Predict big dump in advance? The gold content of the stock god Buffett is still rising

Original Title: "Predicting big dump in advance? The gold content of the stock god Buffett is still rising"

Original author: Mary Liu, BitpushNews

When others are greedy, be fearful; when others are fearful, be greedy." This simple yet profound motto comes from the mouth of 94-year-old billionaire investor Warren Buffett.

The market prophet, known as the 'Oracle of Omaha', once again confirmed the value of this saying with his precise judgment - he seems to have foreseen long ago that Donald Trump's policies may bring a storm to Wall Street.

Yesterday Wall Street experienced a 'Black Monday', with a sharp market decline, confirming Buffett's 'prediction'. Investors' concerns about an economic recession heightened, triggering panic selling in the market. The S&P 500 index fell more than 9% from its historical high on February 19, just one step away from a 'fall' (defined as falling 10% or more from a previous high). Among the top 10 billionaires, only Buffett's net worth rose against the trend.

For Buffett, the market's big dump undoubtedly once again proves the foresight and correctness of his investment strategy.

layout ahead of "Trump recession"

Berkshire Hathaway, a company under Buffett, has been continuously reducing its stock holdings in recent years, with a scale of tens of billions of dollars, instead hoarding a huge amount of cash.

Data shows that Buffett has sold more stocks than bought for nine consecutive quarters, including significantly reducing stakes in many well-known companies. As early as last year, before the Trump administration took office, Buffett had started selling most of his Apple shares and reducing investments in Bank of America and Citigroup.

In the past few months, Berkshire Hathaway's cash reserves have been soaring, reaching an astonishing $334 billion, which accounts for more than a third of its entire investment portfolio. What is shocking is that this cash reserve size even exceeds the total market value of all listed companies in the UK's FTSE 100 index.

Warren Buffett is a typical long-term investor, who prefers to sit on the sidelines patiently waiting for the best opportunity, rather than blindly chasing market hotspots and the latest trends.

Despite holding a huge amount of cash, Buffett clearly denies the statement that he 'prefers cash over stocks.' In his February letter to shareholders, he emphasized: 'Although some commentators believe that Berkshire's cash position is unusually large, most of your funds are still invested in stocks, and this investment preference will not change.'

Panic spreads, Buffett's maxims become 'golden rules' again

In the midst of market fluctuations, it may be worthwhile to listen to the advice of this legendary investment figure once again.

In his letter to shareholders in 2017, he wrote, "In the short term, the stock market may fall, and it is impossible to predict how much." But he then went on to say that if there is indeed a big dump, remember the following passage from Rudyard Kipling's classic poem 'If,' written around 1895:

"If everyone around you loses their minds, can you still stay calm... If you can wait without getting tired of waiting... If you can think—without making thoughts your goal... If you can believe in yourself when others doubt you... Then, the Earth and everything on it will be yours."

Why does staying calm bring rewards?

It is worth noting that Buffett is talking about the major fall of the US stock market, such as the bear market from 2007 to 2009, during which the market value of the S&P 500 index shrank by more than 50%. Compared with that time, the current pullback experienced by investors is far from that storm.

In fact, the stock market pullback is a normal operation of the capital market. Data from Bede Private Wealth Management shows that since 1980, the S&P 500 index has experienced 21 falls of 10% or more, with an average intra-year fall of 14%.

Certainly, in the face of sudden changes in the market, investors often find it difficult to predict the future direction accurately. Just as Buffett wrote in 2017:

"No one can tell you when these (暴fall) will occur. The indicator light may turn from green to red at any time, without any yellow light buffer."

Buffett believes that there are 'extraordinary opportunities' hidden in the market downturn. Because historical data has repeatedly proven that the market will eventually return to an upward trajectory, and what value investors need to do is to wait patiently and take full advantage of the market downturn to 'pick up' cheap chips.

According to data from Hartford Funds, since 1928, the average bear market in the US stock market has lasted less than 10 months - the definition of a bear market is a fall of 20% or more from recent highs. For investors planning to invest for decades, the impact of a bear market is just a brief moment in the long river of investment.

Therefore, even in the panic and torment of experiencing a bear market, always keep your eyes on the ultimate 'prize' - your long-term financial goals that you are striving for. Continuing to invest when the market falls is like actively buying stocks on sale. As long as you stick to a diversified investment strategy, the deeper the stock prices fall, the better 'bargain' you can get.

Buffett's investment philosophy, along with a famous quote from his 2009 letter to shareholders, both emphasize the importance of actively seizing investment opportunities in a market downturn: 'Big opportunities are not always common, when gold falls from the sky, use a bucket to catch it, not a thimble.'

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