The Berkshire Hathaway CEO has long favored stocks over bonds, a smart view given the historical outperformance of stocks.
It seems like everyone is saying the bond market looks attractive now, but one notable investor isn’t on board.
Berkshire’s investment portfolio has gotten even more equity-heavy with time. When 10-year Treasury debt yielded less than 1% in 2020, Buffett marveled at the willingness of bond investors to accept that paltry rate. Ten-year Treasury debt now yields about 4.6%, but Buffett is still holding back. But Berkshire takes what investors call a barbell approach. It has a big slug of riskier assets, in the form of stocks, nearly half of that Apple , and a large amount of low-risk assets, mainly cash. The cash amounts to a substitute for bonds.
Asked at the meeting about an insurance contract with American International Group in which Berkshire took a $10 billion premium for insuring against $20 billion of long-term liabilities, Buffett said: “And when we take that $10 billion, we don’t agree to put it in 5-year bonds and 10-year bonds. We don’t even think that way.”
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