Jerome Powell Says Fed Is Not ‘Out of Ammunition.’ Warren Buffett Isn’t Buying It
Warren Buffett's exit from bank stocks suggests he's not buying what the Fed is trying to sell. | Image: Johannes EISELE / AFP
- Jerome Powell flexes the Federal Reserve’s ability to flood the system with money.
- The Fed chairman says they are not out of ammunition.
- Warren Buffett is busy trimming his holdings.
During a 60 minute interview, Federal Reserve Chairman Jerome Powell highlighted the Fed’s preparedness to deal with the pandemic economic impacts. As the central bank chief was trying to calm the American public, Warren Buffett was busy trimming his holdings.
Jerome Powell: “We Have the Ability to Create Money”
In a 60 Minutes interview, Powell projected the Fed’s omnipotence to deal with record-level unemployment and unprecedented business closures amid a global pandemic:
Well, there is a lot more we can do. We’re not out of ammunition by a long shot. No, there’s, there’s really no limit to what we can do with these lending programs that we have.
As the stock markets cratered in March, Powell acted swiftly by reducing interest rates to near-zero while offering $3 trillion in liquidity to banks, businesses, and states. The Federal Reserve flooded the system with money, and it appears they’re prepared to do it again.
We — as a central bank, we have the ability to create money digitally and we do that by buying Treasury Bills or bonds or other government guaranteed securities. And that actually increases the money supply,
Powell may sound reassuring, but some smart money investors are not sold. Sven Henrich, the founder of NorthmanTrader.com, pointed out that in 2019 Powell said a recession was not in sight.
Meanwhile, the smartest money investor of them all, Warren Buffett, is quietly reducing his exposure in the stock market.
Buffett Unloads Shares
While many people are waiting for Warren Buffett to make an elephant-sized acquisition, the Oracle of Omaha is doing quite the opposite. Little by little, he is cutting his stakes in several companies across multiple sectors.
In April, Buffett’s Berkshire Hathaway sold $6.5 billion worth of airline stocks, calling his investment in the industry a mistake. Around the same time, the legendary investor unloaded $30.9 million worth of Bank of New York Mellon shares.
This month, Buffett continues to trim Berkshire’s holdings. He dumped nearly 500,000 shares of U.S. Bancorp to the tune of $16.3 million. On top of that, a Securities and Exchange Commission filing revealed that Berkshire cut its holdings in Goldman Sachs by 84% . The conglomerate also reduced its stake in JPMorgan Chase and tech giant Amazon.
Looking at Buffett’s actions, it seems that he’s not waiting for salvation. He appears to be getting out of the stock market while everyone else is waiting for the Fed’s deliverance.
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 any stocks of the companies mentioned.
