Despite claims to the contrary, even the best fund managers can never predict with any certainty what the future holds. Since fortune-telling is not a viable option, we must be prepared to react to whatever reality comes our way.

Fairholme views market crashes, panics, and downturns as opportunities to buy more of the companies we love at fire sale prices. The only way to exploit these opportunities is to have cash on hand.

Opportunities to buy companies at bargain prices arise suddenly and unexpectedly. A lawsuit, criminal probe, industrial accident, or recession may send a company's shares into a tailspin. In such a case, and if the company is otherwise sound, we may look beyond the fear and buy as aggressively as others sell. Often the price drop is a knee-jerk overreaction, artificially compounded by pessimism and algorithmic sell orders. 

Fairholme believes that maintaining a cash cushion may give us the peace of mind to ride out downturns. A lack of cash may sometimes force us to sell our holdings into a very soft market, which may further depress the prices of these holdings.

Naysayers argue that holding a large amount of cash that yields nearly nothing is foolish, and perhaps it is - until it isn't. On all counts, we think it's better to have cash and not need it, rather than to need it and not have it. 

Investors who criticize hoarding large amounts of cash in good times may want to reflect upon that long-neglected investment treatise: Aesop's "The Ant and the Grasshopper."