Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19
The Exponential Stocks Bull Market Explained - Video - 13th Mar 19
TSP Recession Indicator - Criss-Cross, Flip-Flop and Remembering 1966 - 13th Mar 19
Stock Investors Beware The Signs Of Recession / Deflation - 13th Mar 19
Is the Stock Market Still in a Bear Market? - 13th Mar 19
Stock Market Trend Analysis 2019 - 13th Mar 19
Gold Up-to-Date' COT Report: A Maddening Déjà Vu - 12th Mar 19
Save Fintech? Ban Short Selling. It's Not That Simple - 12th Mar 19
Palladium Blowup Could Expose Scam of Gold & Silver Futures - 12th Mar 19
Next Recession: Concentrating Future Losses & Bringing Them Forward In Time As Profits - 12th Mar 19
The Shift of the Philippine Peso Regime - 12th Mar 19
Theresa May BrExit Back Stab Deal Counting Down to Resignation, Tory Leadership Election - 12th Mar 19
Phase 1 of Stock Market Correction - 11th Mar 19
Long Awaited Stock Market Pullback has Finally Arrived - 11th Mar 19
US Presidential Cycle and the Stock Market - Video - 11th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - 11th Mar 19
Chinese Economic Data Shakes the Global Stock Markets - 11th Mar 19
The Fed Is Playing a Dangerous Game - 11th Mar 19
The Stock Market Has Called the Fed’s Bluff, What’s Next? - 11th Mar 19
Turkey Holiday Bazaar Extreme Jewelry Price Haggling - Fethiye Market - 11th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

Sell American, Buffett Is

Stock-Markets / Financial Markets 2011 Feb 16, 2011 - 09:02 AM GMT

By: Brady_Willett

Stock-Markets

Best Financial Markets Analysis ArticleIn an October 16, 2008 op-ed entitled ‘Buy American. I Am’, Warren Buffett revealed that he was moving his own wealth into equities, adding that “If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.” Coming from someone that regularly contends he never tries to time the markets, this was easily Buffett’s most bullish call since October 1974.  And while it would take and additional 5-months before stocks would reach a ‘bottom’, it is now safe to conclude that Buffett, once again, was right.


To recap: Back when many believed all was lost Buffett had the courage to invest in America based largely upon one elegantly simple premise: “…the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts…Equities will almost certainly outperform cash over the next decade, probably by a substantial degree.”

28-months after Buffett penned the above: America is still here, stock prices have bolted significantly higher, and it is now accepted wisdom that policy makers have successfully ‘forced’ investors into riskier assets by reducing the returns on safe assets. Accordingly, the legend of Buffett continues to grow…

Needless to say, the conditions that made Buffett bullish back in late 2008 are no longer prevalent today. Rather, ‘fear’ in the marketplace has vanished, stock prices have outpaced any fundamental improvement in the economy, and the story of cash being a dead asset has been beaten to death.  Ever the contrarian, Buffett’s historic romp into equities is, at least for the moment, over.

Buffett Begins Hibernation Process

In the fourth quarter of 2010 Buffett continued to reduce his (Berkshire’s) equity positions, cashing out approximately $1.2 billion (Berkshire 13F filings). Buffett also failed to produce any new buys and only added to a single long-term holding (Wells Fargo).  When contrasted against yesterday’s penchant for deal making these activities, or lack thereof, strongly suggest that Buffett is becoming bearish on equities.

It has been argued that many of Berkshire’s recent stock sales are related to the retirement of GEICO CEO Louis Simpson (the same story used to explain Berkshire’s stock sales in the third quarter of 2010). However, GIECO-related portfolio reshuffling does not fully explain why Berkshire’s cash hoard continues to skyrocket.  To be sure, Berkshire’s upcoming 10K will likely reveal that Buffett has added more than $10 billion in cash since the second quarter of 2009 (up approximately +50%) - a figure well above the increase in tangible equity created by Berkshire during the same time.  Furthermore, given recent trends Berkshire will likely soon eclipse the record $67 billion in cash and ‘fixed maturity securities’ Berkshire hit in 2005.

Assuming stock prices do not capitulate lower, this 5-quarter theme of cash accumulation could remain in play for some time. After all, remember that the last time reckless monetary and fiscal stimulus efforts united to produce a recovery Buffett spent nearly 5-years amassing cash.

In short, the problem of having more cash than ideas is not one that Mr. Buffett has had to deal with since he went on a buying binge in 2008.  And while it is not known to what degree Buffett has reduced his personal exposure to equities, that Berkshire cannot find any equity bargains and is starting to hoard cash in a relatively big way is self explanatory: sell.

BWillett@fallstreet.com

By Brady Willett
FallStreet.com

FallStreet.com was launched in January of 2000 with the mandate of providing an alternative opinion on the U.S. equity markets.  In the context of an uncritical herd euphoria that characterizes the mainstream media, Fallstreet strives to provide investors with the information they need to make informed investment decisions. To that end, we provide a clearinghouse for bearish and value-oriented investment information, independent research, and an investment newsletter containing specific company selections.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules