How I Invest with David Weisburd
00:12:49 · David Weisburd, Christopher Donahue
[00:12:49] S0: And let's just take corporation. You mentioned a lot of the is required on a daily basis, and let's say it's a corporation. What's a small portfolio in terms of thirty year treasuries, money markets, and how should investors think about how to build a portfolio around their cash? [00:13:07] S1: Well, if it's a corporation, the odds of them owning a thirty year bond are almost nonexistent. What what the corporation in that example is thinking about is what is the CFO... What is the strategy? What is our cost of capital? Are we doing acquisitions? Are we building plants? All of the regular needs of a corporation are baked in there. It's completely different than what, say, an institution, a pension plan, or retail investor would do or a charity of some kind. Each one of those has individual cash needs. What we preach is, at BASE, you have to decide what's a proper amount of cash, so you stay safe on base. You don't want to be hanging 10, and then you are forced to sell, forced to do something you don't want to do, miss out, all the things I've said before. And all of those people have a different array of answers for that. And a lot of them will balance the short term cash, really short term cash, with a longer term cash, maybe up to two years, and go back and forth between those kinds of products. But they're all looking at it the same way. I want my cash when I need it. What do I need it for? And I really want daily liquidity at par on that part of it.
00:14:38 · David Weisburd, Christopher Donahue
[00:14:38] S0: So then retail or institutional investors, they have a portfolio. So in general, only call it 5% of their funds. Maybe if it's a retail investor, maybe 10%. They want super liquid so that they can make some purchases, but endowments they need to have to pay for their yearly yearly expenses. But on corporations, the cash is kind of like the leftover thing. The cash is what they need on a daily basis. [00:15:04] S1: Well, sometimes it's not leftover. Sometimes that treasurer is told, I want X percent of something, or I want X number of dollars in cash available all the time. If I want to do an acquisition, I've got to have cash available. Now, maybe cash should be available through a loan or through revolving credits, and that counts. But almost all treasurers are going to have several months of payroll in the bank and not be a living hand to mouth. And so it isn't what's left over. To me, it would be the reverse. It's what's first. [00:15:42] S0: There's almost like these two buckets. There's these money spend that you're gonna have to spend over the next couple months, and then there's, like, these cash positions. We've all heard of Apple or Google or name your tech company having just enormous amounts of cash, hundreds of billions of dollars. Now you can't talk about specific clients, but if you were one of those tech companies, what do those positions look like when you double click? Is it all just in one day treasuries? [00:16:14] S1: No. It it would be out the array, and some of those companies have money in our money market. Yeah.
00:16:14 · Christopher Donahue, David Weisburd
[00:16:14] S1: No. It it would be out the array, and some of those companies have money in our money market. Yeah. [00:16:20] S0: So without without mentioning companies No. I don't mention them. But Maybe talk about what what those look like. What do those portfolios [00:16:26] S1: I don't know what their whole balance sheet looks like, but, you know, they trade in billions, and these are big numbers. And they've gotta be in a fund that can handle that. And if we can use an example, I can talk about FHI, Federated Hermes. And because we're owner operators, and because we have no net debt, we have a lot of financial flexibility to borrow. Okay? And if we have excess cash, we tend to pay special dividends, do acquisitions, and buy stock back. And then we're always debating which which of those are the best for the long term interests of the enterprise and the shareholders. Those guys are all doing the same thing. As you know, they're spending more money than Godot on building on their CapEx expanded data centers. And yeah, getting the compute. We got to get the compute. So fine, get the compute. That's what they're doing. It's really hard for me to say what their balance sheet should look like or how they want to structure But [00:17:35] S0: in their cash position that they have with you, is it all one instrument? [00:17:39] S1: No, they would be in one or two funds, different funds. And some of them are okay with going into a prime fund. Others are in the gov funds. Some really want a conservative and are in the treasury fund.
00:17:39 · Christopher Donahue, David Weisburd
[00:17:39] S1: No, they would be in one or two funds, different funds. And some of them are okay with going into a prime fund. Others are in the gov funds. Some really want a conservative and are in the treasury fund. [00:17:55] S0: Maybe you could double click on those. What are the differences between those? [00:17:58] S1: So, a prime fund would have about a 15 basis point higher yields. Prime securities, highly rated, minimal credit risk is the standard under the SEC rules. And this is something we've been doing for many, many decades. So that would be one. Then the actual govie, it was 15 basis points over the govies. So that would be government securities, agencies, and things like that. And then the treasuries would be the lowest of the yield of all of those, and a few basis points less than the govies. So, that's the array. Now, they're not going to be, generally speaking, using tax freeze, which is a whole different ballgame as a general rule. And because they're out taxing? Because they have other ways to deal with their taxes than trying... Like an individual wants a tax free New York money market fund because they pay New York taxes, and they don't want to deal with it. [00:19:02] S0: Is that not a good idea? Oh, it's
00:19:02 · David Weisburd, Christopher Donahue
[00:19:02] S0: Is that not a good idea? Oh, it's [00:19:04] S1: a great idea. But for the corporation, it's got to be almost like a flip of the yields where they look at what they're getting on the if there's a disparity in the municipal market where the yields are so high that they're happy to do it, then they're they're happy to do it almost on a taxable basis. And that happens once in a while, but that's not the general rule at all.
00:19:30 · S2
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