Buffet gives thumbs down to the market

He didn't say it outright, but from what I gathered from Buffet's commentary over the weekend he pretty much gave a thumbs down to the market. During his address to shareholders of Berkshire over the weekend, I'm sure there were many investors hoping to hear Buffett wax bullish on the markets and mention how the decline in March was an opportunity to - as the phrase coined by Buffett himself -   "be greedy when others are fearful". But that was not the case. In fact, Buffett was actually selling not buying. Specifically, he dumped his entire positions in airline stocks and claimed it was a mistake to have owned them. The funny thing is I remember Buffet saying for years how he hated airline stocks and for whatever reason this time around he decided to own them and obviously got burned.

 The $137 Billion cash war chest of Berkshire was not used to buy any "bargains" during the March rout because according to Buffett, there wasn't anything attractive enough. He also stated something that I'm surprised the financial media didn't latch onto. He more or less hinted that there's high risk of more shoes to drop when he mentioned Fannie and Fredie Mac going into conservatorship in early Sept 2008 was a sign of worse things to come (that wasn't actually the first big shoe to drop. For instance, the collapse of Bear Sterns happened in March 2008).  This is maybe why Buffet hasn't deployed that cash yet. It could very well be that Buffett expects to see more shoes to drop.  After all, were are still relatively early in this crisis when you think about it.

Buffet provided his usual "don't bet against America" spiel but actions speak louder than words. He's not buying America unlike when in October 16, 2008  he wrote on op-ed piece in the New York times titled "Buy America. I am". It should be noted that when he wrote that piece the SPX closed at 946 which meant it still declined another 30% from there before hitting bottom!


As far as the market goes in the short to medium term, I was calling for SPX 3000 a few weeks back and we almost got there Wednesday. The low hanging fruit from this rally has been picked in my opinion, but I'm not expecting the market to suddenly collapse just yet. The window is still open for SPX 3000, but sentiment conditions did deteriorate somewhat heading into Thursday right at the point when the market got ST overbought and so it was not to surprising to have seen this pullback. Let's see what happens from here. If the market can hold it together for the next day or 2 and not fall apart, the bears could very well shit the bed again and we'll indeed hit SPX 3000 at some point.