Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Is Warren Buffett Implying the Stock Market Will Crash?

Stock-Markets / Financial Crash Nov 05, 2009 - 01:49 AM GMT

By: StocksBuddy


Best Financial Markets Analysis ArticleBefore we begin this article we would like to clarify that neither this article nor this site is associated with Mr. Buffett. Then why did we title this article that way. Continue reading and you will figure out the relationship.

Buffett’s big bet: $34B on 2nd-largest railroad

It’s a natural fit for the Oracle of Omaha, a city with a special place in railroad history. It was the starting point for the westward push of the transcontinental railroad. Today, Omaha is the headquarters of Union Pacific, and Burlington Northern trains rumble through.

In a statement, Buffett, whose investing decisions are carefully scrutinized by the world of finance, voiced confidence in the railroad industry.

“Most important of all, however, it’s an all-in wager on the economic future of the United States. I love these bets,” he said Tuesday.

There have been many articles around this and many have analyzed this in their own perspective. Some state that this investment suggests economy is improving while others suggest that such a big investment in this climate speaks the confidence of Mr.Buffett in the future of railroad and america. Others feel that stock markets should rally now because worlds best investor himself is investing after 60% run up. However, nobody might have analyzed this in the way we would like to present.

  • Mr. Buffett does NOT time markets. So the statement that his investment suggests market should rally further is completely absurd.
  • This investment also means that everything in the economy is fixed and that we are on our way to recovery. This is rubbish as well. This requires a lot of detailed thought… to follow in a bit.
  • Buying at the trough — things aren’t going to get much worse. Anyone remembers Pier 1 imports where the investment went sour. Nobody is perfect and there are definitely ups and downs. You really cannot take cues from anyone so to speak.

Now coming to the actual analysis. Here’s what we believe is what his recent investment is telling us.

Did it ever occur to anyone that Mr. Buffett is actually “diversifying” rather than picking tops and bottoms? Current portfolio of Mr.Buffet consists mainly of Financial and services based companies. Having a cyclical play in the portfolio is always a nice idea.

The recent investment in a RailRoad clearly states that there is a huge Crash in financials ahead of us. Why?

Did anyone figure out why one earth did Mr.Buffett buy this HUGE stake when the stock already climbed nearly 80% from it’s lows in March? During the same time he invested in Goldman Sachs without any issues. So he could have diversified into railroads with half the money then itself. So why now?

If you were Mr.Buffett and were sitting with $34B in cash, what would you do? You would probably put it in a safe investment with decent return or invest in some company which you believe in. The problem is that current climate is so messed up that CANSLIM and Mr. Buffett value investment will lead you to less to 5 stocks out of 18000 stocks trading in the US. So, how do you find value in the current climate? You do not really have any other investment options left.

Ok, i will sit in cash. Yes, that could be another option which Mr.Buffett could have pursued, but he chose to invest in a completely different sector that is NOT a growth sector at all and only a cyclical play. Why? Doesn’t that imply sitting in cash is even worse than buying into a cyclic play? Mr.Buffet has always liked financials, latest investment in GS shows the same. Then why did he chose to invest in an extremely slow moving and cyclic play and NOT just chose to sit in cash? That clearly tells us at least a couple of things.

  • $$$ is going to lose more value and hence sitting in cash is not an option.
  • Sitting in cash has another problem in it that what if the banks vanish into thin air?
  • If financials and other sectors were good enough, Mr. Buffett would have continued investing in those companies as he has been doing all along. Biggest bet of Mr. Buffett that too in a cyclical play tells us something.

Though NOT explicit, the above two points itself suggest us that Financials are definitely going to underperform in the coming months/years. May be a financial crash yet again?

Let us see if he is the only one kind of implying this.

Jittery Companies Stash Cash

Stung by the financial crisis, companies are holding more cash — and a greater percentage of assets in cash — than at any time in the past 40 years.

The trend appears to have continued in the third quarter, despite an improving economy. Of those 500 companies, 248 have reported third-quarter results. Their cash increased to 11.1% of assets, from 10.1% in the second quarter. Companies as diverse as Alcoa Inc., Google Inc., PepsiCo Inc. and Texas Instruments Inc. all reported big third-quarter increases in cash holdings.

If everything was just fine, why are so many companies just hoarding more and more cash? Do they know something that we don’t?

Mother of All Carry Trades faces inevitable bust

Noted economics professor has been stating this for a while and it makes complete sense. Whenever this carry trade turns sour, $$$ is going to rally ferociously. May be 10-30% in a matter of week(s). That will turn stock markets into another 1987 or 2008.

Then there is today’s FED meeting announcement.

Fed again pledges to hold rates at record-lows

A very simple question. If US economy was doing extremely well and if GDP is REALLY increasing as stated Here and if inflation is knocking the doorsteps in the form of Gold rises to record in New York and so is OIL, then why aren’t FED folks even changing their tone on such extremely positive improvements and inflation?

You may want to check out FED’s analysis

Simply put. Things are getting worse and stock markets are going to play the catch up game sooner or later. We do NOT advice any long positions in any market including commodities. Short whole heatedly and wait for the event to happen. Indications are painted all over the place. It’s just matter of time.


If you haven’t already read our analysis on Why Stock Market has been going up, you should check it out. Stock markets are hanging on a thin line of wire and when US markets trip over they will take world markets on a roller coaster ride that would be worse than what we saw in 2008 and early 09.

India's No.1 Trading Community From the desk of Analysts comes the above article. SB Analyst team comprises of experts from varied fields such as Technical Analysis, Fundamental Analysis, Macro-Micro Economics, World Affairs, Currency and much more. Apart from user contributions, our analysts post analysis on on a regular basis. For more details, please visit us @

© 2009 Copyright StocksBuddy - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules