Berkshire Hathaway's sold off all airlines. It seriously trimmed down its GS investment (10mm -> 2mm shares), and mildly trimmed its JPM investment (Berkshire/Amazon/JPM are still interlinked on healthcare venture).
What are everyone's thoughts on the meaning of this? Are they just repositioning and adjusting for the world after COVID? Or perhaps they're about to make some serious acquisitions?
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I think it is clear that they see a bunch of sideways movements in the future. You know, the markets tanked due to the uncertainty of Corona. Then they had a rally when everyone realized that Corona wasn't that uncertain: politicians are stupid, they'll do some stupid stuff with some good stuff mixed in. They'll do the stupid stuff very early, and the good stuff very late. And in general just be stupid politicians as everyone expected. You know, the kind of stuff you pay 6 figures to some Ph.D. economist to tell you.
But after that initial uncertainty, and the quick recovery, what's actually left? Struggling businesses that will fail/have a hard time (years) going back to profitability. The banks who depend on deals with these companies (i.e. having a lot of money to move around as much as possible) will also slow down, so why would you expose yourself to them. In general it seems to be a good idea to reduce your exposure: If you are almost certain things will slow down and go sideways, why would you risk all your money now when there could potentially be some downside to come?
Of course this logic assumes you are heavily exposed to these companies already. If you, on the other hand, had no stake on any of these companies then I'd say you could start buying because if things are cheap then risking a little downside is okay because it is not like you can predict the lows anyway.
The thing is, Buffett doesn't buy/sell with anything less than a 10 year time horizon, so even if he sees uncertainty in the near term, he won't sell unless he thinks there's something wrong with the underlying business.
That is the exact kind of "rule" that breaks down during a crisis. A company that dies in 1 month will still be dead in 10 years. And, a lot of times, death isn't even the worst fate.
If I may divorce myself from the cold logic of the markets and think more macro, at this point in his life he may be concerned about his legacy and the post-Buffet Berkshire. There is always the idea that active managers just get rich by playing a bad strategy during the exact time when the market is irrational in just the right way to make their bad strategy good. And Buffet is the eternal US bull. But he has new facts:
A foreign country, ignoring the rumours of it being manufactured in the Wuhan lab, managed to hide a virus from US intelligence just long enough to get a deal signed, and for it to have already spread outside of China. All while the WHO was expertly doing their job of being incompetent. I think we all know that if the US even tried to pull that shit, Chinese and Russian intelligence would have it down the minute the order to conceal came out of the president. The eternal bull may now be the eternal skeptic. The US economy no longer gets any free handouts from Buffet.
I tired to follow your logic but don’t I’m not seeing it, a little help?
Well yes, a company dying is certainly different than the market going sideways for a while, and Buffett doesn't seem too concerned about the long-term outlook of the US economy, given the latest Berkshire meeting and the fact that he's still long a number of other US companies.
One possibility is the rumors that GS is looking for a large acquisition. Buffet may think that they will overpay.
He sold GS to buy a stake in RBC.
Goes to show that there are indeed 10 BBs now
Maybe he thinks most stocks are overvalued now. S&P 500 is up from the March low while we have the worst employment data since 1929. Yes stock market is based on the expectation of future earnings but I think people are a little bit too optimistic right now.
Bet on America but be careful of what you do.
Because the worst is yet to come for Goldman and the financial industry in general
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