Just How Bad is the Economy for Buffett and the Fed to Be Doing This?
The US is lurching towards an economic catastrophe.
If you’ve been paying attention, over the last few weeks there have been several LARGE “tells” in the markets. Specifically, two of the biggest cheerleaders for stocks in history – Warren Buffett and the Fed – are getting EXTREMELY bearish.
First and foremost, Warren Buffett is the man who famously stated that he likes to own companies for a long time, ideally “forever.” And he has begun dumping huge quantities of stocks.
All told, Buffett sold 21 stocks worth billions of dollars in the last four months. He’s unloaded large portions of his holdings in Goldman Sachs, JPMorgan, and other large banks, as well as multiple airline stocks, pharmaceuticals, and energy stocks.
The media claims Buffett is doing this because he wants to make sure he owns less than 10% of these companies. But when do you remember Buffett ever unloading so many stocks worth billions of dollars in such a short period?
On top of this, Buffett didn’t use the March meltdown to load up on investments.
Put another way, during the largest market collapse in years, at a time when many businesses were on sale, Buffett didn’t buy anything. Instead, he chose to start unloading several of his largest positions.
Whatever Buffett is seeing in the economy that is making him do this… it’s NOT good.
A Clear Warning from Central Bankers
Then there’s the Fed.
For decades now, the Fed has been a cheerleader for the economy and stocks. Indeed, it is extremely rare to find the Fed ever issuing a gloomy view of the economy or markets. Which is why it’s astonishing to see the Fed making statements that you would expect from a raging bear.
During the last week, Fed Chair Jerome Powell has publicly stated:
- The US is facing its biggest economic shock in living memory (this would include the Great Financial Crisis), an economic downturn which Powell says is “without precedent.”
- The depression/recession could stretch through the end of 2021.
- Asset prices (stocks) remain vulnerable to significant price declines (crashes).
When do you ever remember hearing a Fed chair say anything like this? Typically, the head of the Fed issues statements that understate the severity of a risk. Remember Bernanke saying the subprime crisis was “contained”?
And yet, here is Jerome Powell saying that the economy is in its WORST collapse ever, that it could least through the end of 2021, and that the stock market could crash.
And this is AFTER the Fed has spent over $2.7 TRILLION propping up the markets in the last two months. Just how horrific is the economy that Powell is saying this stuff after the Fed began buying assets in:
- The Treasury markets (US sovereign debt)
- The municipal bond markets (debt issued by states and cities)
- The corporate bond markets (debt issued by corporations)
- The commercial paper markets (short-term corporate debt market)
- And the asset-backed security markets (everything from student loans to certificates of deposit and more)?
Between Warren Buffett and Fed Chair Powell, we’ve got two of the biggest stock cheerleaders in history issuing some truly horrific stuff.
Again… just how bad are things that these two individuals are acting this way?
I want to be clear here: I’m not suggesting that the market will crash next week or even the week after. But I am warning you that two of the most connected, powerful investment figures in the world are issuing truly horrific warnings about the economy.
It’s very possible we could see another horrific market crash in the future. But rest assured I’ll warn you well in advance – along with some investments you can use to turn it from a time of pain into a time of profits.
Editor, Money & Crisis