Why Warren Buffett Is Still Buying Treasury Bills After the Recent Downgrade

It is no secret that the U.S. government has experienced some economic setbacks over the years, causing some investors to question the safety of certain investments. However, despite the recent Fitch downgrade of the U.S. government's credit rating, Warren Buffett, the CEO of Berkshire Hathaway, continues to buy $10 billion of Treasury bills each week.

Here's why the "Oracle of Omaha" is still buying Treasury bills and why he believes they still are a safe investment option.

Not concerned with Fitch downgrade

In August, credit rating agency Fitch downgraded the U.S. government's credit rating from AAA to AA+. Fitch's decision was driven by a long-standing decline in governance standards, especially with the rising government deficits and surge in debt.

Buffett is known for his ability to make sound investment decisions and he has invested heavily in Treasury bills over the years. According to Buffett, he is not concerned about the recent Fitch downgrade and sees no reason to worry. Although he said Fitch raised some valid points, Buffett remains confident in the safety of Treasury bills.

U.S. dollar still the reserve currency

Another reason Buffett is not concerned about the Fitch downgrade is that he believes the U.S. dollar will remain the reserve currency of the world. The U.S. dollar has been the world's reserve currency for decades and continues to hold that position today. While some experts have predicted a shift toward other currencies, according to Buffett, the reality is that the dollar's dominance remains unchallenged.

Its stability, liquidity, and widespread use in international transactions make it the preferred choice for central banks and governments worldwide. Moreover, the global uncertainty and economic instability caused by the COVID-19 pandemic increased demand for the U.S. dollar as a safe haven asset.

Berkshire's barbell investing approach

Berkshire Hathaway's approach to investing, known as the "barbell strategy," has become increasingly popular among investors in recent years. This technique involves balancing high-risk, high-return investments with more conservative, stable investments, creating a portfolio that can withstand market fluctuations.

The high-risk investments can potentially produce significant profits, while the stable investments provide a safety net to minimize potential losses. Buffett, for instance, implements the barbell strategy through investments in cash and equities.

Berkshire Hathaway holds a significant portion of its $147 billion cash and equivalents in T-bills, with over $120 billion invested in T-bills as of June 30. Berkshire currently buys Treasury bills at the weekly government auctions of three-month and six-month bills and rolls over its maturing T-bills by continuing to purchase new ones. Berkshire Hathaway's equity portion of the investment portfolio totals approximately $350 billion with about half of that in Apple (AAPL).

While Buffett doesn't like long-term Treasury bonds, he sees T-bills as a safe investment option that offer high security and liquidity. By continuing to buy $10 billion in U.S. Treasuries each week, he is further strengthening his investment portfolio and diversifying his holdings.

Buffett's continued investment in Treasury bills serves as a testament to their safety and security as an investment option. Despite the recent Fitch downgrade of the U.S. government's credit rating, Buffett remains confident in the stability of Treasury bills and their potential to provide solid returns. By taking a "barbell" approach to his investment portfolio and balancing out his holdings in cash and equities, Buffett is able to diversify his investments and hedge against potential economic fluctuations.