High levels of cash and underweight tech are often contrarian signals and may actually turn out to be bullish. Buffett is definitely getting greedier when others are turning fearful.
The May Global Fund Manager Survey showed cash levels jumping to 6.1%, a 20-year high and up from 5.5% in April.
I missed Econ 101, could someone explain how cash levels can change? In a brokerage account, if my cask level is “a” and I sell “b” value of stock, my cash level is now a+b. But the buyer of the stock cash level “c” is now reduced by “b” (c-b). i.e. no change in cash levels. Even with magin accounts I see it as a zero sum situation.
Perhaps it is Berkshire buying several billion in stock. The money is flowing from BRK (which is probably not tracked) into brokerage accounts that are tracked???
This refers to the cash fund managers hold. Usually they have a small percentage to facilitate withdrawals, so that they don’t have to sell each time someone redeems shares. If they hold unusually large amounts it is inferred that they are bearish.
Also if they charge a fee say 1% of AUM, it would be very annoying if they had high cash balances on which they charge the fee.
This refers to the cash fund managers hold. Usually they have a small percentage to facilitate withdrawals, so that they don’t have to sell each time someone redeems shares. If they hold unusually large amounts it is inferred that they are bearish.
Also if they charge a fee say 1% of AUM, it would be very annoying if they had high cash balances on which they charge the fee.
Yes, but where does the cash come from? If they sell and another fund manager buys, there is no change in cash level.
An alternative explanation, perhaps, is that the increase in cash percentage is due to the decrease in stock value. e.g. Start with $5 cash and $95 stock holdings. Stock holding value decreases to $85 due to mark to market valuation. Cash percentage has increased from 5% to 5.5% without any stock trades or cash transfers.