Stocks Are in Trouble

Never before have I lived through a time like this.  The Pandemic has taken stocks on a roller coaster.  The market just crashed 30 plus percent and is roller coastering up and down constantly.   But one of the most shocking and telling things has just happened.  As of May the 4th 2020 Warren Buffet just sold all his airline stocks.  Take a minute to breathe and let that fact sink in.  Warren Buffet is known for being one of the greatest stock investors of all time.  He knows when to buy and he knows when to sell and his success speaks for itself.

In the 2008 housing crash the stock markets went wild.  Many people lost all their retirement funds.  The whole country lost faith in out system and the government had to bail out many major corporations that went bankrupt and were on the verge of shutting down.  They were deemed to big to fail for our economy so the government gave them money to float them.  That was the time Warren Buffet purchased a massive amount of stock as it reached its lowest amount.  He made massive amounts of money by waiting and purchasing when the price was literally the lowest it had been in my lifetime. Intelligent speculator is also known for dominating and playing the short game when markets fall.  But Warren Buffet made one of the greatest moves of all time and he is hailed as a genius because of it.

Now its 2020 and he is selling all of his airline stock.  So what does this mean.  It could be presumed that he thinks the airline market has much further to fall.  Right now it looks like the market is on the rise and prices may be climbing back as out economy starts to open up.  Most states have put into place a plan to remove the stay at home orders in a week to two weeks and confidence is slowly starting to increase in the market place.  But if Warren Buffet is selling that means it is most likely that he has some inside information letting us now know we are in for a world of falling prices.

This could mean that the market will take a big fall in the future and that the airlines are in big trouble.  Will it mean that they will all be going bankrupt due to the lack of travel and cut back of roughly 50% of all flights this month? It could mean a government bailout or even worse the federal government may even take control of the airlines once they go.  A new world awaits us. Remember we are only talking about the market as we see it.  Please see your local broker, investment firm, or attorney for financial advice.

Stores are Failing in this Market

It is no surprise that times are hard for many businesses at the moment.  With the Pandemic most companies have been hit hard by the change in how our world works.  Customers have changed and their habits have been changed by force.  Even money has become a big issue because 30 million people have been put on unemployment and they simply do not have the same amount of money to spend anymore.  What they are spending it on is essential costs like rent and things that keep them alive.  The stimulus checks that went through for most people in need only helped for a few weeks or a month depending on the cost of living in their area.  What has occurred because of all of this, is businesses are starting to fail. 

The first large retailer just went into bankruptcy because of the pandemic.  J. Crew was not doing well before the lockdowns started, but now they have officially declared bankruptcy. This Mass Market clothing company was well known.  They appeared on fashion week, were in magazines and even a favorite of Machelle Obama.  Even with all of this they were unable to survive the storm. Now due to the chapter 11 filing of their parent company, they handed over control of the company to creditors. This still means that the e-commerce portion will be open while the bankruptcy and reorganization is happening. Companies that are thriving during this pandemic are market research companies  who saw the storm coming and made wise financial decisions to profit from the market crash.

But for J. Crew, their debts simply overcame them.  They have been struggling with the effects of the covid-19 pandemic which has hit many retail stores hard.  The lack of individuals being able to actually legally shop in person has changed the ability to make profits like they were. The retail industry sales in march fell by 50%.  That is 50% of retailers who most likely will not be able to pay bills.  April is slated to be an even worse month and it will be brutal on the industry. 

The Federal Stimulus Package ran out of money a few weeks ago and many companies who applied were denied due to lack of funding.  The funding for many of the companies who were accepted still has not arrived. This is putting insurance companies in the position of cutting off insurance for lack of payment.  In many industries that in and of itself and can shut a company down. As per the usual we are only talking about the market as we see it.  For financial advice see your broker, investment firm, or attorney.

Will Airlines Fail

The Financial Times just released one of the biggest articles and front pages of the decade.  Yes, it is a decade changing event, because it shows one of the greatest minds in the world making a financial move that will resonate and possibly fortel the future of the American Economy.  The headline today read, “Warren Buffet Sells Stake in All US Airlines”.   This is life changing and in a way honestly sad.  This move comes on the brink of the pandemic and it looked like the American Markets were starting to gain confidence.  Most States have put out a plan for opening back up their local economies and the stay at home lockdowns are coming to an end here in a week or two for most of the country.  This has taken out the stock market on a bit of an up swing and most of us thought that the country was going to be on the right track. 

Now, we see that one of the world's greatest minds and best investors of all time has shown his hand.  He has sold all of his stock in the airline industry.  This singles that he thinks they are most likely going to be going out of business, bankrupt, or in line for a future bailout from the government.  So will the airlines stocks crash to zero and disappear.  Most likely not.  This is going to be another too big to fail moment if Warren Buffet is right and their stocks plummet.  The bailout or government takeover would have to happen. Our country cannot be without air travel as it would shutdown the economy all by itself.  But what is even scarier is what Mr. Buffet told Berkshire Hathaway.

Warren Buffet has told Berkshire Hathaway not to buy any stocks.  American FX Capital another market research company which is known to short the market well in crashes seems to also be lining up for another market fall.  Which goes along with Warren not only selling all his airlines stock, but he also is signalling to his investors that they should not be in the market at all.  He thinks even after a 30% market crash that the market has a lot father to fall.  

This means that our economy which is already in a recession, may be in line for the great recession of our time.  We though 2008 was the worst shape our economy would ever be in, but Warren Buffet is signalling that the worst is literally yet to come. As usual we are not giving financial advice only talking about the market as we see it.  Please see a broker, local investment firm, or attorney for financial advice.