Warren Buffett ready for the next stock market crash

The world’s most successful investor is ready for another ‘major’ acquisition and has $38 billion in cash ready to pick up bargains as the stock market falls from its recent high.

Warren Buffett’s famous annual letter to Berkshire Hathaway shareholders said: ‘Our elephant gun has been reloaded, and my trigger finger is itchy… We will need both good performance from our current businesses and more major acquisitions’.

Railway king

A year ago Buffett bought Burlington Northern Santa Fe, America’s second-biggest railroad company, for $26.5 billion, something he described as a bet on the recovery of America but others saw as an inflation play.

Buffett has sold out of Goldman Sachs who he rescued in the global financial crisis two years ago, one source of that amazing cash pile. And anybody who can make billions out of Goldman in a crisis is clearly not to be underestimated.

So what and who is he waiting for? Surely the Sage of Omaha senses another violent downswing of the market pendulum is almost upon us with oil touching $120. Oil price spikes have been a certain predictor of stock market sell-offs and recessions since the 70s.

But even at 80 Warren Buffett is not an old man in a hurry. He has always been a patient man, sitting with his elephant rifle for just the right moment to pull the trigger. The last time it took a matter of a few months for an oil spike to crash financial markets. It may not be different this time.

What to buy?

Will he buy another railway set? This is not just a big boy’s toy. Railways have monopolies and can raise prices. At the same time they compete very effectively with road as an alternative when oil energy costs are rising.

Buffett is also notoriously low-tech in his investments. He prefers a sure cash-flow to the fad of the moment so that he can calculate steady returns that generally turn out to be stellar, and that is where the financial genius comes is apparent.

America will always have another Warren Buffett in financial terms. Hedge fund manager John Paulson is already getting higher returns. But Buffett is an investment icon and philosophy that nobody else can match.