Since the beginning of this year, as the Federal Reserve embarked on an aggressive tightening cycle, arousing market concerns about a U.S. economic recession, the three major U.S. stock indexes have also performed bleak, and the S&P 500 has recorded its worst half-year performance in 52 years.

In such an investment environment, even the "stock god" Buffett is difficult to deliver a satisfactory answer to the market.

  On the evening of August 6, Beijing time, Berkshire Hathaway, Buffett’s investment company, announced its second quarter 2022 financial report.

The financial report shows that its investment portfolio lost as much as $53 billion (about 358.4 billion yuan) in the second quarter of this year.

For the entire second quarter, the company's net loss attributable to shareholders was as high as 43.755 billion US dollars (about 295.9 billion yuan), compared with a net profit of 28.094 billion US dollars in the same period last year.

  The four heavyweight stocks are "not powerful"

  Dragging down the huge losses of Buffett's investment companies

  In the second quarter of this year, the overall performance of US stocks was poor. The Dow fell by 11.25% in the whole quarter, the S&P 500 fell by 16.45%, and the Nasdaq fell by 22.44%.

  According to the financial report, in the second quarter of this year, Berkshire Hathaway’s stock positions were concentrated in five companies: Apple ($125.1 billion), Bank of America ($32.2 billion), Coca-Cola ($25.2 billion), Chevron (23.7 billion US dollars), American Express (21 billion US dollars), the five companies account for about 69% of the positions.

  Among them, Apple, Bank of America, American Express, and Chevron all suffered huge drawdowns in the second quarter, with declines of 21.58%, 24%, 25.39%, and 10.35%, respectively.

Coca-Cola bucked the trend and rose 2.22% in the second quarter.

  It should be noted that, in addition to normal stock investment gains and losses, gains and losses on investments and derivatives are one of the reasons for the sharp drop in net profit.

The financial report showed that its investment and derivatives net loss in the second quarter was 53.038 billion US dollars.

However, this point has also been complained by Buffett many times, saying that the gains and losses of investments and derivatives have no real meaning for understanding financial reports and evaluating economic performance.

  Volatility in Berkshire's earnings also affects share price performance.

Berkshire's Class A shares fell more than 22% in the second quarter and are down nearly 24% from their all-time high on March 28.

  In response, Berkshire Hathaway reiterated its call for investors to pay less attention to the quarterly volatility of its equity investments in a press release: Any given quarterly amount of investment gains (losses) is generally meaningless and provides Net earnings per share figures can be extremely misleading to investors with little or no knowledge of accounting rules.

  New Occidental Oil Makes Profits

  Cash on hand still exceeds $100 billion in the second quarter

  In fact, although Buffett's top three stocks have pulled back, he still made a lot of profits in the stocks he added this year.

  Berkshire Hathaway has continued to buy Occidental shares since the first quarter of this year, bringing its first-quarter net spending on stocks to $41 billion.

Since June, as the share price of Occidental Petroleum has fallen, Berkshire has actively increased its positions many times. With the latest one, Berkshire's total shareholding has further increased to 19.4%.

  Benefiting from the surge in international oil prices, Occidental Petroleum's performance has been very bright.

Berkshire Hathaway will also reap the benefits of a higher share price.

The stock climbed from around $29 at the beginning of the year to an intraday high of $74 on May 31, a gain of as much as 140%.

Subsequently, Occidental Oil has undergone repeated adjustments. As of the close of last Friday, Occidental Oil has risen by 103% during the year.

  It should be noted that once Berkshire Hathaway owns more than 20% of Occidental's common stock, it will be able to include Occidental's performance in its own performance statement proportionally, which will give Berkshire a boost · Hathaway's performance; at present, it is only 0.6% away from the shareholding ratio that can be included in the report. Some analysts expect Occidental Petroleum's net profit this year to be about 10.7 billion US dollars.

So if Berkshire Hathaway ends up taking a 20% stake in Occidental, it could add more than $2 billion to reported profits this year.

  Buffett has always believed that there must be enough cash reserves to deal with the economic crisis.

  As of the end of June, the company's reported second-quarter cash reserves still reached $105.4 billion (about 712 billion yuan), down only slightly from $106 billion at the end of March.

  Although it is frequently operated, it is basically completed without affecting the cash reserve.

Berkshire bought $6.15 billion in stock and sold $2.32 billion in the second quarter, according to the earnings report.

  The company mentioned that it spent about $1 billion on share repurchases in the second quarter, bringing the total to $4.2 billion in the first half.

  The U.S. economy is in a technical recession

  Expectations of rate hikes cast a shadow over U.S. stocks

  Data released by the U.S. Department of Commerce on July 28 showed that the U.S. gross domestic product fell 0.9 percent in the second quarter of this year on an annualized basis.

The Wall Street Journal, Bloomberg and other mainstream media reported that the U.S. economy fell into a technical recession after two consecutive quarters of contraction.

  In the second quarter of this year, the Federal Reserve launched a mode of violent interest rate hikes to fight inflation, and the economic outlook was also in jeopardy. U.S. stocks fell into a bear market for a time.

From the data point of view, the Nasdaq plunged 22.44% in the second quarter, the S&P 500 fell 16.45%, and the Dow fell 11.25%.

  In the face of high inflation not seen in decades, the Fed's "hawkish" signal this year has become more and more obvious.

After raising interest rates by 25 basis points in March, the Fed raised interest rates by 50 basis points non-stop in May. In June, it began to raise interest rates by 75 basis points, the largest since 1994.

  Since last week, Fed officials have frequently released "hawkish" signals, breaking market expectations for an early end to interest rate hikes.

Among them, Chicago Fed President Evans said that if the economy slows as expected, he will support a 50 basis point rate hike at the September meeting.

But if economic data is hotter than expected, a third straight 75bps rate hike is not out of the question.

  Regarding the Fed's interest rate hike expectations, some market analysts told reporters that the market originally believed that the latest U.S. employment data would fall sharply, and then it could force the Fed to slow down the pace of interest rate hikes at the September meeting, but now the latest data has broken this expectation. .

  The analyst said: "If the Fed's rate hike slows down, the stock market will be supported by expectations and will be able to 'return blood', which is also a source of confidence that the stock market has stabilized in the recent period, but who can think of the employment and other data released by the United States But there has been a sharp increase that exceeded expectations.”

  The reporter noticed that the July non-farm payrolls report released by the United States showed that the number of new jobs reached 528,000, more than double the expected 250,000, and a substantial increase from the previous month's data.

  "This shows that the current economic situation is not bad, and it provides enough confidence for the Fed to further raise interest rates. There is no need to worry too much about raising interest rates and causing an economic downturn, but raising interest rates is a blow to the stock market." The researcher said that after the data was released, the market It is predicted that the probability of the Fed raising interest rates by 75 basis points in September has exceeded the probability of raising interest rates by 50 basis points. At the same time, the reason for the rise in US stocks during this period is that the Fed is expected to slow down the pace of interest rate hikes, but if the Fed has to continue to raise interest rates significantly, Then U.S. stocks may fall further.

  West China Metropolis Daily - cover reporter Zhu Ning