Mr. Buffett maintains that “cash is king”! An alarm for the US stock market?
Mr. Buffett last quarter $Apple (AAPL.US)$The holding ratio of many US stocks, including those, has been drastically lowered, and it has been oversold for 7 consecutive quarters, and it has accelerated to the 2nd quarter of this year,The total amount of stock oversales reached 75 billion dollarsI did it.
Also, $Berkshire Hathaway-A (BRK.A.US)$According to the financial results report, the company held 234.6 billion dollars of US short-term government bonds as of the end of the second quarter, and also held more than 42 billion dollars in cash and cash equivalents.Current cash on hand is a record high of 276.9 billion dollarsIt has become.
In contrast, US bonds with a maturity of less than 1 year held by the Fed were 195.3 billion dollars as of 7/31. This isBerkshire far surpasses the Fed in terms of US short-term debt positionsIt means it's there.
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While US stocks are sluggish, the “god of investment” sends pessimistic signals
Warren Buffett announced that he would buy short-term government bonds through US bond bidding during the economic crisisI was doing it.
Normally, returns on short-term government bonds are not as high as risk investments such as stocks, etc., but since the Federal Reserve (Fed) maintains interest rates in the range of 5.25% to 5.5%, returns on short-term government bonds will rise. As of 8/2, the yield on 3-month government bonds was 5.05%, the yield on 6-month government bonds was 4.68%, and the yield on 12-month government bonds was 4.18%.
If the yield on government bonds is around 5%, it is estimated that the risk-free return on US bonds held by Berkshire Hathaway in large quantities will be about 12 billion dollars per year, and quarterly profit of about 3 billion dollars.
The market interpreted that this series of cash carryover and stock sales definitely showed Mr. Buffett's pessimistic attitude towards the US economy and the marketI'm doing it. In addition to the “god of investment,” which involves actions that convey a pessimistic attitude towards the US economy, more and more people on Wall Street are beginning to worry about the risk of an American recession.
Last Sunday, the Goldman Sachs economist team raised their forecast that the US economy would fall into recession over the next 12 months from 15% to 25%. Also, JPMorgan Chase recently raised the possibility that the US economy will fall into recession by the end of this year from 25% at the beginning of last month to 35%.
Opinions are also divided on when the current adjustment phase will end.
J.P. Morgan analyst Thomas Salopek published a research report reviewing the history of market bottom prices,The market is not issuing a complete “bottoming signal”It was said.
The three indicators of worsening credit spreads, steeping US bond yield curves, and an increase in the defensive sector indicate that the current market is sluggish.
Meanwhile, Bank of America expressed the opposite view, and Sabita Subramanian, who is in charge of equities and quants strategyThe recent sharp drop in US stocks is nothing more than a “common technical adjustment,” and it is unlikely that it will turn into a full-scale bear market, and the stock price ceiling is still not visibleIt inspired the market.
Also, $Berkshire Hathaway-A (BRK.A.US)$According to the financial results report, the company held 234.6 billion dollars of US short-term government bonds as of the end of the second quarter, and also held more than 42 billion dollars in cash and cash equivalents.Current cash on hand is a record high of 276.9 billion dollarsIt has become.
In contrast, US bonds with a maturity of less than 1 year held by the Fed were 195.3 billion dollars as of 7/31. This isBerkshire far surpasses the Fed in terms of US short-term debt positionsIt means it's there.
Warren Buffett announced that he would buy short-term government bonds through US bond bidding during the economic crisisI was doing it.
Normally, returns on short-term government bonds are not as high as risk investments such as stocks, etc., but since the Federal Reserve (Fed) maintains interest rates in the range of 5.25% to 5.5%, returns on short-term government bonds will rise. As of 8/2, the yield on 3-month government bonds was 5.05%, the yield on 6-month government bonds was 4.68%, and the yield on 12-month government bonds was 4.18%.
If the yield on government bonds is around 5%, it is estimated that the risk-free return on US bonds held by Berkshire Hathaway in large quantities will be about 12 billion dollars per year, and quarterly profit of about 3 billion dollars.
The market interpreted that this series of cash carryover and stock sales definitely showed Mr. Buffett's pessimistic attitude towards the US economy and the marketI'm doing it. In addition to the “god of investment,” which involves actions that convey a pessimistic attitude towards the US economy, more and more people on Wall Street are beginning to worry about the risk of an American recession.
Last Sunday, the Goldman Sachs economist team raised their forecast that the US economy would fall into recession over the next 12 months from 15% to 25%. Also, JPMorgan Chase recently raised the possibility that the US economy will fall into recession by the end of this year from 25% at the beginning of last month to 35%.
Opinions are also divided on when the current adjustment phase will end.
J.P. Morgan analyst Thomas Salopek published a research report reviewing the history of market bottom prices,The market is not issuing a complete “bottoming signal”It was said.
The three indicators of worsening credit spreads, steeping US bond yield curves, and an increase in the defensive sector indicate that the current market is sluggish.
Meanwhile, Bank of America expressed the opposite view, and Sabita Subramanian, who is in charge of equities and quants strategyThe recent sharp drop in US stocks is nothing more than a “common technical adjustment,” and it is unlikely that it will turn into a full-scale bear market, and the stock price ceiling is still not visibleIt inspired the market.
“Adjustments of 5% or more are common, and have occurred an average of 3 times or more per year since 1930 (this year is the second time following April). Larger adjustments aren't that frequent, but even so, adjustments of 10% or more occur on average once every year (most recently fall 2023),” Subramanian stated in the report.
Looking back on Mr. Buffett's legendary investment career, what takes the most breath away is probably his astute judgment at the time of sale.
・1999 IT bubble: don't touch unfamiliar industries
In 1999, the IT bubble reached its peak, but Buffett insisted on the principle of “not making more money than you can,” and refused to invest in unfamiliar technology stocks.
They insisted that “no one else will participate in a game with an advantage over me” even when provoked, and believed that the American stock market value had already greatly exceeded the economic growth rate, and that the performance of the Dow average for the next 17 years would not greatly exceed that of 1964 to 1981 unless the market fell.
In the 1999 stock market, when the S&P 500 index rose 21% and the Nasdaq index surged 66%, Berkshire's total market value fell nearly 20%, making it the second worst performance since 1990.
However, by 2000/3, the IT bubble finally began to burst, and in 2001 it completely collapsed, and Buffett was able to successfully avoid it.
・2008 Global Financial Crisis: Be Greedy Only When Others Are Afraid
The global financial crisis broke out in 2008, and the Dow Jones Industrial Average fell 52% from peak to lowest price, and both technology stocks and conventional industrial stocks plummeted.
However, while the market became pessimistic, Buffett said in 2008/10,”Be afraid when others are greedy, and only be greedy when others are afraidI left a quote saying”.
From 2008/9/10, Mr. Buffett began buying at the bottom price, $Constellation Energy (CEG.US)$, tangaroy, $Goldman Sachs (GS.US)$, BYD, $GE Aerospace (GE.US)$Buy a large amount of stocks such as $Wells Fargo & Co (WFC.US)$Berkshire's holdings are $15.1 billion $Associated Capital (AC.US)$I bought it.
Goldman Sachs shares fell from 125 dollars to 53 dollars, and General Electric shares fell from 22.15 dollars to 14.03 dollars, but Mr. Buffett bought preferred shares with a fixed return of 10% per year, and unless the company goes bankrupt, consolidated profits can be raised every year even if left unattended.
Five months after the quote, US stocks began to bottom out, heralding the arrival of a 10-year bull market, and Buffett and Berkshire made another leap in assets, and earned investment returns of 10 billion dollars or more during the financial crisis alone.
・2020 novel coronavirus: cash is king, waiting for opportunities
In response to the spread of the novel coronavirus infection in 2020, the global stock market plummeted, Berkshire held a lot of cash, waited for an opportunity to move, and began investing a large amount of money in the Japanese stock market in response to the aftermath of the COVID-19 pandemic, and from 2020 onwards, he invested 1.6 trillion yen in the 5 major trading companies, and as of the end of last year, the price rose to 2.9 trillion yen, resulting in a profit of 8 billion dollars.
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Why was Buffett able to build an undefeated investment career?
In Buffett's investment career so far, the rate of return has only been negative for 2 years.Not being in the red or being able to avoid larger losses is the key to securing large profits in the long termbecomes.
Buffett's investments do not allocate assets like Bridgewater or other institutional investors, but rather capital allocations. Also, that prior capital allocation mainly indicates the allocation of each of the three types of investments: investment in undervalued stocks, arbitrage transactions, and access to control of investment target companies.
1. The first investment is known in the market as value investing, and its essence is to find securities traded at a price significantly higher than their valueThat's it. However, the market is constantly changing, and as the stock price index continues to rise and the axis of market evaluation becomes upward, the number and scale of undervalued securities decrease.
2. When it is difficult to find attractive investment opportunities with sufficient volume, Buffett adds arbitrage investments. In years when the performance of the Dow Average is poor, Mr. Buffett mainly relies on the contribution of arbitrage trading to maintain victory over the market and not incur losses or reduce losses.
3. The first investment can be converted into a third investment. After gaining control, Buffett doesn't care about price fluctuations in the market; rather, he treats his investment as an owner. For this reason, Buffett is extremely tough on both investment opportunities.
With capital allocation, Buffett can secure long-term profitability by searching for investment opportunities that meet his requirements at various stages of the market and adding or reducing capital with different portfolios.
Furthermore,Buffett aims to increase the capital of his portfolio over the long term and has a high tolerance for short-term market fluctuations. With long-term goals in mind, risk cannot be measured by short-term market volatility, and it is more appropriate to define it in terms of permanent loss of capital.
To address the risk of permanent loss of capital, Buffett's approach is to seek greater safety margins.The optimal safety margin is the limit where there is no loss even if the worst happensThat is, and this is one of the reasons why Buffett was able to overcome the bear market.
Source: moomoo
ー MooMoo News Evelyn
This article uses automatic translation for some of its parts
In 1999, the IT bubble reached its peak, but Buffett insisted on the principle of “not making more money than you can,” and refused to invest in unfamiliar technology stocks.
They insisted that “no one else will participate in a game with an advantage over me” even when provoked, and believed that the American stock market value had already greatly exceeded the economic growth rate, and that the performance of the Dow average for the next 17 years would not greatly exceed that of 1964 to 1981 unless the market fell.
In the 1999 stock market, when the S&P 500 index rose 21% and the Nasdaq index surged 66%, Berkshire's total market value fell nearly 20%, making it the second worst performance since 1990.
However, by 2000/3, the IT bubble finally began to burst, and in 2001 it completely collapsed, and Buffett was able to successfully avoid it.
・2008 Global Financial Crisis: Be Greedy Only When Others Are Afraid
The global financial crisis broke out in 2008, and the Dow Jones Industrial Average fell 52% from peak to lowest price, and both technology stocks and conventional industrial stocks plummeted.
However, while the market became pessimistic, Buffett said in 2008/10,”Be afraid when others are greedy, and only be greedy when others are afraidI left a quote saying”.
From 2008/9/10, Mr. Buffett began buying at the bottom price, $Constellation Energy (CEG.US)$, tangaroy, $Goldman Sachs (GS.US)$, BYD, $GE Aerospace (GE.US)$Buy a large amount of stocks such as $Wells Fargo & Co (WFC.US)$Berkshire's holdings are $15.1 billion $Associated Capital (AC.US)$I bought it.
Goldman Sachs shares fell from 125 dollars to 53 dollars, and General Electric shares fell from 22.15 dollars to 14.03 dollars, but Mr. Buffett bought preferred shares with a fixed return of 10% per year, and unless the company goes bankrupt, consolidated profits can be raised every year even if left unattended.
Five months after the quote, US stocks began to bottom out, heralding the arrival of a 10-year bull market, and Buffett and Berkshire made another leap in assets, and earned investment returns of 10 billion dollars or more during the financial crisis alone.
・2020 novel coronavirus: cash is king, waiting for opportunities
In response to the spread of the novel coronavirus infection in 2020, the global stock market plummeted, Berkshire held a lot of cash, waited for an opportunity to move, and began investing a large amount of money in the Japanese stock market in response to the aftermath of the COVID-19 pandemic, and from 2020 onwards, he invested 1.6 trillion yen in the 5 major trading companies, and as of the end of last year, the price rose to 2.9 trillion yen, resulting in a profit of 8 billion dollars.
In Buffett's investment career so far, the rate of return has only been negative for 2 years.Not being in the red or being able to avoid larger losses is the key to securing large profits in the long termbecomes.
Buffett's investments do not allocate assets like Bridgewater or other institutional investors, but rather capital allocations. Also, that prior capital allocation mainly indicates the allocation of each of the three types of investments: investment in undervalued stocks, arbitrage transactions, and access to control of investment target companies.
1. The first investment is known in the market as value investing, and its essence is to find securities traded at a price significantly higher than their valueThat's it. However, the market is constantly changing, and as the stock price index continues to rise and the axis of market evaluation becomes upward, the number and scale of undervalued securities decrease.
2. When it is difficult to find attractive investment opportunities with sufficient volume, Buffett adds arbitrage investments. In years when the performance of the Dow Average is poor, Mr. Buffett mainly relies on the contribution of arbitrage trading to maintain victory over the market and not incur losses or reduce losses.
3. The first investment can be converted into a third investment. After gaining control, Buffett doesn't care about price fluctuations in the market; rather, he treats his investment as an owner. For this reason, Buffett is extremely tough on both investment opportunities.
With capital allocation, Buffett can secure long-term profitability by searching for investment opportunities that meet his requirements at various stages of the market and adding or reducing capital with different portfolios.
Furthermore,Buffett aims to increase the capital of his portfolio over the long term and has a high tolerance for short-term market fluctuations. With long-term goals in mind, risk cannot be measured by short-term market volatility, and it is more appropriate to define it in terms of permanent loss of capital.
To address the risk of permanent loss of capital, Buffett's approach is to seek greater safety margins.The optimal safety margin is the limit where there is no loss even if the worst happensThat is, and this is one of the reasons why Buffett was able to overcome the bear market.
Source: moomoo
ー MooMoo News Evelyn
This article uses automatic translation for some of its parts
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Kimihiko : Lifetime?
ETFケン : You can't bring money to the graveyard
ありがとう星 : What are the views of Mr. Buffett and Bank of America
As to which one is correct, the answer will come out eventually.
However, I wonder if I have no choice but to hold on from a long-term perspective, especially myself
181078766 : I wonder if another crash will come this week~.