Do you remember the great stock market crash of 2008/2009?
If you are an investor over the age of 30 you most certainly do.
That crash ruined people.
The S&P went into 2008 at 1,500 and by March 2009 hit a low of 666.
My math tells me that is a drop of more than 50 percent. And that is how far the 500 biggest, strongest companies in the world performed.
If you were caught in the wrong sector or the wrong group of companies your portfolio did much worse than that.
Crushing losses were the experience of the Great Recession for the retail investor. Many people sold out near the bottom and never got back in.
Or worse yet, sold out at the bottom and are getting in now after a 10 year bull run.
Do you know who didn’t experience crushing losses? The wealthy one percent.
The one percent who get to access to the very best hedge fund managers in the business. Hedge funds that require $1 million minimum investments which keep the other 99 percent of people from getting in.
Not only did the one percent who were invested in these exclusive hedge funds not get hurt by the crash…..they actually profited from it. The elite hedge funds were positioned to win big as the market tanked.
Think I’m wrong? I’m not.
I was inside the belly of the beast. I saw the returns posted by the best hedge funds that the rich people had access to during the crash.
Some of them were outrageously profitable.
- Michael Burry had his Scion Capital shorting mortgage backed securities.
- David Einhorn shorted Lehman Brothers down to zero for Greenlight Capital
- John Paulson was short everything
Further it wasn’t just about shorting companies going into the stock market collapse. It was buying the right companies at the bottom of it.
Warren Buffett for example made tens of billions from the investments he made in 2008.
Should we be surprised that the best hedge funds did so well during the carnage? Of course not.
These firms have massive advantages over the retail investor:
- They think about nothing but investing 24 hours a day, 365 days a year
- Their research teams are staffed by people with genius level IQs
- They have the research budgets to hire the smartest consultants in any industry
- Their huge asset bases given them direct access to management
It is crazy to try and compete with these guys. Especially when the competition involves risking your savings.
You wouldn’t play Tiger Woods in his prime for your life savings, so why would you try and compete with the Tiger Woods of the investing world?
The right answer is that as a retail investor you shouldn’t try and compete with these elite investors. Instead the retail investor should steal from them…….by taking their best ideas.
Which is something that we can do all of the time.
Is This Worth Paying Attention To? – Buffett Has Gone Crazy Long Financials
I don’t know if you noticed, but I did.
Warren Buffett is currently incredibly long the financial sector.
As of his last SEC filing (September 30, 2018) Buffett has six American financial institutions in his top ten positions.
Buffett’s top ten include five banks Bank of America (BAC), Wells Fargo (WFC), US Bancorp (USB), Goldman Sachs (GS), JP Morgan (JPM) and one credit card company American Express (AXP).
In total Berkshire had $80 billion invested in just these six financial entities at the end of September. He also has positions in other bank stocks that don’t make it into his top ten holdings.
And he keeps adding more!
Here Are The Financials The Buffett Is Still Buying
In the third quarter purchased $13 billion of bank stocks. That included two brand new positions for Buffett.
The first is JP Morgan (JPM) which is now the tenth biggest position in the Berkshire portfolio. Buffett bought $4 billion of JP Morgan shares in the third quarter.
That is a very big initial position in a company, even for Buffett.
JP Morgan’s share price is currently lower than it was for the entire third quarter when Buffett was buying. That means you can follow Buffett into this big position of his but at a better price.
With the banking legend CEO Jamie Dimon leading the way JP Morgan is widely viewed as the best managed of the big four investment banks. You can see that in the company’s industry leading returns on equity. Plus, JP Morgan currently yields almost three percent.
The other new bank stock in the Buffett portfolio that was acquired during the third PNC Financial (PNC). Buffett bought $829 million of PNC shares.
As with JP Morgan, PNC Financial shares are now lower than the price that Buffett was paying in the third quarter.
PNC is large, currently the eighth largest bank in the United States by assets. PNC also sports a yield of almost three percent.
Would it be wise to follow Buffett into these two companies today?
My opinion is a resounding yes!
Buffett is pounding the table on the financial sector with $80 billion of his portfolio invested here. Today we can buy shares of both of these companies at a better price than the Oracle of Omaha was paying just a few months ago.
Be smart. Don’t compete with geniuses like Buffett who have access to information that you will never see.
Instead steal from them.
Stick with me, and I’ll do all the dirty work.
I steal from the 1 percent —– and give to you.