Dear Reader,
Whew! This market’s getting tight.
This weekend everybody got news that Buffett’s been selling his Apple stake… almost 60% in the first 6 months of this year, and half of it basically in the last 90 days.
President Reagan’s Final Warning
President Reagan issued a warning to the country in his “Farewell Address to the Nation.”
But many elites ignored his warning… and we now face a widespread collapse unlike anything we’ve seen in our lifetimes.
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The Buffett announcement kind of smacked a bunch of people awake.
If you would’ve watched CNBC the week before, everybody’s predicting the S&P 500 ends up 20% higher than it already is. Here’s my take:
First, you see something like the jobs report come in a little bit weaker than expected like it did at the end of last week…
And then you see Buffett selling his Apple stock…
And all of a sudden everybody kind of wakes up to some of the things that are happening in this economy.
These are things that we’ve been talking about for a while here.
So, why did Buffett sell his stake?
Nobody knows why Buffett sold his stake but I’ll tell you this:
He’s a sophisticated investor who understands price and value.
And we do know certain stocks have been incredibly overvalued.
And a lot of that value has been driven by excess government spending.
So we find ourselves in a market that’s been correcting a little bit.
And look, you know the market was really high.
The reason I made this bearish call last month was I thought to myself, what kind of upside do we have? 5% maybe?
It just seemed more likely the downside was a heck of a lot greater than the upside.
And I started watching the earnings reports that were coming in and they were, frankly, underwhelming.
As I mentioned yesterday, lot of professional investors have been unwinding their AI and tech trades in the past few months.
And you know, we don’t have a crystal ball…
We can’t foresee the future…
But we do know price and value.
If there’s one thing I’ve learned over the 30 years I’ve been doing this, it’s price and value.
And there’s a difference between price and value.
Recently, the price has exceeded the value of most of the stocks I’ve been looking at, which told me it was time to sell. That’s why we’ve been such aggressive sellers the past few months.
We’ve sold over 53 different positions so far this year.
We’ve done great and that’s exciting, but the question is, what happens now?
Well, a lot of people are coming out and saying that the Fed looks like it’s going to run an emergency rate cut of .5%, which would be really strange to me…
I mean, Jerome Powell basically said we’re going to look at the data but not any single data point.
So if he actually ran out and did an emergency rate cut in an otherwise fairly healthy economy…
That would smell like a panic.
And it would contradict what he said.
So I don’t expect Powell to go out and rush a rate cut – certainly not based on the unemployment data. But I do expect him to look at the CPI this month.
And that could really change things.
If he sees that consumer prices have actually come down and inflation is really solidly below that 2.5% to 3% depending on which measure you look at, then there’s room to cut rates.
But you know the worst-case scenario here for the Fed is that we’re entering stagflation.
“Stagflation” – what a nasty word, isn’t it?
Those of you old enough to remember, when you hear stagflation you think Jimmy Carter; you think the ‘70s.
It’s where inflation is too high and growth starts to slow.
I think part of this market panic has been because people are worried about that. But we’re in the early innings of this game.
So my advice is hang tight; we’ve already made our moves, we’ve trimmed our positions – our most risky stuff.
Anything else we have that’s in the higher risk category, I feel pretty comfortable with; I understand those businesses. I understand their capital structures. I understand the longer-term opportunities with them.
So I feel fairly comfortable with what we have.
But I know Behind the Markets stocks aren’t all the stocks you own.
That’s why I talk about in Midnight in America, the book and the documentary we put out, the four steps you need to take right now to profit from this market panic we may find ourselves in.
It’s a little early to say for sure, but we may be entering that depending what happens going forward.
So hopefully you’ve taken your other accounts and made the adjustments based on the instructions, the four steps that I laid out in this book.
Have a wonderful Tuesday, God bless you, and talk soon.
“The Buck Stops Here”
P.S. President Trump and Elon Musk are calling what’s coming “worse than losing any war.” See which economic indicator they’re most concerned about here.
