Predicting a big drop in advance? The gold content of stock god Buffett is still rising

Author: BitpushNews Mary Liu

"Others are afraid when they are greedy, and others are greedy when they are terrified." This simple but profound wisdom motto comes from the mouth of 94-year-old billionaire investor Warren Buffett.

The market prophet, known as the "Prophet of Omaha", once again confirmed the value of this motto with his precise judgment - he seemed to have foreseeed that Donald Trump's policies might bring a storm to Wall Street.

Wall Street encountered "Black Monday" yesterday, and the market fell sharply, confirming Buffett's "prophecy". Investor concerns about the recession have heated up, triggering panic selling in the market. The S&P 500 index fell more than 9% from its all-time high on February 19, just one step away from a "retracement" (defined as a 10% or more decline from its previous high). On the Top 10 Rich List, only Buffett's net worth rose against the trend.

For Buffett, the market plunge undoubtedly once again proves the forward-looking and correctness of his investment strategy.

Plan ahead for "Trump Recession"

Buffett's Berkshire Hathaway has continued to reduce its holdings in recent years, with a scale of up to billions of dollars, and has instead hoarded huge amounts of cash.

Data shows that Buffett has sold more than buy stocks for nine consecutive quarters, including a significant reduction in stake in several well-known companies. As early as last year, before the Trump administration came to power, Buffett began selling most of Apple stocks and reducing investments in Bank of America and Citigroup.

Berkshire Hathaway’s cash reserves have soared over the past few months to a staggering $334 billion, accounting for more than a third of its entire portfolio. Shockingly, this cash reserve scale even exceeds the total market value of all listed companies in the UK's FTSE 100 Index.

Buffett is a typical long-term investor. He is more willing to sit quietly on the sidelines and wait patiently for the best time, rather than blindly chasing market hotspots and the latest trends.

Despite holding huge amounts of cash, Buffett explicitly denied that he "looks more on cash than stocks." "Although some commentators believe Berkshire's cash position is unusually large, most of your funds are still invested in stocks, and this investment preference will not change," he stressed in a letter to shareholders in February.

Panic spreads, Buffett's motto becomes the "golden law" again

As the market fluctuates, you might as well listen to the advice of this investment legend again.

In a 2017 letter to shareholders, he wrote: "In the short term, how much the stock market may fall is impossible to predict." But he immediately said that if a sharp drop really happens, remember this passage from Rudyard Kipling's classic poem "If" written around 1895:

"If all the people around you lose their minds, you can still remain calm...If you can wait and not get tired of waiting...If you can think - instead of taking thoughts as your goal...If you can still believe yourself when everyone doubts... Then, the earth and everything on the earth will belong to you."

Why can stay calm bring rewards?

It is worth noting that what Buffett is talking about is a significant decline in U.S. stocks, such as the bear market from 2007 to 2009, during which the S&P 500 market value shrank by more than 50%. Compared with that time, the pullback investors have experienced is far less than that stormy wave.

In fact, the stock market pullback is the norm for the operation of the capital market. Data from Bed Private Wealth Management shows that the S&P 500 has seen 21 10% or more declines since 1980, with an average decline of 14% this year.

It is true that when the market changes suddenly, investors often find it difficult to accurately predict the future direction. As Buffett wrote in 2017:

"No one can tell you when this (piloss) will happen. The indicator light may turn from green to red at any time, and there will be no buffering of yellow lights."

Buffett firmly believes that there are "extraordinary opportunities" hidden during market downturns. Because historical data has proven countless times that the market will eventually return to the upward track, and all value investors need to do is wait patiently and make full use of the market downturn to "pick up" cheap chips.

According to data from Hartford Fund, the average bear market in the U.S. stock market has lasted less than 10 months since 1928 - the definition of a bear market is a 20% or more decline from its recent high. For investors who plan to invest for decades, the impact of the bear market is just a brief moment in the long investment river.

Therefore, even when experiencing panic and torture in a bear market, always focus on the final "prize" - the long-term financial goals you strive for. Continuous investment when the market falls is equivalent to actively buying when the stock is discounted and promoted. As long as you stick to a diversified investment strategy, the deeper the stock price falls, the more cost-effective you can get "bargain" (bargain).

Buffett's investment philosophy is similar to a famous saying in his 2009 letter to shareholders, both emphasizing the importance of actively seizing investment opportunities when the market is down: "Great opportunities are not common. When gold is dropped on the day, you have to take it with a bucket instead of using a thimble."