What assets should be allocated in a bear market? The answer from the world's former richest man and stock god Buffett is: U.S. bonds.

Due to Buffett's extremely stable investment style, Berkshire Hathaway has a large amount of US dollar cash on its books all year round. With the advent of the bear market, Berkshire's US dollars are increasing, so Buffett chose to convert a large amount of US dollar cash into US bonds. The total amount has recently approached the historical high, reaching a huge amount of US$147 billion. Among them, about 120 billion are short-term US bonds with a term of 3 to 6 months.

Although Buffett has already accumulated $120 billion in U.S. Treasuries, he is still investing $10 billion a week in U.S. Treasuries. In early August, rating agency Fitch downgraded the credit rating of U.S. Treasuries, but this still did not stop Buffett from increasing his holdings of U.S. Treasuries. In other words, the stock god is using practical actions to show his support for the United States.

However, whether the stock god's operation is out of his firm confidence in the destiny of the United States or the idea of ​​taking advantage of the high interest rate of US bonds, only he and God know. After all, Buffett loves short-term US bonds, not long-term US bonds.

However, in any case, Fed Chairman Powell knows that high interest rates to attract deposits have been tried and tested. As long as the US national credit is still there, this quasi-Ponzi game can still be played. And as long as the US can maintain its image of being the first in military and technology, its national credit will not be too bad.

Everyone wants to stock up on some US debt to take advantage of the high interest rates offered by the Federal Reserve, so there is no need to worry about the lack of sales for US debt. If the sales of US debt are good, then the task of US debt sales by Treasury Secretary Yellen will be easier. After all, President Biden struggled to obtain two years of unlimited debt issuance authority in June, so he must take this opportunity to issue more debt and collect more money for the government to spend!

You see, banks, as the Fed’s close friends, have been hoarding US debt for two years, waiting to get the high interest rates. Unexpectedly, a run on the bank caught them off guard at the beginning of the year almost wiped them out. The Fed personally stepped in and launched the financial nuclear warhead BTFP, making a silent declaration to the whole society: Everyone, watch out, anyone who cooperates with me in hoarding US debt will be granted a gold medal of immunity from death!

Therefore, Buffett, who felt that American banks might collapse at the end of 2022, had already cleared out related bank stocks. However, after the Federal Reserve issued a get-out-of-jail-free card in March, giving everyone enough confidence to continue hoarding U.S. debt, Buffett quickly turned around and began to let his Berkshire Hathaway also start hoarding U.S. debt!

Berkshire, which had only more than 20 billion U.S. Treasuries at the end of March, has been frantically hoarding U.S. Treasuries at a rate of weekly increases. In just four months from April, May, June, and July, its U.S. Treasuries holdings exploded to more than 120 billion!

Such a keen sense of smell, such accurate judgment, such decisiveness in turning around, such speed of action! Otherwise, how can we say that he deserves to be the stock god and the richest man?

Even if the US$120 billion in US debt is at the latest interest rate of 5.25% after the Fed's latest rate hike, the annualized return is $6.3 billion! You can earn billions of dollars without doing anything, and it's a risk-free return! Isn't it said that making big money can't be done by earning it, but by picking it up?

Tether, the issuer of USDT (about 72.5 billion U.S. dollars in U.S. debt), started to act earlier than Buffett. Readers who often read Liu Jiaolian’s internal reference know that Tether has been making a lot of money since the first quarter of this year.

Some of the most notable ones are those that are only beginning to take action now, including MakerDAO’s DSR/EDSR deposits and Paypal’s PYUSD[7], which rushed into the market.

However, the amount Buffett hoards is larger than all of them, and even larger than Tether, which is relatively large among them. Just like the advertising slogan of Apple, which Buffett holds a large stake in: Bigger than bigger.