Key Points:

• Warren Buffett is concerned about cybersecurity insurance after recent breaches.
• He’s wary of bank holdings as loan payments falter, with Ally Financial and JP Morgan showing signs of trouble.
• Buffett is reducing his stakes in Bank of America and may trim other bank investments.
• Warren Buffett’s recent sales and cash holdings signal caution so better check ‘The Next Nvidia’. You can see for yourself here.

Doug and Lee discuss Warren Buffett’s recent concerns about cybersecurity insurance, noting its significance given Berkshire Hathaway’s (NYSE: BRK-B) involvement in that sector. Buffett’s worries extend beyond cybersecurity to the banking sector, particularly regarding companies like JP Morgan (NYSE: JPM) and Ally Financial (NYSE: ALLY), which have shown signs of financial instability. Ally Financial, in particular, saw a significant drop in its stock price due to late car loan payments. They speculate on Buffett’s recent actions, including selling Bank of America shares, and wonder if he will trim stakes in other financials like Citi, signaling potential trouble for companies with heavy consumer loan exposure.

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Edited Video Transcript:

Warren Buffett said a day or two ago that he was worried about cybersecurity insurance,

which you would think is not the kind of thing Warren Buffett would talk about or worry about too much.

But it sort of leads into a number of financial transactions that he’s had recently.

Can you walk us through some of that?

Well, I thought it was interesting that he was concerned about, although Berkshire Hathaway insurance companies handle almost all the cybersecurity insurance, you know, that is, you know, put on, you know, for clients.

But I think it’s an interesting thing to watch because, you know, this most recent Microsoft CrowdStrike collapse was bad.

It was very bad.

And, you know, a lot of people got hit hard on that.

It hit the airlines.

It hit, you know, and if we get a massive meltdown due to cybersecurity issues that maybe attacks the national grid, the electric grid or something of that nature or the communications grid, that could be big.

So I think I think Buffett probably has some legitimate concerns there.

But I think his concerns are a little bit more now with the banks that he holds.

Yeah.

Yesterday, I think JP Morgan was the first bank to say this.

They basically hinted, and this is very early in the earnings cycle, way up, that things were looking very soft.

Yep.

And Ally Financial, which is, you know, the old GMAC, and, you know, hold a ton of car loans.

They basically came out and said, uh-oh, uh-oh.

People are turning late on paying their car loans.

And the stock dropped eighteen percent.

And that’s a huge drop for what is, you know, people think is a reasonably conservative company.

But, you know, Buffett owns Ally.

Buffett owns Citi.

Buffett owns, you know, other financials.

And once again, it hit the tape this week.

He’s selling more Bank of America.

Why is he unloading all of that?

And I wouldn’t be surprised to see him cut the stakes in the city.

He bought two point two billion of it just two years ago.

So it’d be interesting to see if he trims any of those stakes.

I would be worried if I was a holder of a stock in a company that had made a lot of consumer loans over the last two or three years.

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