Money Rehab with Nicole Lapin - Warren Buffett Is Selling Stock - Should You?

Episode Date: September 11, 2023

What do Warren Buffett (one of the greatest investors of our time) and Micheal Burry (the guy in The Big Short who predicted the housing crash) have to say about today’s market? Nicole unpacks what money moves they're both making, and whether you should follow suit. Want to start investing, but don't know where to begin? Go to moneyassistant.com and meet Magnifi, your AI money assistant, designed to help you make a plan for your financial goals. Want one-on-one money coaching from Nicole? Book a meeting with her here: intro.co/moneynewsnetwork 

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. All right, what do Warren Buffett, one of the greatest investors of our time, and Michael Burry, the guy in the big short who predicted the housing crash, have to say about today's market? You know what? They're both concerned. And because of the investing track record and the gravitas of these guys, that then makes everyone else concerned.

But let's unpack what they're both really doing here. Buffett's strategy has always been to buy companies or shares of companies below their intrinsic value. That's the basic premise of his favorite strategy, value investing. But in our current stock market, most stocks are right now trading above their intrinsic price, which has kept Buffett on the sidelines waiting for his shot. Now, that waiting game hasn't hurt his company, Berkshire Hathaway. They're still making tons of money and the value of their shares continues to rise, even though a price of one Berkshire Hathaway A share is super, super expensive. At the time of this recording, just one share of Berkshire Hathaway Class A stock is $550,000. It's actually

more than that, which is bananas. Anyway, in the company's latest disclosures in August, Berkshire Hathaway reported selling $8 billion in stock, which has raised the amount of cash they have on hand. And that's the thing that's freaking most people out. If Warren Buffett is selling his stock, should I? Short answer, no. His company has been on a long selling streak for the last three quarters, with sales totaling some $33 billion in sold shares. They're still buying, though, with a reported recent investment of $10 billion in U.S. treasuries. This suggests that Buffett is betting against the U.S. stock market in the future, but seeing more opportunities to make money in the bond market than in the stock market. Burry is also betting against the stock market.

His company, Scion Asset Management, bought Put Options with a total value of $739 million on QQQ and another batch of Put Options with a value of $886 million on SPY. As you know from the show, SPY and QQQ are exchange-traded funds that track the broader market. A put option, which we've also talked about on the show, and we have a whole M&N show about this, we have options, which I've linked in the show notes, is a way to basically profit from a stock price going down. It's a contract that gives the holder the right to sell an asset at a preset price below its current value. While this is really telling and people have been worried

when they saw these headlines, remember there is a lot here that we don't know. Funds like Scion Asset Management are required to file financial disclosure forms that broadly say what they bought and sold each quarter. Scion's disclosure doesn't tell us, though, how long these put contracts are for or even what they paid for them. So this could simply be a way of them hedging against a market downturn. We just don't know from the information available. We do know that Burry believes that the market is overheated and due for a retraction. This is also a broad bet that the market will retract, since these are funds that track the performance of the entire index, not just a small slice. Now remember, markets go up,

markets go down. They retract. That's what they do. That's their nature. And historically, I will say that September is the worst month for the U.S. stock market. It's possible that we could see a retraction by the end of the month. While most economists are not projecting a recession in the near term, it's probably wise to think about all the ways you can hedge your own investments just like Buffett and Brie. And you can also do that using Buffett's trick of investing in treasuries. Buying treasuries is one way to make sure that whatever you invest in will have a guaranteed return in the short term. For today's tip, you can take straight to the bank. If you invest in will have a guaranteed return in the short term. For today's tip, you can take straight to the bank. If you're looking for a little extra protection out there, you can always look to put some of your cash into a money market fund. These

are funds that function much like a savings account, but they invest your money, meaning they pay a little bit of a higher interest rate than a savings account. They are not, though, FDIC insured, so I don't recommend putting every dime you have in there, but they're widely considered to be a safe way to earn a little extra money on the cash you do have sitting around. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Levoy. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us

on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.