How Warren Buffett Safeguarded His Wealth with a Record Cash Reserve Pre-Stock Market Crash

 How Warren Buffett Safeguarded His Wealth with a Record Cash Reserve Pre-Stock Market Crash

Warren Buffett's Berkshire Hathaway recently faced significant losses as the stock market experienced a sharp downturn. Despite this, Buffett's strategic decision to build substantial cash reserves has played a crucial role in mitigating these losses. This article explores how Buffett's foresight in amassing cash reserves helped protect Berkshire Hathaway during this volatile period.

Berkshire Hathaway's Portfolio Hit by Market Declines

On Monday, Berkshire Hathaway's stock portfolio was hit hard as major holdings like Apple, Bank of America, and Mitsubishi experienced sharp declines. The global stock market sell-off resulted in losses worth approximately $15 billion for Berkshire Hathaway. The company's market capitalization fell by over 3%, bringing it down to $899 billion. Significant stakes in Japanese companies such as Mitsui, Marubeni, and Sumitomo, along with American Express, Moody's, and Kraft Heinz, also saw declines, wiping out hundreds of millions of dollars.

Record Cash Reserves: A Strategic Move

In the last quarter, Berkshire Hathaway reported record cash reserves of $277 billion, largely due to a $76 billion stock sale. This decision to reduce stock market positions and accumulate cash was a deliberate strategy by Warren Buffett to prepare for market volatility amid growing concerns over a potential US recession. Buffett's cautious approach paid off, as these cash reserves provided a buffer against the recent market turmoil.

Impact on Major Holdings

1. Apple Decision

   • Apple, one of Buffett's largest investments, saw its share price drop by more than 7%, resulting in a $5.7 billion loss for Berkshire Hathaway. Buffett's decision to sell nearly half of his Apple stocks indicated his concern about the tech giant's future performance. This move was part of a broader strategy to reduce exposure to tech stocks, which also included declines in other major tech companies like Alphabet, Amazon, Meta, Microsoft, Nvidia, and Tesla.

2. Bank of America and Mitsubishi

   • Bank of America and Mitsubishi, other significant holdings for Berkshire Hathaway, also experienced sharp declines. The reduced valuation of these companies contributed to the overall loss in Berkshire's portfolio.

3. Japanese Holdings

   • The stakes in Japanese companies Mitsui, Marubeni, and Sumitomo faced similar downturns, affecting Berkshire's international investments.

4. Other Major Investments

   • Declines in holdings such as American Express, Moody's, and Kraft Heinz further exacerbated the losses, highlighting the widespread impact of the market sell-off.

Conclusion

Warren Buffett's strategic foresight in building record cash reserves proved to be a crucial defensive measure during the recent stock market crash. By reducing exposure to vulnerable stocks and amassing substantial cash, Buffett was able to safeguard Berkshire Hathaway's wealth to a significant extent. This approach not only mitigated immediate losses but also positioned the company to capitalize on future opportunities in a volatile market environment.

5 Essential Insights Before the Stock Market Opens

 5 Essential Insights Before the Stock Market Opens

Today is packed with significant events and updates that could impact the stock market. Federal Reserve Chair Jerome Powell is set for another day of testimony on Capitol Hill. Major tech companies Microsoft and Apple have made notable decisions regarding their involvement with OpenAI. Taiwan Semiconductor Manufacturing Co. (TSMC) is seeing a rise in premarket trading due to impressive revenue reports. Samsung Electronics workers are extending their strike, and Oracle shares are reacting to news about a potential deal with Elon Musk’s xAI. Here’s what investors need to know before the market opens.

1. Powell Heads to Capitol Hill for Second Day of Testimony

Federal Reserve Chair Jerome Powell will be testifying before the House Financial Services Committee today. In his testimony yesterday before the Senate, Powell highlighted the central bank's focus on balancing risks from inflation and unemployment. He also emphasized that there is no set timeline for interest rate cuts, which have been at their highest levels in 23 years. Powell's remarks and the questioning he faces today could provide further insights into future monetary policy directions, affecting market sentiment.

2. Microsoft, Apple Reportedly Relinquish Observer Roles on OpenAI Board

Bloomberg has reported that both Microsoft and Apple have decided against taking observer seats on OpenAI’s board. Microsoft, which has invested $13 billion in OpenAI, announced its withdrawal due to antitrust concerns. Apple also reversed its decision to join the board following Microsoft's move. This development comes in the wake of regulatory scrutiny from the European Commission regarding Microsoft's bundling practices and Apple's restrictions on developer payments. Shares of both companies are slightly higher in premarket trading.

3. TSMC Shares Rise on June Revenue Jump

Taiwan Semiconductor Manufacturing Co. (TSMC) is experiencing a 2% increase in premarket trading. The semiconductor giant reported a significant 33% year-over-year rise in June revenue, driven by growing demand in the AI sector. Despite a slight decline from May’s figures, TSMC's first-half revenue for 2024 saw a substantial 28% increase compared to the same period last year, reflecting strong overall performance and investor confidence.

4. Samsung Workers to Extend Strike Over Pay, Vacation

The labor union representing workers at Samsung Electronics has announced an indefinite extension of their strike, which began as a three-day work stoppage. The 30,000-member union is demanding a 3.5% pay increase and better transparency in compensation. This strike marks a historic first for Samsung, which has never faced a labor strike in its 55-year history. The ongoing dispute could impact Samsung’s operations and market position, especially as it recently overtook Apple as the leading smartphone provider.

5. Oracle Shares Look to Halt Slide After xAI Deal Falls Through

Oracle shares are attempting to recover after a 3% drop following news that a potential $10 billion server deal with Elon Musk’s xAI fell through. The deal was intended to expand xAI’s use of Nvidia chips rented from Oracle. Despite the setback, Oracle is seeing slight gains in premarket trading as investors digest the implications and look for further developments in Oracle’s AI and cloud strategies.

Conclusion

These five key developments provide a snapshot of the factors influencing today's stock market. Investors should keep a close eye on Federal Reserve updates, tech company moves, semiconductor performance, labor strikes, and corporate deals as the market opens. Understanding these insights can help in making informed investment decisions.

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Nike's Stock Price: Crucial Levels Amid Earnings-Driven Fluctuations

 Nike's Stock Price: Crucial Levels Amid Earnings-Driven Fluctuations

Key Takeaways:

• Nike shares dropped more than 12% in extended trading on Thursday after the company reported weaker-than-expected quarterly revenue and cut its sales outlook.
• The stock sits poised to break down from a rising wedge pattern.
• A measured move in Nike shares projects a price target of $75.
• It's also worth monitoring if a prominent swing low that formed on the chart in October 2022 provides support around $82.

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Introduction

Nike (NKE) shares plummeted more than 12% in extended trading on Thursday after the athletic apparel and equipment maker reported weaker-than-expected quarterly revenue and cut its sales outlook. As investors digest these disappointing results, several critical levels on the stock chart warrant close attention. In this article, we delve into the technical analysis of Nike's stock price to identify key levels that traders and investors should watch amid earnings-driven fluctuations.

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Breakdown from Rising Wedge Pattern

Nike shares trended sharply lower between late February and early April after the 50-day moving average (MA) crossed below the 200-day MA, forming a bearish death cross signal. Since then, the stock has oscillated within a rising wedge—a chart pattern that often signals a continuation of the longer-term downtrend. The company's recent disappointing earnings report sets the stage for a potential breakdown from this pattern, likely to occur on Friday.

Trading volume has notably increased over the past week, indicating that institutional investors have been rebalancing their portfolios ahead of the earnings report and the end of the quarter. This heightened activity suggests that significant price movements could be on the horizon.

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Monitor These Levels Amid Further Weakness

Investors can use the measured move technique to project where Nike shares might head next if the decline continues post-earnings. This technique involves calculating the distance of the most recent downtrend preceding the rising wedge and subtracting that amount from the pattern’s lower trendline. In this case, we subtract $18 from $93, resulting in a price target of $75.

This target marks a potential area on the chart where bargain hunters might find buying opportunities, especially if other technical indicators suggest oversold conditions at this level. Furthermore, amid additional weakness, it's crucial to monitor if the prominent swing low formed in October 2022 provides support around $82. This level could serve as a critical buffer, preventing further declines and possibly attracting bullish interest.

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Conclusion

Nike's recent earnings report has undoubtedly introduced significant volatility into the stock. By closely monitoring the key levels identified through technical analysis—$75 as a projected price target and $82 as a potential support level—investors can better navigate the turbulent market conditions. Whether you're a trader looking for entry points or an investor seeking to understand the stock's trajectory, keeping an eye on these critical levels will be essential in the coming weeks.

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Disclaimer: The article is for informational purposes only and not investment advice. as of the date this article was written, the author does not own any of the above securities.