Buffet becomes Japan’s second largest equity investor

Last week, Warren Buffett turned 90 years old. He chose to do something special. With the truck loads of cash that he is holding he invested $ 6 billion into 5 of the top Japanese general trading houses or “sogo sosha” as they are known in Japan.

These companies are mostly diversified conglomerates, but with common themes such as infrastructure, energy, metals, raw materials, chemicals, food and textiles.

Assuming he took a little greater than 5% position in each companies, he became the largest shareholder of each of these companies after the Japanese government. 70% of company stocks in Japan are held by the government via the Government Pension Investment Fund). So, Buffet is the second most influential shareholder in Japan now.

What is it that Buffet is seeing that others are not seeing?

Is he betting on a change in leadership and a new plan to end three decades of economic stagnation. Prime Minister Abe announced his resignation last Friday on account of health reasons. Buffet announced his investments on Monday morning before the Tokyo markets opened.

Is this a bet against China as they could be put in the penalty box an initiative that will be driven by US? Japanese markets are still more than 40% lower than its all-time high in 1989.

Considering Buffet is a real long term investor, intuitively my thinking is why would he want to invest in a country with depleting demographics?

The rhetoric slinging back between US and China is not that much covered by the main media. Pompeo has been the main spokesperson for US. In many ways, US patience is being tested by China and it could soon be developing to something more than a Cold War. “China’s expansionist actions in South China Sea, Taiwan, Hong Kong and on the Indian border are raising alarm bells at the Pentagon. The Editor of the Chinese newspaper Global Times, said the US government is underestimating how many warheads China has.

Remember we pointed out some time back incumbent presidents, when they’ve actively sought a second term in war time, they have a 6-0 record.

Equities

The CBOE put/call data is the lowest in 16 years. The number of “little guys” (Robin Hooders) traders are edging higher. The Investors Intelligence bull/bear ratio is at the extreme since the January 2018 high. The breadth is extremely weak. Despite all this, the markets are cruising higher and something has to give way.

The S&P 500 exceeded the channel breakout point at 3540 to 3588. Only a cross and close below 3538 will confirm that the move to 3588 was a throw-over and a turn down can be considered.

Bonds

Price action in bonds are getting more sideways and confusing. Will wait for a clearer picture to emerge .

Euro

Euro prices were all over the place. Prices spiked to 1.2010 and quickly reversed. A decline below the Aug 27 low at 1.1765 should confirm the change in trend. A move above 1.2010 should not happen.

Gold

Think Gold is starting its next leg of the down move. Only a move below 1870 will fully eliminate any further upside pressure.