Warren Buffett has a simple motto for success: “Be fearful when others are greedy and to be greedy only when others are fearful.”
The 94-year-old billionaire investor, dubbed the Sage of Omaha for his ability to predict the market, has proved the wisdom of this mantra yet again after correctly betting that Donald Trump would crash Wall Street.
While Buffett didn’t come out and say as much, he has expertly moved his money in order to protect against a crash. Buffett’s conglomerate Berkshire Hathaway has been selling billions of dollars worth of shares and keeping cash instead.
Buffett has sold more shares than he bought for nine quarters, including selling large stakes in high-profile companies. Last year, before Trump came to power, Buffett sold most of his stake in Apple as well as selling down investments in Bank of America and Citigroup.
His cash pile has soared to an extraordinary $334bn (£258bn) over the past few months – accounting for more than one third of his entire portfolio. To put that into context, it surpasses the value of all the businesses listed on the FTSE 100.
Many had struggled to pinpoint the motive for Buffett’s defensive stance, but it now it looks like the nonagenarian could have sensed Trump’s trade war would trigger a sell-off in the US markets.
Wall Street plunged on Monday because of fears the president’s tariff policy would tip the world into recession. The Nasdaq, a tech-focused index that includes Nvidia and Apple, fell an extraordinary 4pc – the largest one day move in three years.
For Buffett, the market decline is vindication of his drastic switch from shares to cash.
“Buffett is one of these people who buys on the way up and decides to take money at the top,” says Michael Hewson, founder of MCH Market Insight.
Much of his selling came at a time when Wall Street was hitting new highs as investors bet on a Trump bump, similar to the stock market rally seen during the president’s first term in office. Even as late as last month, the S&P 500 was closing at all-time highs.
In contrarian fashion, Buffett was positioning his portfolio for the Trump slump – a world where economic growth stagnates.
“US markets are very expensive and he’s taking money off the table,” says Hewson. “The cash gives him optionality. Buffett is someone who puts his money where he gets the best return. He trades very much for the long term. He’s someone who’s happy to sit on the sidelines and doesn’t buy into the latest fads .”
Buffett is renowned as one of the world’s most astute investors and has played a key role in some of Wall Street’s biggest deals, often as a lender of last resort for many companies in trouble.
When hedge fund LTCM blew up in the late 1990s, it was Buffett who offered to rescue it with a $250m bailout deal. During the financial crisis, Goldman Sachs turned to the legendary investor for a bailout. He injected $5bn into the Wall Street bank to keep it afloat and out of government hands – a deal which eventually netted him $3bn in profits.
Later, he adopted many of the tactics used in the world of private equity to acquire some of the world’s largest corporations. He teamed up with Brazilian buyout group 3G Capital to acquire Kraft Heinz, a food conglomerate controlling the Heinz range of soups and sauces.
Asked why he decided to buy the group, he had a simple answer: “ketchup”. He also made an audacious $143bn bid to acquire Unilever in 2017, which was rebuffed by the company’s board.
Buffett has rejected the notion that he now prefers cash to stocks, telling shareholders last month: “Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won’t change.”
Bizarrely, one investment Buffett has recently been topping up on of late is Domino’s Pizza.
But with US stocks running into bubble territory – the AI boom has driven extraordinary increases for names like Nvidia – Trump’s policies have proved the trigger for a stock market decline that many observers felt was overdue.
Hewson says: “I don’t think he envisioned US markets coming off to the extent they have. The Nasdaq is still higher than it was a year ago but a correction was still well overdue .
“Trump on his own wasn’t the catalyst because DeepSeek out of China has also been a factor. But it has sharpened the focus on whether these valuations are sustainable. Once one person starts to sell, you get a rush for the exits.”
As stocks tumble on Wall Street, millions of Americans are panicking. But if you follow Buffett’s mantra, perhaps now is the best time to start buying.
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