Buffet Calls the Top: Berkshire Quietly Dumps Half Its Apple Shares Amid Unprecedented Selling Spree, Zero Hedge, August 4, 2024
When yesterday we said, when discussing Buffett's ongoing liquidation of his Bank of America stake, that "Berkshire's rising cash stockpiles merely reflect the firm's inability to find deals in today's overvalued and weak economic environment", little did we know just how accurate that would be, because fast-forwarding just one day later we find that far from only dumping Bank of America, the 93-year-old Omaha billionaire had been busy quietly dumping his most iconic holding in an unprecedented selling spree that sent Berkshire's cash pile soaring by a record $88 billion to an all-time high $277 billion at the end of Q2.
Stocks Pummeled, Fear Rises Sharply
At this time, no one needs to tell you that global markets have been in a meltdown around the world unless you have been camping deep in a forest for the last week.
Let’s look at what we can learn from the events since the last blog post on July 10th.
When markets fall fast, the Greed and Fear Index and sub-indices tell us that the herd of professional traders and investors have been moving money to the sidelines or have moved from going long (profit when markets rise) leveraged money (future and options) to going short (profit when markets decline). This can be done at lightning speed in the world of high-speed computer trading.
Yet, there are lessons for the retail investor/trader with their funds other than watching multiple monitors throughout the day and evening.
When we looked at the CNN Fear and Greed Index at the close of trading on July 10th, we could see that the indicator was still in the greed category. While not as high as earlier in the year, it was still high. Now we jump forward to August 5th.
You can see that we are currently in the extreme fear category. When comparing this to the timeline below, we can see that we have already reached a level below anything shown in the last 12 months. This is where traders and computers would be looking for a rally to start.
Does it mean it can not go lower? Of course not. However, it does mean things have changed drastically from July 10th. What was overbought has moved to oversold.
We also know that the NASDAQ cut through its 200-day MA today, a major line in the sand, and bounced back up through it to close above it. If we subtract today’s low from the July 10th high, we can see that we were close to a 16% decline in this 17-day period. A 20% decline is usually called a “correction” or “pullback” in a bull market.
Personally, with what we have been watching since 2009, and many, many other larger factors outside the markets, I see this as a retracement rally in a larger bear market. None of us will know for certain until the markets have fallen much lower, and by that time, it may be too late to make changes to one’s portfolio.
However, for now, I am ready for a temporary rally that may last a few weeks or several. The pendulum needs to swing in the other direction for a while.
Bitcoin Bomb
Since last Monday, Bitcoin has travelled from 70,027 to 49,202. Other coins have fared even worse. Give up on cryptos? It has certainly been painful.
[Source: Coin Market Fear and Greed Index]
Once again, I go back to the pendulum between fear and greed and Fibonacci patterns.
In my July 10th post, I stated, “The lowest reading in 2023, 31.83 was on 9/11. The lowest reading so far in 2024, 35.68, as on 7/5”.
As of August 5th, we can say for certain that today’s Fear and Greed Index from Coin Markets was slightly lower (31) than it was on 9/11/23.
Taking that sentiment data, and the fact that as of tonight (7:17 pm CST) the price of Bitcoin is over $55k, it appears we have started a rally again.
While I believe it will volatile, the next question to be watching in the days to come will be how Bitcoin reacts with US stocks when the sentiment pendulum swings back to neutral or greed.
1990, 2024: The Nikkei Ceiling?
If you were on the first trip to 40k in the 1980s, but didn’t quite make it, then 34 years later managed to get over the 40k level, only to lose it hard within a few months, would you be confident of this level right now?
The fact that the Nikkei has come back under 40,000 and 38,915 (1990 record that held for 34 years) is massive for global equities. This bear deserves to be watched closely in the weeks ahead.
There were tools that retail traders could have used during the decline from the top that would have made money since their objective is to attempt a daily return that is opposite an index. In this case, the index is the NASDAQ 100.
I would not start now, based on what we have already seen read, but you may wish to consider it as part of your portfolio when sentiment levels reach neutral or higher.
One shining moment in the last few weeks has been gold. As we can see, it did not turn bearish but remained bullish.
Hold the presses. Check this out!
This is only the 3rd DAY in a quarter of a century that the VIX broke 60. The other two were in the May 2020 and October 2008.
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Disclaimer: Best Minds Inc was closed in 2018. I am retired. Nothing I am writing should be taken as advice to buy or sell any form of security or asset. Everyone must study and consider their own situation before putting money anywhere, as well as understand they are living in a time where major changes at the highest levels of money are taking place. These writings are free.
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