WSJ: Investors Struggle With Cash Conundrum

A nice article from the WSJ about the lack of compelling investments at the moment and the pain of holding cash (link)

The author mentions the fact that the king of value investing himself, Warren Buffett is holding “his biggest cash hoard ever” with $49 billion sitting on the books.  That’s a lot of cash but I’d like to see it as a relative measurement (say as a percentage of Berkshire’s assets or investable assets) to get a better sense for how cautious the Oracle really is.

Perhaps my favorite part of the article is when the author alludes to the value of cash over and above its paltry interest rate: it’s optionality.

Mr. de Vaulx adds that cash is dry powder, worth more than people think because it lets him buy cheaply once stocks decline — as overvalued stocks typically do. Like-minded investors realize they may have to wait months or more, as happened in the late 1990s, when broad stock indexes began a surge to record levels that most tech stocks still haven’t seen again. Value investors suffered then but were vindicated when prices collapsed.

This reminds me of a GMO white paper published by James Montier in 2011 – I think its a good time to dust that off and post it here for you, dear reader.