To The Moon

The Special Bank.

$Bank of America(BAC)$ holds a “special” place in my heart.

It was one of the first few US stocks I bought, when I decided to “abandon” the HK market.

It happened also after reading a post that Mr Buffett has bought into it at $24 a piece, back in late September 2020.

Besides a healthy dose of dividend every quarter, the stock price at one time skyrocketed by > 100% and then consolidated.

Of late, it has gradually climbed back to almost +76% of my buy-in price.

While I am still holding out for a ‘possible’ +100% gain (harking back to January 2022), it did cross my mind on whether it is wishful thinking.

It didn’t help to notice too that Mr Buffett has started to offload this bank’s stock since July 2024.

Berkshire Hathaway’s action.

Warren Buffett’s $Berkshire Hathaway(BRK.A)$ has been on a selling spree for the investment conglomerate’s stake in Bank of America.

This has caused eyebrows to be raised in the financial markets.

According to an 18 Oct 2024 SEC filing, Berkshire still have 8.7 million shares for about $370 million in the latest transaction.  Still a lot of shares, no.

However, with the fresh sales on Tue, 15 Oct 2024, Berkshire stake in the bank falls below the 10% mark.

This means Berkshire, no longer have to comply & file with the SEC for any additional sales within 2 business days as it had to do in the past.

On 20 Oct 2024, University of Copenhagen, Macroeconomist, Henrik Zeberg - views this sustained sale as:

• A possible warning regarding the prospects of the US economy.

• The overall health of the banking space.

Part of Zeberg’s outlook was based on data indicating that unrealized losses at US banks have soared 7x higher than during the 2008 financial crisis. (see below)

U.S. banks unrealized gains chart. Source: FDIC

These losses, stemming from investment securities that have lost significant value, suggest that the banks may be operating under an environment of financial instability.

For example, this can be tied to the (a) recent surge in interest rates (treasury), despite the Fed’s -0.5% jumbo interest cut and (b) the mismatch between bond market values and the banks’ held securities. 

The grim outlook can also be deduced from the regional banks, as represented by the $SPDR S&P Regional Banking ETF(KRE)$ index. (see below)

The banks have only experienced a temporary bounce since the panic in May 2023, following concerns over banking instability.

This has Zeberg suggesting that the relief rally is likely nearing its end.

Mr Buffett’s BAC Selling Spree.

The legendary investor, Warren Buffett, known for his long-term investing strategy, has been shedding his position in Bank of America - one of the largest financial institutions in the world.

These actions could be seen as a signal that the problems in the banking sector may be worse than currently understood. 

“Ready for financial crisis part II? Extreme unrealized losses in US Banks. And Warren Buffett is selling his Bank of America shares. Recession is coming,” Zeberg said. 

The economist also noted that the $Financial Select Sector SPDR Fund(XLF)$ analysis might point to turbulent times ahead. (see below)

According to the analysis, there is a sharp rise into what Zeberg identified as a “rising wedge” pattern, a bearish signal that often precedes significant market declines. (see above)

More troubling is the divergence between (a) price movement and (b) the Relative Strength Index (RSI), a key indicator of weakening momentum. (see above)

With all these factors, Zeberg is of the opinion that the financial world could be heading into turbulent waters again. 

Recession Prospect ? 

There are several theories regarding Buffett’s offloading of his stake in BAC, which has contributed to the ‘Oracle of Omaha’ amassing one of the largest cash piles in the company’s history. 

For a start, $Tesla Motors(TSLA)$ Mr CEO believes this could signal Buffett’s preparation for a possible stock market crash, that he believes is likely to happen if Kamala Harris is elected amid fears the Democratic party candidate might be a risk to equities. 

My thots: How to take Mr CEO’s view in all seriousness when he is resorting to bribery (to the tune of $1 million daily) to get Americans to vote for ex-president Trump ?

These recession concerns coincide & resonates, when the Fed enacted its 1st interest rate cut in 4 years, lowering the rate by -50 basis points or -0.5%.

To this end, the stock market has seen a resurgence, with the S&P500 index soaring to new highs alongside commodities such as gold. 

On this, Zerberg maintains that the probability of recession remains on the horizon, and it will hit after markets surge to record highs.

For those anticipating a recession, the question has been the timing of the possible economic downturn, with metrics such as unemployment rate hinting at the possibility of the next 3 to 6 months. 

My viewpoints : (mine only)

If you have been reading my posts, you would know that when it comes to US economic reports on inflation and US labour, I have been rather religious in keeping abreast with the latest.

So far, statistically things seemed to be progressing positively.

However, the one thing that calls for concern is the level of national debt US is trending higher & higher, with no end insight.

As of Tue, 22 Oct 2024 - it is $35.77 trillion and counting. This is the ticking time bomb that will cripple US and its economy.

With the election around the corner, it is very important that Americans know whom they should vote to govern the country for the next 5 years - Democrat or Republican. (see above)

Historically, it is the Republicans that further burden and erode the futures of American citizens through overspending and don’t bother to balance its books.

Must Read: Click on below titles to access. Give a like & help to repost ok. Thanks.

• US Market Not Awakened by Tesla's Gains.

• MCHP and AIG To Fall > -30% in Q3, Timbre !

• Good Stock (PLTR) Falls for Bad Company (FFIE). OMG !

• Do you think US bank stocks will continue to scale to greater heights ?

• Do you think US mounting debt will be the agent that will crash US market ?

If you find this post interesting, give it wings! ️ Repost and share the insights ?

Do consider “Follow me” and get firsthand read of my daily new post. Thank you.

@Daily_Discussion

@TigerPM

@TigerStars

@Tiger_SG

@TigerEvents