Billionaires Dumping Stocks, Economist Knows Why

[flowers]

http://www.moneynews.com/MKTNews/billionaires-dump-economist-stock/2012/08/29/id/450265?PROMO_CODE=110D8-1&utm_source=taboola&site=nationalreview

Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast.

Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.

In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.

With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.

Unfortunately Buffett isn’t alone.

Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee.

Finally, billionaire George Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.

So why are these billionaires dumping their shares of U.S. companies?

After all, the stock market is still in the midst of its historic rally. Real estate prices have finally leveled off, and for the first time in five years are actually rising in many locations. And the unemployment rate seems to have stabilized.

It’s very likely that these professional investors are aware of specific research that points toward a massive market correction, as much as 90%.

One such person publishing this research is Robert Wiedemer, an esteemed economist and author of the New York Times best-selling book Aftershock.

Editor’s Note: Wiedemer Gives Proof for His Dire Predictions in This Shocking Interview.

Before you dismiss the possibility of a 90% drop in the stock market as unrealistic, consider Wiedemer’s credentials.

In 2006, Wiedemer and a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States. They published their research in the book America’s Bubble Economy.

The book quickly grabbed headlines for its accuracy in predicting what many thought would never happen, and quickly established Wiedemer as a trusted voice.

A columnist at Dow Jones said the book was “one of those rare finds that not only predicted the subprime credit meltdown well in advance, it offered Main Street investors a winning strategy that helped avoid the forty percent losses that followed . . .”

[truth_seeker]

If it is in the news, it might be old news.

And for every seller, there is a buyer. Who is to say focus on the seller, instead of the buyer?

Are we expected to see this as "Buffett selling, he's the smart one?"

Buffett is not a day trader, trying to pick highs and lows, ups and downs.

[Oceander]

If it is in the news, it might be old news.

And for every seller, there is a buyer. Who is to say focus on the seller, instead of the buyer?

Are we expected to see this as "Buffett selling, he's the smart one?"

Buffett is not a day trader, trying to pick highs and lows, ups and downs.

The question is:  where are they putting their money now?  Considering that Buffett is a little better at investing than most, I'm less interested in where his money was than where it's going to be.

On the topic itself, assuming this to be true, it doesn't necessarily point to a market correction so much as it does to a fall in consumer sentiment, which will hurt those companies that are most dependent on consumer spending.  I wonder if grocery stores are being dumped as well, since grocery stores tend to sell must-have staples for which buying is relatively constant.

[olde north church]

The question is:  where are they putting their money now?  Considering that Buffett is a little better at investing than most, I'm less interested in where his money was than where it's going to be.

On the topic itself, assuming this to be true, it doesn't necessarily point to a market correction so much as it does to a fall in consumer sentiment, which will hurt those companies that are most dependent on consumer spending.  I wonder if grocery stores are being dumped as well, since grocery stores tend to sell must-have staples for which buying is relatively constant.

Is Buffett really better or do the media focus on his wins and not his losses AND when you've go billions, what's a couple hundred million tossed to the dogs?

[massadvj]

If the Fed stops printing money, interest rates will have to go up.  If interest rates go up, yields on stocks and bonds will also rise.  If yields go up, valuation goes down.  The trouble is, there really is nowhere to run, unless you short the market.  Higher interest rates will affect virtually every market in existence since higher borrowing costs translate into less spending power at every level.

[Luis Gonzalez]

The Kondratiev wave cycles are being accelerated by advances in technology, so the cycles of booms and busts are becoming increasingly volatile and even erratic, with shortened spans between the peaks and valleys.

The fact that they cycles are being shortened, makes them more dependent on consumer spending habits. People like Buffet apparently know this and are being proactive to protect their holdings.

The next cycle is due in 2015 (not an exact date), but that's the start of the upswing, which means that the descent into the "valley" (or as Kondratiev put it, the economic winter) is just about due.

P.S. Economists are predicting that the next Kondratiev wave will revolve around health care (NOT green energy), which may shed a light on the government's urgency to "reform" that industry.

 

[Oceander]

The Kondratiev wave cycles are being accelerated by advances in technology, so the cycles of booms and busts are becoming increasingly volatile and even erratic, with shortened spans between the peaks and valleys.

The fact that they cycles are being shortened, makes them more dependent on consumer spending habits. People like Buffet apparently know this and are being proactive to protect their holdings.

The next cycle is due in 2015 (not an exact date), but that's the start of the upswing, which means that the descent into the "valley" (or as Kondratiev put it, the economic winter) is just about due.

P.S. Economists are predicting that the next Kondratiev wave will revolve around health care (NOT green energy), which may shed a light on the government's urgency to "reform" that industry.

 

That "reform" doesn't seem to be capable of doing anything other than wrecking the health care industry.

[Luis Gonzalez]

That "reform" doesn't seem to be capable of doing anything other than wrecking the health care industry.

If the next boom is healthcare, and government controls health care, then whatever economic benefits may come from a boom, will be reaped by the government.

[jmyrlefuller]

One such person publishing this research is Robert Wiedemer, an esteemed economist and author of the New York Times best-selling book Aftershock.

Editor’s Note: Wiedemer Gives Proof for His Dire Predictions in This Shocking Interview.

Before you dismiss the possibility of a 90% drop in the stock market as unrealistic, consider Wiedemer’s credentials.

In 2006, Wiedemer and a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States. They published their research in the book America’s Bubble Economy.

The book quickly grabbed headlines for its accuracy in predicting what many thought would never happen, and quickly established Wiedemer as a trusted voice.

Ah, yes, a book salesman.

Folks, just.about everyone and their mother could see the housing bubble was not sustainable. Being able to see that coming is notthat impressive, especially if one uses that to legitimize a bunch of  shock predictions that have no basis in reality— something we see far too often with these charlatans.