Donald Trump and many of his supporters did pretty well in the stock market after he won back the White House. Warren Buffett, it appears, not so much.
That’s the recap of the post-election market frenzy, the impact of the so-called Trump Trade that has been producing some notable winners (among them, Trump himself) and if you can believe the trading-desk chatter, losers like Buffett.
Buffett has been selling stocks like Bank of America and even market darling Apple, if you haven’t noticed, hoarding more than $300 billion cash and cash equivalents (T-bills) because he said tax rates were going higher, and he expected stocks to crater.
In other words, Buffett watchers tell On The Money he was betting on a Kamala Harris victory, which would have reversed the Trump Trade in major indices and certain stocks (shares of Truth Social among them) that have found buoyancy on the possibility of a Trump victory and his promises of lower taxes, including on capital gains.
Now that the possibility of Trump winning has turned into a reality, the famed Oracle of Omaha is looking more like the Knucklehead from Nebraska, some of these traders say. Sure, shares of his holding company Berkshire Hathaway were up with the rest of the market after Wednesday’s massive Wall Street, but think of all the money he left on the table by sitting in as much low-yielding, short-dated treasuries as the Fed, and not having his cash in the roaring S&P.
Even more, the rumor in the trading-desk world is that the famed value investor was actually hoarding cash to pounce when he saw value after a sharp decline in equities. How did that turn out with the Dow up over 1,500 points on Wednesday?
As for Trump, he’s been making a few bucks over the past couple weeks on the stock of his social-media company Truth Social, which trades under the symbol of DJT, largely on speculation that the money losing outfit would somehow benefit with Trump in the White House (shares are up about 90% in recent weeks).
On the day after his victory, he picked up about $1 billion in paper gains on his shares of DJT. He owns 53% of the stock, or 114 million shares, and public filings show he hasn’t sold any. On Thursday, the volatile trading of the stock continued as it gave up some of those gains.
OK, maybe I’m being a little tough on old Warren and easy on The Donald. They don’t call Buffett the Oracle of Omaha for nothing. Because of his exceptional long-term track record of finding under-valued stocks and companies and stuffing them in his Berkshire Hathaway portfolio, he is one of the world’s richest men, worth approximately $140 billion. At 94 he’s still considered among the best investors ever.
Forbes, meanwhile, says Trump is now worth around $8 billion, but half of that seems to be in the appreciation of DJT stock, the currency for the money-losing Truth Social platform, which coincidentally announced the day after his election that it continues to lose tens of millions of dollars based on weak user growth and lack of ads.
Speculators, meanwhile, are piling into the stock not just because they like the company’s fundamentals as they are; they think Trump can somehow propel the company’s fortunes from the White House, which is easier said than done given ethics rules.
As I’ve reported, there’s also a theory that Truth Social might be purchased by Tesla chief and Trump advisor Elon Musk to merge with the “X” platform.
Then there’s talk about a so-called short squeeze in the stock. A short sale is when someone bets a stock will decline by borrowing shares, selling them immediately and replacing the borrow at a later date when it falls.
But traders can “squeeze” the shorts by operating in tandem to buy and hold, forcing shares higher and causing the shorts to cover their borrowing at ever higher prices and a loss. The bigger the squeeze, the higher the shares will rise.
Yes, lots of wishful thinking around this stock, but for now Trump looks like he got this one mostly right, while the so-called Oracle didn’t.
Buffett didn’t respond to a request for comment.