Finimize - 💰 What Buffett bought

What’s going on here?

Despite his many billions, it seems Warren Buffett’s still a sucker for a bargain: Berkshire Hathaway increased its stakes in Japan’s five biggest trading houses, after their stocks mostly fell over the past year.

What does this mean?

Buffett has made no secret of his love for Japan’s trading houses. The Oracle of Omaha waxes lyrical about their financial discipline, shareholder-friendly policies, and diversified revenue streams – from energy to commodities and logistics. And now, he’s put even more money where his mouth is. Berkshire raised its stakes in Mitsui, Mitsubishi, Marubeni, Sumitomo, and Itochu to an average of 9.3%. That’s inching closer to the previous 9.9% cap – a limit that the five companies have now agreed to relax.

Why should I care?

Zooming in: Selling Sunset, Buffett style.

Berkshire's reportedly considering selling HomeServices of America – its US real estate brokerage. After years of profit, the business was left nursing a $113 million loss in 2024 after having to pay a $250 million legal settlement for inflated brokerage commissions. Buffett has cut his losses before, famously canning his newspaper businesses when the industry’s decline became irreversible. But this could be a bigger issue than one failing venture: the potential sale could signal a lack of faith in the broader US housing market. After all, high mortgage rates and home prices have been keeping folk from buying and selling property lately.

The bigger picture: The Oracle might be seeing something.

Buffett does seem to be erring on the side of caution overall. Berkshire Hathaway has a record $334 billion in cash and low-risk short-term Treasuries – nearly double what it had a year ago. Makes sense: popular US stocks have been pushed to eye-watering valuations, leaving little room for error. At the same time, high interest rates and political uncertainty are making a letdown look more likely.

What’s going on here?

US consumer sentiment dropped 11% in March from February to reach its lowest level since November 2022 – and, likely to steer clear of the shops, Americans can’t even rely on a movie-style makeover to fix this confidence issue.

What does this mean?

The latest data showed that tariffs, government layoffs, funding cuts, and immigration restrictions have worn US consumers down. And that’s across the aisle, with Democrat and Republican voters both reporting the same. You can’t blame them for being wary: the S&P 500 fell 10% from its February peak last Thursday. If you look at it on a yearly basis, consumer sentiment is down 27%, making economists worry that folk will tighten their purse strings. That would impact businesses, the job market, and the economy.

Why should I care?

For markets: Rock, meet hard place.

JPMorgan now expects the US economy to pick up by a measly 1% over the next two quarters versus the same time last year. On top of that, the big bank sees layoffs speeding up. If those predictions are on the (lack of) money, the Federal Reserve could be tempted to trim interest rates to relieve some of the pressure on the economy. Problem is, inflation’s forecast to hit 4.9% this year – and that could force the central bank to keep rates high, potentially leaving the economy to struggle for longer than investors might like.

Zooming out: The Land of Opportunity is in Europe, apparently.

If shoppers stop handing their hard-earned cash over to businesses, corporate earnings would be whittled down – and, in turn, stock prices too. So it’s no wonder that investors are reshuffling portfolios, with their long-held faith in the US economy shaken. Many are selling stateside stocks and buying abroad instead. European stocks – especially shares in defense companies – have proved particularly popular: Germany’s DAX index is up over 15% this year, while the S&P 500 has slid 4%.