- Warren Buffett is sitting on a boatload of cash with no target acquisition in sight.
- The Federal Reserve’s money printing is driving Berkshire Hathaway out of business.
- To rub salt into the wound, Berkshire lost $50 billion in the first quarter.
At 89 years old, Warren Buffett is watching the end of his long and illustrious career as the greatest value investor. Ironically, the curtains closed for Buffett amid the greatest economic turmoil since the Great Depression, a time when he should have made a killing. But he’s forced to sit on the sidelines where he’s losing investors tens of billions of dollars.
The Fed’s Cash Spelled the End of Warren Buffett
It’s no secret that since the latter part of 2019, Buffett’s Berkshire Hathaway has been raising cash. Buffett said he’s “hunting for an ‘elephant-sized’ acquisition,” a sign that he’s preparing for the next downturn.
Whether it’s luck or the result of Buffett’s genius, the economy and the stock market cratered in March. Berkshire Hathaway was in a great position to rescue distressed companies as it did during the 2008 financial crisis. The conglomerate was waiting for the phones to ring.
But the call that would trigger the release of Berkshire’s money never came, no thanks to the Federal Reserve:
Powell might end up in a pedestal. The Fed acted when the market was essentially frozen, with unprecedented speed and determination,
The Fed’s $2.3 trillion stimuli at the time when capital was freezing up rendered Berkshire Hathaway nearly obsolete. The Fed flooded the system with cheap money and forced Buffett to miss out on what could have been his bargain-hunting spree.
Buffett Failed to Liquidate Before the Crisis Erupted
Although Buffett was expecting a crisis, he still failed to protect his investments. In the first quarter of 2020, Berkshire lost nearly $50 billion of its clients’ money as the value of its assets plummeted due to the coronavirus-induced panic.
To make matters worse, the legendary investor has no idea how or when the economy will bounce back:
We do not know exactly what happens when you voluntarily shut down a substantial portion of your society,
The Oracle of Omaha seems to be losing his touch. Interestingly, it comes at a time when the Fed is inadvertently driving Berkshire out of business. It would appear that the new normal doesn’t need Warren Buffett.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The writer does not own Berkshire Hathaway (BRK.A) shares.
Last modified: September 25, 2020 8:41 PM