SUMMARY
- Warren Buffett ditches several banks, citing risky behavior and deceptive accounting practices
- Recent banking chaos suggests Buffett's foresight may be spot on, as concerns over global crisis grow
- Berkshire Hathaway exits multiple bank stocks, but keeps faith in select few like Bank of America
Yo, check this out: Warren Buffett, the investment guru himself, decided to drop several banks from his portfolio, claiming they were taking foolish risks and faking their earnings to look better. He saw the writing on the wall and decided it was time to move on, and now it seems like he was right, with the recent chaos in the banking sector.
The collapse of Silicon Valley Bank and Signature Bank is causing major concerns about a global banking crisis, and people are starting to worry about their money's safety. Could this be the beginning of a massive credit crunch and recession? Only time will tell.
Buffett noticed some shady things going on with banks, like valuing assets at cost instead of market value, which beefed up their profits in a sketchy way. They were also mismatching assets and liabilities – not cool, banks. Silicon Valley Bank fell into this trap and met its doom in March.
Our man Buffett had been in the banking biz for a long time, but it just wasn't giving him the warm fuzzies anymore. He sold off shares he'd held for decades, saying, "I just think the system isn't set up quite right in terms of connecting punishment to culprits... it's incredibly important that your banking system runs well."
So what did he do? Berkshire Hathaway bailed on JPMorgan, Goldman Sachs, Wells Fargo, M&T Bank, and PNC Financial in the last three years. They also cut back on BNY Mellon and US Bank stakes big time. But they didn't ditch everyone; they kept Bank of America and picked up Citigroup, Ally Financial, Jefferies, and NuBank. Although the value of their bank stocks has taken a hit, it's clear that Buffett's instincts are still on point.
WOM Money Picks
Be a part of the winning team | 81% Success Rate.