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Warren Buffett Is Quietly Calling the Stock Market’s Bluff

Last Updated September 23, 2020 1:49 PM
Kiril Nikolaev
Last Updated September 23, 2020 1:49 PM
  • The S&P 500 has rallied off its lows despite bad economic data.
  • Warren Buffett continues to add on to his $128 billion cash stockpile.
  • Buffett’s Berkshire Hathaway is poised to make a tremendous fortune should the markets collapse.

Warren Buffett has been remarkably quiet during this time of historic turmoil. The legendary investor has a penchant for making fortunes during economic downturns. But the Oracle of Omaha has yet to make a big splash in the stock market – or really any splash at all.

Instead, he’s been making moves in the shadows that suggest the worst of this crisis is far from over.

S&P 500 Rallies Despite Dismal Economic Backdrop

Wednesday’s pullback notwithstanding, the S&P 500 has come roaring back to life in April. The bellwether index has bounced nearly 30% from its 2020 low.

S&P 500, stock market
The stock market recovery has been uneven, but the S&P 500 is trading well above its yearly lows. | Source: Yahoo Finance 

Meanwhile, Wall Street is turning a blind eye to bad economic data. At least 16.8 million Americans have lost their jobs in the last three weeks due to the economic fallout of the coronavirus pandemic. And retail sales just suffered a record blow .

But investor sentiment is growing more bullish as policymakers flood the economy with trillions of dollars in stimulus. Congress enacted a $2.2 trillion relief fund, while the Federal Reserve fired an unprecedented $2.3 trillion “bazooka.” 

According to the CNN Fear & Greed Index, stock market sentiment is on the verge of exiting “Fear” territory.

Investors have thrown fear right out the window
Investors have thrown fear right out the window. | Source: CNN 

Despite this renewed bullish vigor, Warren Buffett is mostly staying on the sidelines. The writing on the wall shows that the S&P 500 may be in the midst of a sucker’s rally.

Warren Buffett Is Quietly Raising Billions of Dollars

The renowned value investor is working behind the scenes while the stock market grabs headlines.

Earlier this month, Buffett unloaded $30 million worth of Bank of New York shares. Berkshire Hathaway dumped $388 million worth of Delta Airlines and Southwest Airlines shares  as well.

Those stock sales pale in comparison to what Warren Buffett is doing overseas. Berkshire Hathaway sold euro-denominated bonds worth a whopping $1.1 billion dollars  in March. Then the multinational holding company raised 430 billion yen or $4 billion  through a multi-tranche yen bond.

Warren Buffett is not yet done raising cash
Source: Twitter 

Keep in mind, Warren Buffett is already sitting on a stockpile of cash to the tune of $128 billion. And yet Berkshire continues to add to its war chest.

Warren Buffett Could Make a Fortune from a Global Economic Meltdown

As Buffett builds his “Fort Knox” balance sheet while the stock market grinds higher, investors should question what this means about the possibility of the V-shaped recovery that so many analysts are hoping for.

Berkshire’s activity suggests the Oracle of Omaha shares the International Monetary Fund’s (IMF) view that the world is about to face the worst crisis in living memory . After all, the firm has strategically raised enormous cash positions in Europe and Asia alongside the United States.

Buffett once said to be greedy when others are fearful. The richest investor in the world is not yet greedy – and the rest of Wall Street no longer looks fearful.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.