Warren Buffett Thinks More Bank Failures Are On The Way. Could He Be Right?
Key takeaways
- Investing titan Warren Buffett predicts we’ll see more bank collapses like Silicon Valley Bank and Signature Bank
- But he was willing to bet $1 million on depositors’ money being safe should it happen again
- A diversified strategy is recommended during times of turmoil
Legendary investor Warren Buffett has enough clout that when he gives an opinion, people listen. His latest is that we haven’t seen the last of a Silicon Valley Bank-style collapse and for investors to prepare accordingly.
In a silver lining, he did mention a caveat to his statement that suggests it’s not all doom and gloom. Let’s take a look at Buffett’s thoughts and what it could mean for the stock market.
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Warren Buffett’s bet on banks
Since the collapse of Silicon Valley Bank, Signature Bank and Credit Suisse, the market has been jittery over who could be next. For industry giant Warren Buffett, he says we haven’t seen the last of it because, well, banks do “dumb” things.
SVB and Signature Bank were the second and third-largest bank failures in U.S. history and the worst we’ve seen since the 2008 financial crisis. Extraordinary measures were taken by U.S. regulators to protect the deposits and sell off the beleaguered assets.
Buffett is betting on bankers giving in to “temptation” to “get a little bit bigger spread on record, a little more than earnings” — which could cause further turmoil in the banking sector.
What does it mean for investors?
Buffett’s warning is a clear sign to shareholders that bank stocks could go through a period of turbulence and confidence in a bank can turn in the blink of an eye. Diversifying is always a solid strategy for investing, and it’s even more critical in times of economic uncertainty. Buffett is giving everyone a headstart on putting that strategy to good use.
He’s also confident no depositors will lose their money because of federal protection on the money, saying “Nobody is going to lose money on a deposit in a U.S. bank. It’s not going to happen.”
He even said he’d bet a million dollars on it. And who are we to doubt Warren Buffett?
The bottom line
Buffett is warning others that we’re not done with bank runs yet to help investors prepare for the worst. We’ve already seen countless reticent founders saying they should have put money into multiple banks instead of all their eggs in one basket.
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