American stock markets continue to break records. The market is celebrating Trump's victory. The S&P 500 has reached and is holding on to 6000, and we have passed 21000 in the Nasdaq. We are about to reach the targets I gave at the beginning of the year. I was saying 6200 in the S&P 500 and 22000 in the Nasdaq 100, it looks like we will pass them if the markets continue this pace. Of course, the rote learners will come up with new fear scenarios and convince us with new arguments about why the market will crash. The most popular of these these days is Warren Buffett selling his stocks. If a veteran investor like Buffett is selling, he must know something. The markets are definitely going to crash. Run, save your life. I don't know if the markets will crash or not, but Buffett doesn't know either, and the purpose of Warren Buffett's sales is probably not to protect himself from a crash. Today, I will explain this argument to you in detail and we will solve another rote conspiracy theory together today. We will understand that the great investor Warren Buffett's goals are probably completely different. After this article, you will be a person who is free from another conspiracy theory and has a clearer mind.

The S&P 500 has increased by 27% since the beginning of the year. But 94-year-old Warren Buffett could not get enough of selling stocks. He has made very big sales in two stocks in particular. One is Apple, he sold two-thirds of his position in Apple. Almost 200 million of his 300 million shares are gone. Also, Bank of America, which has decreased by 25% there. He has made sales in other stocks as well, but these are the biggest ones and when we look at it since the beginning of the year, he has sold exactly 127 billion dollars of stocks and is currently sitting on a huge cash of 325 billion dollars. This number is so big that we are talking about twice as much as Apple, known as the cash king. Of course, money does not stay in cash, it stays in interest, and it has a very good return. Treasury bonds in America yield around 5% - 6%. In this case, if you have 320-325 billion dollars in cash, you earn 15-16 billion dollars from 5% interest. Net, why wouldn't he do this without taking any risk.

I think the first reason he prefers cash is this. Because don't forget, he is not a fund manager. Berkshire Hathaway is not a fund, it is a holding company. This holding company has operations that it owns 100% and manages. Especially on the insurance side, there are operations that it owns 100% but leaves the management to the chairman. There are some that it is partially a partner in, such as Apple and Bank of America. It also has board memberships there and earns dividend income from these. On the other hand, it earns money from the rise in stocks and the funds it earns, especially on the insurance side, form the basis of its business model, because as you know, in insurance, you collect the premium but the damage does not occur immediately or maybe not at all. For this reason, insurance companies always have a large amount of cash. It takes this cash and turns it into stock investments. Sometimes it goes and buys a company outright or sometimes it comes and becomes a junior partner, as in the Apple example. When I say small, of course I mean a large partner is also a small shareholder.

Because of this business model, Berkshire does not need abnormally high returns anyway. In fact, when we look at the last 5 years, Berkshire Hathaway's return is at the level of S&P 500. One of Berkshire Hathaway's two stocks, BRK B, has shown more or less the same performance as S&P 500. While S&P 500 returned 93%, Berkshire returned 109% and that's enough. Because the investors here are not people who go and give their money to hedge funds, they are Berkshire Holding's investors. Otherwise, if we compare it with Nasdaq instead of S&P 500 in this enormous 5-year period, we would see how far Berkshire Hathaway has fallen behind. Nasdaq's return is 155%, Berkshire's is 109%, a performance below the market. If we compare stocks like Nvidia, things can get even weirder. That's why Berkshire Hathaway is a company that performs more or less in line with the market.

It is quite reasonable for such a company to switch to cash a little more when the business is going well and interest rates are high. Because Berkshire Hathaway is not an investment fund. Warren Buffett does not manage an investment fund, and it does not need to perform like an investment fund to its investors. Investors are also very knowledgeable about the situation. In such a case, I think a nice return of 5% - 6% is quite sufficient. But there is another issue, yes, Berkshire Hathaway's cash seems very high. But this is not the highest cash ratio in Berkshire Hathaway history. It has been carrying a lot of cash since 2019. Were these decisions very right? For example, where would Berkshire be today if it had bought more stocks after the massive crash in 2022? But in 2019, over 100 billion dollars was a lot of money at that time, and again in 2022, over 100. Last year, it was already close to 200. This year, it exceeded it a little more, it is currently 325. If we were to evaluate Berkshire within its own averages, its current cash is above the average cash share but not at the highest level. There have been years when it has gone much higher. In this context, Berkshire is not in a very abnormal situation. It is above the average but not super high cash. Looking at these numbers, it seems a bit difficult to say that Warren Buffett is definitely preparing for a crisis.

But there are other issues. They asked Warren Buffett in the second quarter why he was selling Apple stock. The man gave a clear answer, he said he was afraid that tax rates would increase. If you remember, the Democrats were in power at that time and they were saying that they would tax capital gains highly in their next term. Buffett also took precautions against this, and it was quite reasonable. He said that if I sell now, I will sell with less tax and later the taxes will have increased a lot. He may have been wrong about this. Because in the end, the Democrats did not win the election, the Republicans did. But Warren Buffett says that the American state has such a large debt that it is impossible to solve it without higher taxes. In other words, he says that even if Trump or Harris comes to power, taxes will increase. We will see whether he is right or wrong in the upcoming period. But this was one of his basic theses. Therefore, the reason behind the sales in Apple stocks in particular is probably not that Apple is a bad company or that he expects a collapse regarding Apple. He wants to benefit from the tax advantage and he has already said this openly.

By the way, he sold his Apple stock with very bad timing. If he had not sold his Apple stock, he would have made 20 billion dollars more profit today. I was buying the stock when Warren Buffett was selling it at around 160-170 dollars. What I am just trying to explain is this; Warren Buffett's needs, his situation, his strategy are completely different from yours, and so are mine. Therefore, what Buffett does does not suit me in many cases, and getting excited because he sold this stock and bought that stock, emptying the portfolio, panicking about selling it too may not yield very good results. However, I agree with Buffett's idea of ​​selling banks. I would sell Bank of America if I were him. Bank of America unfortunately carries an excessive amount of American treasury bonds in its portfolio, the ones with very low interest rates. That's why it's sitting on a serious loss right now. This is not only true for Bank of America, but also for many banks.

There is currently over $1 trillion in unrecorded losses. Because these treasury bonds are due in the future and they are keeping them until that time. If you recall, this problem arose in March 2023. I think Buffett selling the bank may have something to do with this. On the other hand, Trump's current rise to power may ease bank regulations and Buffett's fears may be in vain. Because they may find a way to solve the problem with those treasury bonds through regulation. But within that framework, I find it reasonable that he is selling them because of this. In fact, Bank of America didn't sell them just because. By the way, he also reduced his positions in Wells Fargo, Goldman Sachs and JP Morgan. The timing was very bad, just like the timing of selling Apple. At least in the short term, he has compromised around $20 billion in potential profits due to these bank sales.

Meanwhile, Warren Buffett is approaching 100 years old and may be thinking about handing over the business. Especially after losing his close friend Charlie Munger, his thoughts on this issue may have deepened and I think he wants to create a good playing field for the new CEO before he hands over or dies. It is thought that the new CEO will be Greg Abel. He is also much younger at 62, but he is not exactly young either, and perhaps Greg Abel wants to focus on new areas. Because we know that Warren Buffett does not like technology companies very much. However, all the big returns in the last 5 years have been in technology companies. Buffett is not in any of them.

There is no Nvidia, no Tesla, no Palantir. It was only in Apple and it is coming out of that at this time and maybe he is thinking like this. Let me create a large amount of cash. That cash is already on the sidelines and is not melting right now. Inflation has dropped to 3%. However, interest rates are around 5%-6%. I will pass on this high amount of cash to Greg so that he can draw his new investment strategy and maybe make the investments that this new world requires in the right way. Edward Jones analyst Jim Shanahan also shares this view by the way. He says that the Apple and Bank of America sales may be related to this. He also recently bought 8% of new shares in Berkshire Hathaway Energy from Walter Scott. I guess they had a problem with that. He may be thinking of cleaning all of this up and handing over a brand new company.

It is quite logical by the way and of course according to Warren Buffett, companies are expensive right now. No one can say that American stocks are cheap. They are all at record levels or close to record levels. Buffett may not have wanted to buy at those levels. This is quite reasonable, in fact, he even skipped buying back shares in his own company this quarter. Because he may have very strict criteria. For example, he does not buy when the book value to stock value exceeds a ratio of 1.5, and companies in America are much higher than these ratios. I am not sure if this shows that Buffett is right. Because the companies that Warren Buffett is accustomed to investing in do not have the determination of today's technology companies. Nvidia's gross profit is 75%, its net profit is 50%. Of course, the valuation rates will be completely different.

The growth paths of today's technology companies are much higher than the companies Buffett was accustomed to in the past. For example, Palantir grew by 30% in the last quarter and said it will continue to grow by 30% in the coming period, and therefore the valuations of these companies are very high compared to traditional criteria. Buffett may not prefer this either. But if we put all these things I said in one place, there is no such thing as Buffett necessarily predicting a crisis. There may be a crisis, Buffett may think that these high prices will bring a decline. But he has been thinking about this for exactly 5 years and stocks have skyrocketed in 5 years.

A tremendous opportunity opened up for him in 2022. Stocks made a good pullback. He didn't enter there either, he didn't buy there either. He increased his cash during Covid in 2019. However, companies had fallen to free levels. In other words, I am not trying to tell you whether what Buffett did is right or wrong. He is in a completely different mode, he is managing a giant holding company. He does not have to perform like an investment fund manager. He needs to plan how he will transfer his company to the next generation. He already has big businesses, big cash flows. He does not need to take risks again and perhaps most importantly, what would you invest in if you had 325 billion dollars?

If you do not like technology companies, will he invest in Coca-Cola again? There are already enough there. If you have a lot of money, it becomes difficult to determine how to invest. Because Buffett's investment strategy is to buy a company that has fallen below its value and wait for many years. There are not many companies that are currently below their value. If there are, they are technology companies and they are not included in Buffett's investment strategy. Therefore, if I have to summarize, please do not let any investor's actions affect you directly. Of course, we have a lot to learn from them. But he is trying to make the best decision within his own conditions, his own needs and desires. I am not in that situation, I do not have such a cash flow. I am trying to grow my portfolio, I am more interested in technology. I can understand the opportunities there better, that is how I think for myself.

Therefore, my strategy and Buffett's strategy will of course be different. Your strategy may be different from mine, and that is perfectly normal. Because everyone's risk appetite and worldview are different, but the important thing is to stay away from rote learners. Because many people in the world are trying to create a market with extremely superficial information that does not include any of the analyses we do, does not include any details, and is like selling Warren Buffett stocks and you should buy them. I am here because I oppose this. We are looking at a different world. Buffett is not a bad investor of course. There are new conditions. I think it is possible to make more accurate investments.

The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.