Black Monday: The fear of recession in America has wreaked havoc in the stock market around the world. Stock markets from America to Japan and India have been in a state of panic. Talking about the Indian stock market, investors lost more than Rs 10 lakh crore in the first few hours on Monday. Sensex and Nifty are trading with a decline of more than 3 percent.
The US stock market is trading at its all-time high level in July. There was a boom in the stock markets around the world around that. This also included the Indian stock market. But then something happens that the fear of a decline in the stock market around the world increases. And at the center of this is American billionaire and legendary investor Warren Buffett.
Buffett, the chairman of Berkshire Hathaway, is considered a master of the world of investment. There would be very few people in the world who would have made as much money as Buffett from investing. He has about 277 billion dollars in cash. If we talk in rupees, then about 25 trillion. Buffett also has a significant holding in Apple, American Express and Bank of America. With his huge cash reserves, he can bring a rise or fall in the shares of even the biggest companies.
Is Buffett responsible for the stock market crash?
Warren Buffett’s Berkshire Hathaway sold its stake in many companies including Apple on a large scale in July. This was probably the first time that Berkshire sold so much in a single quarter. On the other hand, if we talk about new investments, Warren Buffett made almost no investments in the June quarter. He says that he will make new investments only when he expects huge profits.
Buffett’s selling gave rise to many speculations in stock markets around the world. Investors started questioning why Buffett was increasing his cash reserves. Investors around the world felt that Buffett knew something that they did not know. This is the reason why there was selling in all the big markets like America as well as China, Japan and India and the stock market crashed.
How does Buffett benefit from the fall in the market?
Warren Buffett has a lot of luck in both hands. He has cash worth $277 billion and also has holdings in many companies. This means that even if the current fall had not happened, he could have earned a good profit due to his holdings in companies like Apple and Bank of America. On the other hand, in case of a fall, he will have the opportunity to earn a huge profit by investing his huge wealth back in the market.
The reason for the fall in the US stock market is the unemployment figures and the Sahm Rule associated with it. According to this rule, if the unemployment rate of three months is 0.5 percent more than the lowest rate of the last 12 months, then recession occurs. This formula has been proved correct since 1970. But, Claudia Sahm, who made this rule, has herself dismissed the possibility of recession based only on unemployment figures.
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