To The Moon

On Wed, 17 Sep 2025, while many are eagerly waiting for US central bank to confirm its first rate cut of 2025, it is suspected that $Berkshire Hathaway(BRK.B)$ may not be hoping for it, even if the cut is only a -0.25% trim.

Why ?

This is because BRK.B could lose over $3 billion a year in Interest Income if the Fed makes aggressive interest cuts over 2026, since most of Berkshire’s large cash pile is invested in US Treasury bills.

US Federal Reserves is expected to:

• Cut its key rate by a quarter point (-0.25%) on Wed, 17 Sep 2025 from the current range of 4.25% - 4.50%.

• Make a series of reductions throughout 2026, that could leave short rates around 3% in late 2026.

As of 30 Jun 2025, BRK.B held $340 billion of cash & equivalents on at its (a) insurance units and (b) parent company.

It consists (mostly of) some $244 billion of Treasury bills, that are short-term government obligations maturing within a year.

Berkshire's cash pile has risen by about $70 billion since mid-2024 due to both (i) earnings and (ii) by paring the size of the company's equity portfolio especially $Apple(AAPL)$ and $Bank of America(BAC)$ .

For the past year, Berkshire Hathaway has NOT:

• Paid out cash to shareholders.

• Perform any share repurchases.

• Issue dividend.

For the record, Berkshire holds far more cash than any other US company outside the banking sector.

Potential Interest Income Loss:

Assuming there has been no changes to BRK.B’s cash holdings; as per Baron’s estimates:

• A one-point (-1.0%) reduction in short rates should translate into a $3 billion+ cut in annual interest income.

• With adjustment for taxes, the hit could be ‘reduced’ marginally to around $2.5 billion — that's more than 5% of BRK.B's after-tax operating profits, now running at nearly $45 billion annually.

The chance that short-term interest rates will go down, may be weighing on BRK.B.

It has continued to languish while the S&P 500 continued to hit new highs, that included a record close on Mon, 15 Sep 2025. (see below)

Stock Prices.

On Mon, 15 Sep 2025:

• BRK.A was down -0.5% to $736,469.

• BRK.B ended -0.6% lower at $491.54.

• S&P 500 gained +0.5%.

YTD, BRK.A and BRK.B are up about +8% vs S&P 500’s +14% total return.

Other Root Causes.

Other possible factors that could have dampened Berkshire stock include:

• Investor preference (in recent months) for more aggressive "risk-on" stocks such as technology.

Afterall, BRK.B is among the most defensive stocks in US market and the largest value issue in the Russell 1000 index.

In 2025, many property & casualty insurance stocks encountered lackluster performances. That may also have hurt BRK.B, as the owner of the world's largest P&C business, ranked by capital.

Berkshire is already experiencing the impact of lower short rates over the past year.

According to Berkshire’s Q2 2025’s 10-Q filing:

• Interest and other investment income at BRK.B’s insurance business (where most of its cash resides) was down -3.0% to $2.5 billion as lower rates offset higher cash balances.

The prospect of lower rates is bolstering the stock market, and therefore Berkshire's $300 billion equity portfolio, which is led by Apple at $66 billion (some 280 million shares), or just over 20% of the portfolio.

The good news is — the chance of lower interest rates is bolstering US stock market grow.

Due to this, the value of Berkshire's $300 billion stock investments is going up.

AAPL (Berkshire’s largest holdings), make up $66 billion, that is just over 20% of Berkshire's total stock portfolio.

In short, lower interest rate helps the stock side of Berkshire’s business but hurt the insurance side’s earnings from cash investments, simultaneously.

This mixed effect may be the impact to Berkshire’s stock price.

Warren’s Investment Philosophy.

Berkshire CEO Warren Buffett believes in maintaining ample liquidity at Berkshire -- although he has acknowledged its cash holdings are enormous and beyond what it needs.

He was willing to hold a sizable amount of cash in 2020 & 2021, when short rates were near zero and when the company was earning virtually nothing on it.

Buffett has been unwilling to extend the maturity of Berkshire's cash holdings to lock in higher rates.

BRK.B has virtually no bond portfolio. The bond holdings totaled $15 billion on 30 Jun 2025, with $11 of 15 billion (or approx. 73%) cash-like with a maturity of a year or less.

Buffett essentially runs what professionals would call a "barbell" portfolio consisting of roughly 50% stocks and 50% in cash.

Buffett took a risk that short rates would fall, reducing Berkshire's interest income, and he seems to be comfortable about that decision.

My Personal View.

When it comes to investing, there is no “right or wrong” approach per se.

It is really up to each individual or company to define where their “comfort” level or “risk appetite” is, really.

YTD, the $S&P 500(.SPX)$ has been on a tear in 2025 (so far) and has gained a +12.47% as of 17 Sep 2025.

As of 11 Sep 2025, two banks have forecasted a bumper end for S&P 500 index: (see above)

• $Deutsche Bank AG(DB)$ predicted the target at 7,000.

• $Barclays PLC(BCS)$ had it at 6,450 that has already been fulfilled as of Wednesday.

Is the euphoria over current US market sustainable or have we been caught up in the highs of a -0.25% interest cut by the Fed?

The answer lies in more economic reports coming out towards end September and also Q3 2025 reporting season that is weeks away.

Where the S&P 500 will end up on 31 Dec 2025, the verdict is still out as there are too many elements that may affect its trajectory in the next few months ahead.

However, what we do know is that Berkshire has not exactly been performing to par, since Mr Buffett’s announcement on his step down as CEO on 03 May 2025, during its annual shareholders meeting. (see below)

As of 18 Sep 2025 closing

• On 02 May 2025, BRK.B closed at $539.80 per share.

• On 18 Sep 2025, BRK.B closed at $490.5 per share.

• Over 4 months, 2 weeks & 5 days, share price has fallen by -$49.30 per share, that is a drop of -9.13%.

In my 8 Jul 2025 post - BRK.B : Is this the Beginning of the End ? (click to read) I have already raised my concerns over Berkshire shares.

Back then, its stock price was $485 per share.

I re-enclose the same parting thoughts here as I did back in July 2025:

With the possibility of more dips, is it worth the risk to hold onto BRK.B and hope the price recovers OR cash out while one is still ahead in profits ? Very tough decision !

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• Do you think the S&P 500 index will hit the 7,000 mark by end December 2025?

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