Warren Buffett and Berkshire Hathaway drastically reduced their positions in Wells Fargo and sold 100 million shares. Oracle of Omaha continues to reduce its position in the banking stock market, cushioning the upside effect on gold and bitcoin (BTC).
Fox Business reported on September 5 that the Berkshire Corporation had $ 32 billion in Wells Fargo at some point. The investment group now owns 3.3% of the bank’s capital, which is estimated at only $ 3.36 billion.
Why did Buffett cut Fargo and how could Bitcoin benefit?
Throughout his career, Buffett has emphasized the importance of investing in value and cash flow. The investor usually prefers companies with stable and predictable operations that provide stable profitability.
Wells Fargo lost $ 2.4 billion in July and posted its first loss since the 2008 housing crisis. After a disappointing quarterly report, the company said it would cut dividends to 10 cents per share.
This month, Moody’s downgraded its rating from stable to negative, citing the slow pace of reforming its governance system. Allen Tischler, an analyst at Moody’s, said:
The review of expectations reflects Wells Fargo’s slower than expected pace of addressing gaps in governance, oversight, compliance, and operational risk management. The slow pace negatively affects costs, further eroding profit potential due to challenging operating conditions. ”
The combination of quarterly losses, profit cut, and rating downgrades likely forced Buffett to cut his positions.
But a recurring theme in the Berkshire portfolio correlation in recent months is investing in Barrick Gold. While Buffett slashed his positions in the US banking sector, he invested in gold and Japanese trading companies.
The decision demonstrates that Buffett is committed to safety when it comes to cash flow and inflation hedging. Barrick Gold’s investment is fueling Bitcoin as BTC’s perception as a value for money store improves, especially given the close relationship between the two in the wake of the March 2020 crash.
Winklevos said Bitcoin will break down gold in the future.
Other prominent investors, including the Winklevoss twin, believe that Bitcoin as “digital gold” will compete with gold in the long term. In particular, the massive rally potential makes it an attractive investment, as the market value of BTC is still only around 1.5% in gold.
Gemini co-founder Cameron Winklevoss said Bitcoin has already made major forays into gold. He said:
“Bitcoin has created a large gold base – it has gone from white paper to more than $ 200 billion in market value in less than ten years. It will continue to consume massively gold over the next decade.”
As Cointelegraph Markets reported last Monday, Wall Street veteran Max Keizer and host of the Keizer report believes that Buffett’s abandonment of the dollar is an optimistic signal for the price of gold and bitcoin.
He said, “Buffett’s move to Japan, along with his investment in gold, confirms that he is getting out of big dollars.” Bitcoin – Gold – Silver will create new ATHs in the short term.