Warren Buffet forecasting a stock crash is the latest bearish investor’s gauge to indicate that the longest stock bull market in history could be about to come to a spectacular end.
Warren Buffet, the legendary classic contrarian value investor, who has amassed a fortune snapping up value stocks at a discount (and funding monopolies), is finally walking lockstep with other investor titans to warn about a coming stock-market crash.
“Warren Buffet is sitting on a $122 billion cash pile”
Warren Buffet forecasting a stock crash now means that there is a unanimous agreement amongst the best of the best investors that some type of financial calamity is heading our way
Take, for example, hedge fund king Ray Dalio’s 1930s analog, or bond king Jeffrey Gundlach who believes that the next recession won’t be a housing crisis but a corporate debt problem. Two self-made billionaire investors who have reached the apex of their career and are optimistic by nature, are pessimistic in their outlook. Even the world’s most established name in banking finance, Jacob Rothchild’s words of caution that, “this is not an appropriate time to add to the risk” is the writing on the wall that spells there may be trouble ahead.
With Warren Buffet forecasting a stock crash, how then is the legendary investor going to face the music and dance
“Never let a good crisis go to waste” quoted by I am not sure who, but let’s apply it to our situation, bearing in mind that the seeds of great fortunes are planted during a depression and harvested in a boom. They won’t teach you this at school but this is how the smart money plays it.
“this is not an appropriate time to add to the risk”
Warren Buffet, the Oracle of Omaha’s Berkshire Hathaway has cashed out nearly 60% of its investment portfolio at the end of June, according to an SEC filing.
In a few words, Warren Buffet is sitting on a $122 billion cash pile and waiting patiently to pounce on the next great value investment play.
Warren Buffet forecasting a stock crash, and his subsequent stockpile of cash highlights the fact that illiquid assets underperform in a downward economic cycle
Illiquid investments are those that can not be easily sold in sufficient volumes, whenever needed unless the investors incur punitive transaction costs.
“Be fearful when others are greedy and greedy when others are fearful” – Warren Buffett
The most liquid of all asset class is cash deposits. Moreover, when a portfolio is weighted towards cash the investors are best positioned to profit from the downturn by acquiring value assets at a discount. Put simply cash is king in a crisis.
Let’s now apply one of Warren Buffet’s greatest investment mantra, “Be fearful when others are greedy and greedy when others are fearful”
Warren Buffet forecasting a stock crash is half the vista
The full picture is that Warren Buffet has been preparing for a stock market crash by building a cash mountain, which is similar to what he did in the last 2008 stock market crash.
Indeed, during the Great Recession of 2008, Warren Buffet was storing excess cash, which he later lent out at a profit.
Dan Loeb targets Sony. Dan Loeb is an activist investor and founder of Third Point, which oversees about $14.5 billion in assets.
Last year the activist investor viewed Campbell soup as a bargain when Third point reported that the soup maker could fetch a takeover value of $52 to $58 per share.
A year later and the activist investor Dan Loeb targets Sony
Dan Loeb's activist hedge fund Third Point is raising an investment vehicle to generate between $500 million and $1 billion so it can continue to buy Sony shares, according to a recent report in Reuters.