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NOV 9, 2023

Warren Buffet is selling, Crypto on the rise, and Hong Kong allowing ETFs again.

by Meta Investor

Week 45 - what's moving the markets?
When Warren Buffet is selling, investors should ask why.
Let’s explore together what is happening at Berkshire and if we can expect China to jump into crypto again.

Buffet is holding cash and profiting from Japan.

  • 3 weeks ago I wrote about bonds and how it is becoming a promising investment (article).
  • The investment legend Warren Buffet thinks so and is selling stocks and enjoying the high yield these “safe” investments offer.
  • All while making the largest bet ever outside the US. This time Japan.

What happened

On Saturday, Berkshire reported their 10-Q quarterly report.
Important highlights:
  1. In Q3, Berkshire sold more stocks than it bought. It bought $1.7 billion of stocks and sold $7 billion, for a net decrease of about $5.3 billion.
  2. Berkshire increased its cash position to a record high of $157bn.
  3. They highlighted their 2023 bets on Japan as a deal that happens only a few times in a century.

Stocks and cash

The first two points are related - switching from stocks to cash.
This switch usually means Buffet and his team are getting ready for better deals on the market, which might signal the market is getting expensive, or there are better alternatives.
In this case, it seems like both, as most of this cash sits in the US treasury bills, where Buffet enjoys the ~5% "free cash" that wasn't seen for almost 20 years.
More details of Berkshire's Q3 stock buys and sells will come in its regulatory 13F filing, due on November 14.
Source: https://www.ft.com/content/4ec10c1b-a365-483f-8566-e2ff47435dd5
Source: https://www.ft.com/content/4ec10c1b-a365-483f-8566-e2ff47435dd5

Bet on the Japanese market

Also, in April 2023 Buffet decided to increase his stakes in the Japanese market.
Spreading the investments across Itochu, Marubeni, Mitsubishi Corporation, Mitsui & Co., and Sumitomo.
This was Berkshire’s largest bet outside the US market ever, leveraging low interest rates in Japan while the US was already raising rates.
This resulted in Berkshire being able to borrow cheaply and use the funds to buy stocks which saw an increase of 37 - 62% this year.
Charlie Munger commented that it was "awfully easy money”.
He also added, “If you’re as smart as Warren Buffett, maybe two, three times a century, you had an idea like that,”.
My take
Warren Buffet is a legend and many investors and funds are trying to align their strategies with the one of Berkshire.
While an average investor would hardly know about the trades in time (they report it quarterly), Warren is known for his trust in the US companies, and when he starts looking overseas, that gives me a clear signal there is something worth exploring.
I will do my research and evaluate if Japan is still a good opportunity. Considering the JPY is at record lows, anyone holding USD might leverage this forex difference and buy undervalued companies for even better prices.

Crypto inflows surpass 2022 (report).

  • Digital asset investment products saw weekly inflows (positive increase in funds) of $261m.
  • This marks 6th week of consecutive inflows, totaling $767m.
  • During those 6 weeks, the total inflows surpassed the US$736m seen in 2022.
Source: https://etp.coinshares.com/de/knowledge/market-activity/fund-flows-06-11-23
Source: https://etp.coinshares.com/de/knowledge/market-activity/fund-flows-06-11-23
My take: Investors are noticing crypto again.
Most of the inflows are into Bitcoin ($228.9m), which goes hand in hand with the expectations about ETF approval.
But, for the first week, we see an inflow in ETH as well, specifically $17.5m
I don’t see this as a sign of rotation from Bitcoin into altcoins just yet, but I expect more attention on the biggest altcoins (“blue chips”).

Hong Kong is easing into crypto ETFs (article).

  • In September 2021 China banned crypto, and that is still effective (explanation).
  • But, in October 2023 Hong Kong decided to ease the restrictions, allowing a broader range of investors access to crypto ETFs.
  • Now, they are going a level further and started discussions of possible Spot ETF approval.
My take: It will take some time and there is no direct impact today.
But before the Chinese ban, China was ranking higher in crypto investments than the US.
While Hong Kong is not China, they have a direct agreement with China's biggest exchanges to access its products.
Still a long shot, but if approved, Chinese investors could access the crypto market again through Hong Kong’s exchange, resulting in additional inflows and interest from the APAC region.
Let me know how you see the Asian market and if you are already opening altcoin positions, or still focusing on BTC/ETH.
You can comment here, or email me directly at matt@metainvestor.gg
With regards,
Matt.
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