Warren Buffett and Jamie Dimon say cash is king right now. Here's why

Andy Mills
·4-min read

Russell Hackmann, president at Hackmann Wealth Partners, spoke with Quartz for the latest installment of our “Smart Investing” video series.

Watch the interview above and check out the transcript of the conversation below, which has been lightly edited for length and clarity.

ANDY MILLS (AM): A lot of folks are predicting a disputed election. What do you see happening to the market?

RUSSELL HACKMANN (RH): Most everyone is expecting some kind of disputed election, right? So I have a hard time believing the market’s gonna fall out of bed if that happens. If there is a scenario, I’m hearing the “smart money,” whatever that is, thinks that Trump’s gonna win and that there’ll be a red sweep. So, you know, if he’s looking like a loser that may be more of a negative for the market. Again, long answer to this question, but the market’s sort of been wanting him to win, it feels like in a sense of putting the politics of it aside just, hey, more tax cuts, renewal of tax cuts. Like, that’s what markets like. Right?

Photo: Chip Somodevilla (Getty Images)
Photo: Chip Somodevilla (Getty Images)

AM: And so you mentioned the possibility the “smart money” is predicting a Trump win and maybe just a red landslide?

RH: That’s what I’ve heard.

AM: So in that scenario, Bank of America (BAC) and Citibank (C) have both released notes saying that a rally could happen, but to sell into that because inflation might be likely. Do you see that as being the scenario as well?

RH: The odds of inflation not being over are very high. When you’re deficit spending and you see both parties, nobody’s really waving their hands and saying, “Hey, we gotta cut spending, we gotta raise taxes, we gotta get this true trillion dollar deficit down.” And when I took econ 101 when I was 18 and I had a lot more hair, right, they told me that deficit spending is inherently inflationary. Right? So, you know, I tend to think either Trump or Kamala is inflationary. And you have been seeing, just around the subject of inflation, long-term interest rates, which are not under the control of the Fed, ticking from the low of around 3.65 when the Fed cut in the last meeting up to around 4.25. So the market’s already kind of saying, “Hey, we think you’re all in D.C. spending like crazy.”

AM: Going back to whether or not it’s contested, what stocks do you see as being most vulnerable in that scenario?

RH: Trump is more anti-war, and therefore that’s worse for the defense stocks like Lockheed (LMT) or Boeing (BA), right? You know that Trump is more pro-tariff, so that’s not great for huge importers like Target or Walmart. It’s been, you know, markets up, S&P’s up 20% this year, it’s up 25% last year. Like we’ve had a pretty good [run, so] my advice for people and the people are saying sell into a rally, I’m saying that’s not the worst advice I ever heard, if you’re a chips on the table kind of person. If you got some winnings, put ’em in your pocket. I’m thinking that’s not a bad idea.

AM: Over the weekend, Berkshire Hathaway reported a record amount of cash on hand. Jamie Dimon is saying cash is king. Do you also agree that cash is king and investors should be holding onto their money right now?

RH: These kind of leaders understand cycles, right? And they also understand euphoria and the nature of markets and what they’re saying is, “Hey, things are pretty good right now.” So if you’ve swung up in value, your portfolio’s doing great, then yeah. We’ve invested for, you know, in the cash portion of the client’s portfolio, there’s nothing wrong with buying a three month T-bill at like 4.5%. Nothing wrong with that, right? We would’ve really appreciated those yields like three or four years ago when rates were at zero.

So yeah, to have some chips off the table if the markets keep running, there’s also some innovative ways to play in the markets now where you can protect some principle but still have upside. Those are the kind of strategies that we’re thinking about. Buffett says, “Be greedy when others are fearful and fearful when others are greedy.” There’s not a lot of fear out there. So think about things that can protect you in a downside environment. There’s always some wow card and you’ve looked at market cycles over time. There’s always something that comes out of left field. Whether it was 2001, whether it was 2008 — it’s always something that virtually nobody expected. So yeah, it’s wise to manage your risk and not get too happy-go-lucky when markets are swinging your way.

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