Famous stockbroker Warren Buffett, who sold the shares of many banking institutions, especially Goldman Sachs, turned to gold.
Renowned stockbroker Warren Buffett’s favorite indicator for stock markets, considered the most successful investor of all time, hit a 30-month high this week. This indicates that the stocks are overvalued and a correction may occur.
The “Buffett Indicator”, which compares the values of world stocks with global GDP, has passed 100% for the first time since February 2018. The billionaire stockbroker said it was a strong warning signal when the indicator hit a record in the months before the dot-com bubble in 2001. The indicator points out that it may be time to enter the stock market when it is in the range of 70-80% and exit when it exceeds 100%.
On the other hand, it should be underlined that the indicator has some flaws. For example, not all countries provide regular and reliable GDP data when comparing GDP with stock valuations.
It comes out of bank papers, goes gold
Buffett, the fifth richest person in the world, recently sold a significant amount of bank shares. The famous stockbroker Berkshire Hathaway sold 62 percent of its shares in JPMorgan and 26 percent of its shares in Wells Fargo in the midst of the Kovid-19 crisis. The giant corporation also trimmed its positions in other financial companies such as PNC Financial, M&T Bank, Bank of New York Mellon, Mastercard and Visa. Additionally, Buffett exited Goldman Sachs shares. However, Berkshire has continued to invest in several banks, including Bank of America, where it bought $ 2.1 billion last month.
With unemployment rates rising all over the world and the global travel, hospitality, retail, energy and tourism industries in trouble, Buffett may believe worse is to come.
$ 563 million to gold company
Led by Warren Buffett, Berkshire Hathaway sold Goldman Sachs shares for $ 503 billion and invested $ 563 million in Canadian gold company Barrick Gold. Shares of the gold company grew by 45 percent since the beginning of the year, and within hours after Berkshire’s investment, it was valued by more than 8 percent.