TERRIFYING: This Makes Me CRINGE!
Nobody quite knows the miracle of coincidences. My life has been full of events so rare that, looking back, they seem to be grandiose, but as they occurred, I paid no mind to them.
As I frequently do on airplanes, I curved out a few hours to reflect on the past and draft new goals for the future, on a recent flight I boarded. Thinking of my father’s bankruptcy when I was 13 has always been a horrible memory – not having electricity or phone services for hours on end, has left a deep scar in my psyche. I became an addictive saver and indeed, I’ve never had an overdraft in my life.
Starting at 13, I marketed my skills to a basketball coach and became his assistant. That position allowed me to market my babysitting skills to the parents of the 6-yr olds in the class and expand my revenue stream to watching over them.
Then, I had told my grandfather, from my mother’s side, that I had saved up money and wanted to do “something productive with it.” He was the one, who gave me a book by Warren Buffett, when I was only 16, and ignited the spark in my mind that I could be wealthy.
I have followed Warren Buffett’s annual reports ever since. This was close to 18 years ago.
A number of days ago, Buffett published his latest Berkshire Hathaway annual report and one topic made me stop and shiver.
Many people believe that Mr. Buffett has lost his touch, but Berkshire just posted record earnings. It is quite unbelievable for a company that size to keep growing so rapidly and consistently, but their strategy is absolutely ingenious and relies on the float of insurance companies for safe leverage.
In this letter, Buffett talks about the fact that Berkshire (1) hasn’t found any good deals since 2015, (2) has a record amount of short-term Treasury Bills (it’s basically cash), and (3) he is of the notion that we might see economic discontinuities and a banking crisis.
Mr. Eternal Optimism didn’t say anything promising about the U.S., nor did he make any bullish predictions on the strength of the Dollar or America’s competitive advantages on the world scene. Instead, he told millions of shareholders, myself included, that he is sitting on the company’s biggest cash pile ever and that it’s prudent to do so in light of the risks of “economic discontinuities” and “market closures.”
This is major and perhaps one of the least bullish letters I’ve read from Buffett since he began publishing them.
While others are leveraged and betting big on U.S. equities, Buffett is reluctant to pull the trigger on anything, not even high-yield corporate bonds. Instead, he is deliberately holding low-yield, short-term government bonds because he knows the risk of default is practically non-existent, and what he wants is to go on a scavenger hunt, once the market plummets and stays down.
Buffett is bearish, just as everyone else has forgotten 2008 and is celebrating wage increases and a record-breaking stock market. I was stunned at the tone Buffett took with this letter and to the fact that it is the complete opposite of his usual, bullish self.
Market closures and economic discontinuities is a delicate way of hinting to bank holidays, USD revaluations, emergency G20 meetings, price controls, FED stimulus measures, and if push comes to shove, increased police presence on the streets of America.
Buffett can’t say it, being that he is a global influencer, but I can tell you, unequivocally, that Buffett fears the end of the American way of living, fueled by the ability of the Federal Government to issue debt at will and finance it with cheap rates, is over.
In terms of severity, this ranks right up there, along with lack of oxygen.
This is a clear warning signal from a man who makes millions of dollars every day and perhaps is the smartest economic mind the world has ever known – take this seriously.
As a first measure, make sure that you own precious metals in physical form. I like looking at the stack of silver on my desk at all times, and I bought more silver last week. I’m also putting the finishing touches on a Special Report regarding options trading strategies for volatile markets.
Next, prepare mentally to embrace volatility. If you can’t stomach 5%-15% drops with your large-cap portfolio and 25%-50% drops in a small-cap portfolio, run for the exit now, because that’s what’s coming – there’s no doubt about it.
Lastly, remember, every crisis wipes away many bad businesses and opens the door to newcomers, to new ideas, and to opportunity. Spot areas where you can excel and make sure that, as the dust settles, you’re on the launching pad for bigger and better financial circumstances than before.
After the great Chicago fire, most entrepreneurs were leaving for the west, but one man decided to stay. His business was lost to a fire for a 2nd time some number of years later, yet he stayed and built it again. This man is behind Marshall Field’s, which was acquired by Macy’s in 2005 and is an American success story of rags to riches. When others flee, hold your ground and fight.