Warren Buffett and the Stock Market Crash

Описание: Warren Buffett and the Stock Market Crash

Warren Buffett made headlines recently after his recent virtual Berkshire Hathaway Annual Shareholders Meeting.
Buffett sold of all his shares in the major US airlines, and Berkshire announced a record quarterly net loss of nearly $50BN. Berkshire had held sizeable positions (around 10%) in the major US airlines.
As well as this, Buffett also allowed Berkshire's cash stake to rise to a record $137.3BN from $128BN at the end of 2019.

Clearly, as he is selling at a significant loss, Buffett believes that there is further pain ahead for the airlines. 
The GOAT is not one to fall for the sunk cost fallacy...
Moreover, his cash position indicates that he doesn't believe that we have reached the stock market bottom yet, although he wouldn't give specifics.

TRUTH 1/2:
Now I want to highlight something I have mentioned before, but it's important to repeat.
1640 CEOs left their posts in 2019, the highest year on record since tracking began in 2002.
For context, there were 1484 exits in 2008 when the country was embroiled in the financial crisis.
This trend has continued in 2020, in January a record 219 CEOs left their posts, the highest month on record.
The economy was going to crash anyway. It was inevitable.
However, they were afraid of massive protests against corporate greed, massive social unrest, etc so they needed a diversion that would provide an excuse.
People will think the crash was solely due to the virus and not the numerous fundamental economic and structural issues at play.
To highlight just a few: we've had the yield curve inversion, the repo madness, the record corporate debt, and corporations being the main source of demand for equities via stock buybacks which enrich executives that hit certain earnings per share targets.
Last year billionaire Peter Thiel, who was part of the notorious PayPal Mafia, spoke on the dangers of American Exceptionalism.
He argues that this has made America "exceptionally un-self-critical"

Peter Thiel: The Star Trek Computer Is Not Enough - National Conservatism Conference:
   • Peter Thiel: The Star Trek Computer Is Not...  

In other words, never bet against the military industrial complex to enforce American superiority and the power of the dollar as the de facto unit of exchange globally.

TRUTH 2/2:
As smart contracts pioneer Nick Szabo has stated:
"Buffett's wealth can be measured less in present cash than in the future cash from the Fed he is right up there at the front of the Cantillon line to get."
As we have previously discussed, the Cantillon Effect essentially refers to the fact that fiat printing itself increases inequality. 

The Cantillon Effect and Wealth Inequality:
   • The Cantillon Effect and Wealth Inequality  

On a more general note, it is important to remember that, despite his gentle image, Buffett is ruthless in his craft. 
A New York magazine profile from 1991 stated: 
"Though he appears homey and guileless and cultivates a hayseed image, Buffett can be iron-fisted."
According to a senior Salomon trader: "Warren looks like a teddy bear, but mentally is he ever tough."

Yes, Buffett has dropped numerous gems throughout the years, but ultimately his responsibility is to Berkshire Hathaway and his own, sizeable, bags.

Overall, it would be foolish to overlook Buffett's current cash position.
When everything is dirt cheap and we do eventually hit the bottom, he will be flush with cash and ready to aggressively sweep up bargains. 
At the moment, it is clear that he believes these bargains are not present, and therefore it would be wise to consider the fact that we may have further downside in store...



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