Warren Buffett added to his cash pile in Q2 has got a lot of people scratching their heads, particularly as the losing cycle has begun.
Most central banks, the Fed being the exception, have started their rate-cutting cycle.
US soft and hard data is now nosediving, and Fed Chair Powell’s decision to make no rate cut in July and remain restrictive has investors bracing for a crash landing, no soft landing but a nasty recession.
So the Fed’s no-July rate cut induced a market plunge, with margin calls triggered, forcing selling and dragging the NASDAQ into correction territory.
Moreover, interest rate policy differentials between the BOJ rate hikes and the Fed refusing to cut in July blew up the 20 trillion dollar carry trade.
“Most central banks, the Fed being the exception, have started their rate-cutting cycle”
WEALTH TRAINING COMPANY
Think about it. Why would investors want to borrow an appreciating Yen with higher borrowing costs, to invest in US stocks when the Fed’s too-little-to-late rate cuts are likely to cause a nasty recession?
And if you think central banks are not causing this volatility through boom-bust monetary policy, I have a bridge in Brooklyn to sell you.
“Be greedy when others are fearful,” Warren Buffett.
But to be greedy, cash is what you need.
So Warren Buffett added to his cash pile in Q2 a record $88 billion, sending Berkshire’s cash mountain to an all-time high of $277 billion in June.
While the octogenarian great value investor was standing on his soapbox holding his microphone and telling the pleb investors never to bet against America, the other hand was doing the opposite.
Q2 13F filed reveals that Buffett dumped half his Apple holdings: Berkshire managed to offload a stunning $84 billion, or some 390 million shares, in AAPL when the stock was appreciating rapidly on the buy America chant.
Warren Buffett’s Berkshire holds 400 million shares of AAPL as of June 30, down almost 50% from 789.4 million as of March 31 and 905.6 million as of the end of 2023.
“Q2 13F filed reveals that Buffett dumped half his Apple holdings”
WEALTH TRAINING COMPANY
Berkshire sold a net $75.5 billion worth of stock, the bulk of which came from Buffett’s liquidation of half his Apple shares
It is a classic case of ignoring what they say, and instead, it is better to analyse what they do.
The rest of Berkshire’s top 5 holdings (Bank of America, American Express, Coca Cola and Chevron) were left untouched in Q2.
Berkshire has for years struggled to find ways to deploy its mountain of cash in a sluggish deal environment, lamenting the lack of cheap opportunities. At Berkshire’s May annual shareholder, Buffett said he was in no rush to spend unless we think we’re doing something that has very little risk and can make us a lot of money.”
But Buffett may not have been in a rush to put money to work instead he was busy selling in Q2, aggressively liquidating the AI bubble.
“Berkshire’s rising cash stockpiles merely reflect the firm’s inability to find deals in today’s overvalued and weak economic environment,”, said Warren Buffett.
“the SEC allowed Warren Buffett to secretly accumulate a stock position and keep the information from the prying eyes of value investors”
– Wealth Training Company
Warren Buffett added to his cash pile, and maybe with the latest (engineered) crash, the legendary value investor will put his $277 billion cash mountain to work
But Warren Buffett’s cash mountain, fully deployed into the market, will not be enough to stem the selling.
The only hope of stopping a liquidity crisis when 20 trillion dollars of carry trades evaporates and is already causing the global crash of all assets is if the Fed takes its boot off the neck of the largest economy and makes an emergency cut.
Warren Buffett added to his cash pile in Q2 and made stealth purchases deliberately not disclosed in his SEC 13 F filings
Yet again, the SEC allowed Warren Buffett to secretly accumulate a stock position and keep the information from the prying eyes of value investors. It is not typical, but occasionally, the SEC has granted Berkshire Hathaway permission to disclose a position before the Buffett effect takes hold. The SEC let him do that in 2020 with Verizon and Chevron.
The Buffett effect means that as soon as it becomes public knowledge that Berkshire is buying a stock, shares instantaneously rise a bit because investors flood in simply because Buffett is buying into it.
“The Buffett effect gives Warren Buffett money printing superpowers”
– Wealth Training Company
The Buffett effect gives Warren Buffett money printing superpowers
It is a strategy that enables Buffett to keep news secret so that he can accumulate positions at low prices before it becomes public information, and that is what happened this time.
But this one was ultra-secretive, with Buffett buying stocks for two quarters straight in a row.
The stock in question is Chubb Limited, Berkshire Hathaway’s ninth-biggest holding in the Hathaway portfolio.
Chubb is a global insurance company that provides a broad range of products and services, including commercial property and Casualty, personal accidents and supplementary health, life insurance, reinsurance
Chubb serves multinational corporations, middle market small commercial and wholesale, mid-size and small businesses and individuals.
Some people correctly speculated that the stock was in the insurance sector.
A casual perusal of the Berkshire Q1 filing, where they detail the cost basis of their investments, we can see the cost basis of banks, insurance, and finance rose by a billion dollars from 27, 136 billion in December 2023 to 28,513 in Q1, 2024.
All of the other categories shrunk in size, since Q1.
