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Strong volatility: That is why Warren Buffett has probably not yet bought in despite the corona crash message


The market situation remains uncertain
Buffett still without a concrete signal to investors
Have the stocks found their floor?

On May 2, Berkshire Hathaway will release its first quarter results. Investors should also get an impression of how the corona crisis, which had left deep marks on the stock markets in March, hit the investment vehicle of star investor Warren Buffett. How well did the investment company get through the crisis and did the management of the company use the drop in prices in the meantime to buy shares?

Buffett’s opaque actions in the era of the corona pandemic

Warren Buffett is one of the best-known representatives of the value strategy. With this investment strategy, investments are selected based on whether a company both has an economically strong position in its business segment and trades below its fair value at the same time, i.e. is particularly cheap. The last criterion, in particular, should have met numerous shares in March, because as a result of the sharp downturn on the international financial markets, not only had the record bull market come to an end, but numerous company shares were also cheaper than they had been for a long time. This is actually the perfect time for Warren Buffett and his investment holding company to expand their portfolio and to increase their stake in robust and competitive companies or to take on new investments.

But even though the signs were “buy”, Buffett has hardly given any signals in this direction. It has since become known that Berkshire has increased its stake in Delta Air Lines and bought back almost a million shares, advising investors to act independently of short-term market developments and instead to make investments that are long-term oriented. But there was no real “go” for entry into the markets from the oracle of Omaha. On the contrary: in April he even threw numerous shares out of the portfolio, which was only made public because he slid below the ten percent participation threshold.

Will Berkshire’s cash mountain remain high?

Experts believe that Buffett barely removed the huge mountain of cash Berkshire Hathaway sits on last month. After all, the company’s cash reserves were $ 125 billion at the end of 2019, enough money to buy almost every US company listed on the stock exchange.

Had Buffett Investments approved, he would have communicated this. Because the word of the star investor still has a lot of weight, if he blows to get started, numerous market participants should follow and thus make the Berkshire positions more valuable. It would also underline Buffett’s competency, and that of Berkshire’s management, if he were the first to give the signal to re-enter the stock market.

The fact that he has not done this in public so far allows the interpretation that the star investor does not believe that the financial market crisis has already ended and that the markets have seen their lows. In view of the current reporting season, additional skepticism is also advisable, because numerous companies that have already presented balance sheets have been economically hit by the consequences of the COVID-19 pandemic. Even worse, the forecasts for the further business development of many corporations turned out to be – the uncertainty especially with regard to the extent of the corona consequences and the duration of the economy which was paralyzed in many sectors continues to shape the markets massively.

In 2008 Buffett became much more specific

The fact that Buffett communicates publicly when he sees the time to make an investment has become clear in the last major market slump as a result of the 2008 financial crisis. At that time, the star investor invested heavily in financial stocks, giving investors a clear signal. The fact that this behavior will not be repeated in 2020 could suggest that the investor simply does not see any bargain prices on the market yet.

In fact, numerous other experts also believe that the temporary recovery of the stock markets after their slump is only an intermediate step on the way to old highs and so on Financial markets will have to struggle even longer with strong fluctuations. Mark Mobius recently warned of a double bottom on the stock markets and said that he believes the following months hold potential for disappointment on the investor side “as soon as the first numbers come in”. And Morgan Stanley experts also recently stressed that the second quarter of 2020 will be the worst quarter for US and global growth in “every investor’s life”. The “Great COVID-19 Recession” will mark one of the fastest declines in economic performance in history, experts believe.

Investors should see on Saturday if the Berkshire balance sheet shows whether Buffett actually bought stocks in this uncertain market environment on a large scale. Experts believe it is possible that he increased the investment company somewhat with some existing investments, but massive investments are unlikely to be expected.

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Image sources: Michael Buckner / Getty Images, Daniel Zuchnik / WireImage

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