top of page

Speculation Grows That Warren Buffett Is “Bracing For A Recession”

The Biden administration is trying really hard to convince us that the U.S. economy is doing just fine, but the numbers just keep getting worse and worse.

Consumer confidence is plummeting, large corporations are conducting mass layoffs all over the country, and major retailers are really struggling right now. Meanwhile, some of the smartest guys in the financial world are making moves that would only make sense if the economy was headed for big trouble. Earlier this month, I wrote about how Michael Burry has bet 1.6 billion dollars that the stock market is going to crash. He made a ton of money in 2008 by being on the correct side of the financial crisis, and he plans to make even more money this time around. This week, speculation has been growing that Warren Buffett also believes that a major downturn is coming. In fact, Business Insider is warning that Warren Buffett “may be bracing for a recession” because he has been selling off stocks at a staggering pace…

Berkshire sold a net $8 billion of stocks and slowed its pace of buybacks last quarter, sparking a 13% rise in its money pile to a near-record $147 billion. The sprawling conglomerate has now disposed of a net $33 billion of stocks over the past three quarters, fueling a $38 billion increase in its stash of cash, cash equivalents, and Treasury bills during that time. Buffett’s second-quarter moves “are consistent with the anticipation of a recession and the fact that stocks are currently pricey,” Hanke told Insider.

Burry and Buffett are both extremely sharp, and they clearly understand what the economic numbers are telling them.

At this moment, most U.S. consumers are struggling to make ends meet from month to month and millions of them are absolutely drowning in debt.

And the latest consumer confidence figures are downright dismal

Consumer confidence cratered in August, falling from a downwardly revised 114.0 last month to 106.1. The projection was for a slight increase to 116. Americans don’t think the economy is doing well currently. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell to 144.8 from 153.0. And they don’t think the economy is going to do well in the near future. The Expectations Index— based on consumers’ short-term outlook for income, business, and labor market conditions—declined to 80.2 in August. That reversed July’s sharp uptick to 88.0. An Expectations Index below 80 generally signals an impending recession.

So that means that we are almost to the level that “signals an impending recession”.

Of course other numbers suggest that a major downturn has already arrived. When the economy is booming, FedEx and UPS have to schedule more flights because they have so many packages to handle. But at this point the number of package flights is falling precipitously

The number of package flights operated by FedEx Express and UPS significantly declined month over month in July, underscoring how far the overall air cargo market has sunk since the spring of 2022 and the effect of efficiency initiatives the companies have undertaken in response to lower express volumes. FedEx (NYSE: FDX) flew 9% fewer domestic flights last month than in June following small sequential gains the prior two months, with year-over-year flight activity down 14%, according to an analysis by investment bank Morgan Stanley. The year-over-year decline in UPS’ flight activity accelerated to 13% from 10% in June. UPS (NYSE: UPS) reduced July flights by 14% from June. Flight activity in May and June, by comparison, was relatively stable.

At the same time, big companies all over America continue to lay off more workers.

Right now, we are seeing a lot of large financial institutions let people go as turmoil in the banking industry continues to spread

BMO Financial Group, Wells Fargo, and USAA have reported hundreds of layoffs to state officials in recent weeks as the U.S. banking industry continues to downsize. The job cuts come as banking executives express caution about the industry’s growth prospects in the second half of the year, and as some banks divest certain parts of their businesses.

Sadly, this is just the tip of the iceberg.

There will be many more layoffs in the months ahead.

Needless to say, the second half of 2023 will not be a particularly good time for retailers.

In fact, Best Buy is already projecting that sales will fall this year more than originally anticipated

U.S. shoppers have continued to pull back on tech spending, according to the latest earnings report from Best Buy. The retailer on Tuesday lowered the high end of its full-year revenue outlook amid declining sales, and now expects to make between $43.8 billion and $44.5 billion in revenue during fiscal year 2024, down from its prior guidance of up to $45.2 billion. Comparable sales from stores, websites and call centers open at least 14 months are expected to dip 4.5% to 6% this year, compared to the previous estimate of 3% to 6%.

And we have just learned that Rite Aid is suddenly on the verge of filing for bankruptcy

Philadelphia-based Rite Aid’s stock price dipped more than 50% Friday after the reports on the pending bankruptcy filing were published by The Wall Street Journal and Bloomberg, citing people familiar with the matter.The Chapter 11 filing would allow the company to restructure its more than $3 billion debt load and help it address lawsuits alleging the company filled hundreds of thousands of opioid prescriptions unlawfully.

Every day, we hear of even more retailers that have gotten into trouble.

Stores are being shut down all over the nation at a frightening rate, and this is particularly true in many of our core urban areas.

For example, the following is from an article about downtown San Francisco that CNN just posted

In many ways, San Francisco’s downtown is in dire straits. The city’s Union Square neighborhood — once bustling with shoppers, diners, and tourists — has suffered from declining foot traffic and shuttered storefronts. Stores in the area now have papered-over windows and “Retail for Lease” signs, according to Google Street View, which was last updated in June.

But downtown San Francisco still seems relatively prosperous compared to downtown Oakland.

One man recently took a camera down there, and he discovered that so many stores have closed that it literally looks like a ghost town right now…

This is what communities all over America are going to look like during the very harsh economic environment that is ahead of us.

We have been warned for a long time that this crisis was coming, and now it is here.

Our leaders just kept making one self-destructive decision after another, and now we are in the early chapters of an economic nightmare.

Michael Burry and Warren Buffett are positioning themselves for what is coming.

What about you?

I hope that you are ready for the approaching storm, because it is really going to pack quite a punch.


bottom of page