“Buffett is one of these people who buys on the way up and decides to take money at the top,” says Michael Hewson, founder of MCH Market Insight.
Much of his selling came at a time when Wall Street was hitting new highs as investors bet on a Trump bump, similar to the stock market rally seen during the president’s first term in office. Even as late as last month, the S&P 500 was closing at all-time highs.
In contrarian fashion, Buffett was positioning his portfolio for the Trump slump – a world where economic growth stagnates.
Wall Street’s benchmark index is eyeing a correction.Credit: AP
“US markets are very expensive, and he’s taking money off the table,” says Hewson. “The cash gives him optionality. Buffett is someone who puts his money where he gets the best return. He trades very much for the long term. He’s someone who’s happy to sit on the sidelines and doesn’t buy into the latest fads.”
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Buffett is renowned as one of the world’s most astute investors and has played a key role in some of Wall Street’s biggest deals, often as a lender of last resort for many companies in trouble.
When hedge fund LTCM blew up in the late 1990s, it was Buffett who offered to rescue it with a $US250 million bailout deal. During the financial crisis, Goldman Sachs turned to the legendary investor for a bailout. He injected $US5 billion into the Wall Street bank to keep it afloat and out of government hands – a deal which eventually netted him $US3 billion in profits.
Later, he adopted many of the tactics used in the world of private equity to acquire some of the world’s largest corporations. He teamed up with Brazilian buyout group 3G Capital to acquire Kraft Heinz, a food conglomerate controlling the Heinz range of soups and sauces.
Asked why he decided to buy the group, he had a simple answer: “ketchup”. He also made an audacious $US143bn bid to acquire Unilever in 2017, which was rebuffed by the company’s board.
Buffett has rejected the notion that he now prefers cash to stocks, telling shareholders last month: “Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won’t change.”
Bizarrely, one investment Buffett has recently been topping up on of late is Domino’s Pizza.
As stocks tumble on Wall Street, millions of Americans are panicking. But if you follow Buffett’s mantra, perhaps now is the best time to start buying.
But with US stocks running into bubble territory – the AI boom has driven extraordinary increases for names like Nvidia – Trump’s policies have proved the trigger for a stock market decline that many observers felt was overdue.
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Hewson says: “I don’t think he envisioned US markets coming off to the extent they have. The Nasdaq is still higher than it was a year ago, but a correction was still well overdue.
“Trump on his own wasn’t the catalyst because DeepSeek out of China has also been a factor. But it has sharpened the focus on whether these valuations are sustainable. Once one person starts to sell, you get a rush for the exits.”
As stocks tumble on Wall Street, millions of Americans are panicking. But if you follow Buffett’s mantra, perhaps now is the best time to start buying.
Telegraph, London
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