Billionaire and investor-extraordinaire Warren Buffett made one of his frequent appearances on CNBC on March 4 and expressed concern about an extreme stock market sell-off when the Federal Reserve begins selling its current Treasury holdings.
The Federal Reserve is currently buying approximately $45 billion worth of Treasuries and $40 billion in mortgages each month, in a process that is designed to stimulate the economy and is known as “quantitative easing.” Buffett worries that investors around the world will react very badly when that process ends.
Last month, when the Federal Reserve minutes from its meeting in January were released, they indicated that the Fed was considering slowing the pace of its asset purchases. Not stopping, merely reducing the amount that they buy every month. The Dow Jones index promptly sank nearly 1%, or over 100 points, within minutes of that release.
"All over the world everybody that manages money is waiting to catch the signal that the Fed is going to reverse course. I think they're on a hair trigger. There are an awful lot of people who want to get out of a lot of assets if the Fed is going to tighten.”