Warren Buffett's decision to hoard cash implies stock markets will crash further. Brace For Selling

Discussion in 'Must-Read Interviews, Articles & News Items' started by Arjun, May 3, 2020.

  1. Arjun

    Arjun Chief Executive Officer (CEO) Staff Member

    Mar 19, 2015
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    Warren Buffett's decision to hoard cash implies stock markets will crash further. Brace For Selling: Experts

    It is well known that Warren Buffett is blessed with a sixth sense which alerts him to when the stock markets are bottoming out.

    We saw a live example of this during the great crash of 2008.

    Warren correctly sensed that the markets had bottomed out and sent out a buy call in the NYT.

    "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful," the visionary Billionaire said.

    "Fears regarding the long-term prosperity of the nation’s many sound companies make no sense .... most major companies will be setting new profit records 5, 10 and 20 years from now," he added.

    "If you wait for the robins, spring will be over," he said with a flourish, implying that there was no time to waste and we had to grab stocks ASAP.

    However, in the present 2020 crash, Warren Buffett has been highly diffident about buying stocks.

    On the contrary, he has been dumping stocks and hoarding cash.

    As of date, he is sitting on a massive stockpile of $137 billion.

    When he was grilled by his fans as to the reasons for his abstinence from Wall Street, Buffett adopted a dismissive tone.

    "We haven’t done anything because we don’t see anything that attractive to do. That could change very quickly or it may not change,” he said, implying that he is in no rush to buy stocks.

    Experts are rightly pointing out that if Warren Buffett himself does not see any bargains yet, we have no business buying stocks.

    Brace For Selling: Technical Analysis expert

    Masanari Takada, an expert on technical analysis with Nomura, has sent the chilling warning that a crash is expected over the next few days.

    He pointed out that most Commodity Trading Advisors are trend followers and they have stopped accumulating Nasdaq 100 futures.

    "If Nasdaq 100 can’t hold 8100, we would expect the buying pressure generated by these CTAs on their own in the U.S. equity market to fizzle out on or around May 8. This would imply a need to brace for selling in tune with the ‘sell in May’ adage,” he said.

    He also pointed out that macro hedge funds are still bearish on equities.

    We suspect that global macro hedge funds will remain bearish until there is some reason to believe that [developed market] economies are on their way to finding a floor,” he said.

    A similar view has been expressed by other experts in technical analysis as well.

    In these circumstances, it is better if we also stay light and not venture into Dalal Street until after the all-clear sign is issued by the experts.