Warren Buffett ready for a stock market crash with a record $49bn in cash

Posted on 22 May 2013 with 7 comments from readers

It’s always important with the world’s top investors to follow what they are doing rather than what they are saying. For example this week ArabianMoney flagged up an investment by George Soros in a risky call option on GDXJ, the junior gold miners ETF, at a time when the headlines said he was abandoning gold (click here)!

Now let us turn our attention to the Sage of Omaha. He may have stocked up on Heinz beans recently but the reality is that Mr. Buffett has a record $49 billion in cash. Talking positive, acting defensively? That’s pretty obvious when you think about it.

Perverse investors

There’s an article on global investment sentiment in The Daily Telegraph today. It highlights the fact that the same investors who are pushing stock markets to record highs are actually all expecting either stagnation in the economy or another recession. Hardly bullish.Warren Buffet has inspired and continues to inspire a higher number of individuals than his savings and his quotes are the screensavers and success formulae for billions of them like the strategy of Bitcoin Code. The quotes come from his personal experiences and his analysis of the financial profiles of the givers and takers alike.

Mr. Buffett has also wisely commented that all it would take for markets to reverse would be the slighted hint from the Fed that its money printing is going to end. Will Ben Bernanke say something soon to stop this runaway asset price bubble that we see in the Us stock market and copied all over the world?

Bubble trouble puts the Fed in a quandary. Damned if it lets a bigger bubble inflate. Damned if it brings the current one back down to earth. The Fed might just need to do this now to get the investment world back into the realms of reality.

Fed message

Of course, it would then have to reverse course again after a stock market crash to stop the world falling apart. But the message would have gotten home. Stocks are no win-win when the US economy is barely expanding and the rest of the world is slowing down.

The market climb back up would be against a steeper wall of worry than we now face which everybody assumes is a one-way bet. That would not worry our old friend the Sage of Omaha with his cash mountain.

As we saw in 2008 when Mr. Buffett even managed a nice turn on the rescue of Goldman Sachs the old boy knows how to play a crash brilliantly. Then again you can only do this if you have the cash to do it. He has it and would the world’s greatest investor be sat on cash if he really thought there was more money to be made in stocks?