Warren Buffett has been selling a lot of stock, and that revelation is inducing his many admirers to follow suit. His Omaha, Nebraska-based conglomerate, Berkshire Hathaway Inc., reported Saturday that it reduced several positions and slashed its stake in top-holding Apple Inc., a sign to some in markets that the “Oracle of Omaha” was bracing for deep stock-market declines. The intended message wasn’t actually as clear-cut as meets the eye, but that nuance might not matter given the speed of the sentiment tailspin in markets.
At the time of writing, the S&P 500 Index had plummeted around 3%. I have no idea what proportion of that reflects Buffett, but it’s fair to say that his unfortunately timed disclosure was part of the sentiment stew.
As a proportion of total assets, Berkshire’s cash and equivalents of a record $276.9 billion are now officially back to their highs from the mid-aughts, before the financial crisis when a cash-rich Buffett famously scooped up iconic investments at bargain prices. On an absolute basis, Buffett’s cash hoard has hit records for several quarters, but I brushed it off until now because cash levels weren’t that high relative to other measures of the firm’s size. That excuse is no longer valid.
The Berkshire news comes at a point of particular vulnerability in markets and the economy. Together with excess savings and low unemployment, high asset prices — sustained in part by elevated US large-cap valuations — have been one of the three pillars of US consumption in recent years. Excess savings have been dwindling for some time, but personal wealth and the labor market seemed to be holding up well until last week. Now, suddenly, the consumption story feels unstable. Two days after the Federal Reserve forwent an opportunity to cut policy rates, a Bureau of Labor Statistics report Friday showed that the unemployment rate rose to a nearly three-year high, starting the selloff that Buffett helped continue.
