple-A, the rating agency emphasized the deterioration in governance standards over the past two decades. Specifically, Fitch highlighted concerns regarding fiscal and debt matters, citing a lack of confidence in fiscal management due to repeated debt-limit political standoffs and last-minute resolutions.
