In one sentence: The hosts finish the 2023 Berkshire recap with Buffett's remark that cash is not trash, how to track money-supply data on FRED, why banks struggle to have moats, and Buffett's warnings on debt and balance.
Key ideas
- Currency in circulation. Buffett cited US currency in circulation going from about $800 billion to about $2.2 trillion, mostly $100 bills, and said the Fed publishes it weekly. Phil's reading: people hoard it. The hosts' numbers are rough and from memory, so check them. [01:00–06:00]
- Track it yourself. Search FRED (St. Louis Fed) for currency, M2 or Wilshire/GDP. M2 includes digital balances and, per Phil, is far larger than paper cash. Phil says he wouldn't change what he does if he knew rates, so it is background. [02:00–09:00]
- Excess money and asset prices. Phil links extra money to rising luxury goods, cars, real estate and stocks. This is his opinion. [08:00–11:00]
- "Cash is not trash." Berkshire holds about $143 billion in cash and Treasury bills. The hosts conclude cash is what lets you buy things when they go on sale, and bills at about 4.5–5% roughly offset the inflation cost while staying liquid. [11:00–15:00]
- The dollar stays the reserve currency. They say there is no credible replacement and shifts take generations. [15:00–17:00]
- Banks: deposits aren't sticky. After Silicon Valley Bank, money moves in minutes, so a bank's moat from customer inertia is weaker, and that pushes banks toward short-term gambles. Phil: a bank's moat is mostly its people (Dimon at JPMorgan). Berkshire reportedly sold most bank stocks but added Bank of America per recent filings. [17:00–22:00]
- Debt and tribalism. Buffett criticised printing money to buy votes and being "tribal". The hosts compare Japan's central bank holdings with the US and say the US gets away with it through reserve-currency status. These are the hosts' interpretation. [22:00–26:00]
- Berkshire as a fortress. Their reading: Buffett wants owners to know Berkshire is prepared and that its management has a plan. [26:00–28:00]
- Capitalism and pain. Free markets lower prices but hurt some workers. A safety net is needed, but removing all pain removes incentives. The New England textile mill, kept open too long for the workers, shows Buffett lived this. [29:00–35:00]
- Close. Phil and Danielle say Berkshire could be a reasonable place for money you don't want in cash, depending on price. Not advice. [38:00–40:00]
How it maps to RuleOne
- The screen's cash and debt rows tell you how prepared a business is, which is the same fortress idea at company level.
- "Cash is not trash" lines up with the Reduce basis idea: keep dry powder to buy when the Event screen shows a sale.
- Bank screening: the moat is management and underwriting, so read the 10-K carefully and keep banks in the circle only if you understand them.
Buffett, Munger and Graham links
- Buffett's 2008 and 2020 letters on holding large cash to act in a crisis.
- Graham's Intelligent Investor ch. 8 (Mr. Market) frames sell-offs as chances.
- Buffett's 1985 letter tells the textile business story and why it was shut.
Words to know
- M2: a broad measure of money, including cash, checking and savings balances.
- FRED: the St. Louis Fed's free database of economic data.
- Reserve currency: the currency held by other countries for trade and reserves.
Try this
Look up M2 on FRED and look at the ten-year chart. Then on /holdings/ write down how much of your own portfolio you'd want to hold in cash or Treasury bills to buy a bargain.
Check yourself
- What did the hosts take "cash is not trash" to mean?
Answer
Cash keeps you able to buy when prices drop, and its cost is less than the benefit. - Why are bank moats weak now?
Answer
Deposits move instantly, so customers are no longer held in place by inertia. - Where can you track money supply?
Answer
FRED at the St. Louis Fed.
Short quotes
"Cash is not trash." (Phil, reporting Buffett's closing point, ~11:00, auto-transcribed)