Warren Buffett’s Weekend Move Foreshadowed Monday’s Stock Tumble, And It Could Point to Something Even Worse

August 5, 2024 Mark Wolf US 0

The Oracle of Omaha just shrunk his position in Apple Inc. in a big way, and it’s sent shockwaves throughout the stock market.

The talking heads are all speculating while financial analysts are trying to calm clients’ concerns. Worries that Warren Buffett has reduced Berkshire Hathaway’s stake in Apple Inc. by nearly half during the second quarter is shouting impending recession to some. Others believe Buffett is merely diversifying risk. Both — actually — could be true.

Just as it could also be true that the reason for the selloff are tax implications. Buffett hinted at that after he sold stake during quarter one this year, and Apple Inc. remains Buffett’s largest single position, according to Fortune.

Apple Inc. also continues to deliver robust returns, especially amid all of the excitement of what AI will bring to their products and profit margins. This is despite the recent dip of 5 percent on Monday and 10 percent earlier, according to CNBC.

Shares of Apple Inc. did grow 23 percent during the second quarter. And frankly, the notion that Apple Inc. has suddenly become a distasteful investment is almost laughable, considering individuals seem to be able to come up with thousands of dollars to buy iPhones — even when they are struggling to buy groceries.

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This isn’t to say that they aren’t struggling with issues, including declining revenues in China, regulatory woes, and overall a slow growth trajectory, according to Forbes. And they are banking a lot on AI, which still remains an unknown.

Maybe the combination added to the decision to diversify risk. Buffett generally shies away from investments that he doesn’t have a real feel for.

Maybe, given how the Federal Reserve and Bidenomics has choked the economy and fostered massive inflation, he may be priming to take advantage of this.

As of today, Berkshire Hathaway Inc.’s stake in Apple Inc. “now stands at roughly $84 billion, down from about $140 billion at the end of March,” according to Fortune. Add this to the expanding coffers, which also include the recent selloff of Buffett’s position in Bank of America, and it looks like there is a concerted effort to stockpile cash.

Is the U.S. headed for a recession?

Without any real understanding for why Buffett has been on a selling spree amounting to approximately $75 billion in the second quarter, according to CNBC, the notion that such monumental hoarding of dollars is a sign that Buffett is preparing for when a recession hits isn’t out of the realm of possibility.

“Buffett may feel we’re about to go into a recession, so by raising cash now he will be able to buy companies cheap later on,” said Jim Awad, senior managing director at Clearstead Advisors, according to Fortune. “He may smell an opportunity coming.”

The worst response that can ever happen to the stock market is panic setting in. And yet, comments on X are already proving that Buffett’s dramatic action is causing just that among investors.

“Tell me a #stockmarket #crash is coming without telling me a stock market crash is coming? #SellOff #CashIsKing #BerkshireHathaway #Apple,” one user posted.

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Calmer heads said that the sale of nearly 50 percent of his position in the second quarter shouldn’t be a shock, given he began selling his stake in Apple Inc. during the first quarter (13 percent).

Still others are using the moment to peddle doomsday theories, including supporting Charlie Ward’s 2022 warning of an all-out crash.

Could the Buffett’s sale of Apple Inc. mean nothing good? Only Buffett and his crew know. But getting crazy over it isn’t going to lead anyone to those answers — or anywhere good for that matter. If there is a market correction coming, you aren’t going to stop it. The best action to take is to just keep watching and employ common sense. Anything else is a losing strategy.





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