Buffet and other billionaires are dumping stocks

The stock market has risen dramatically especially over the last year. A lot of people, including Robert Schiller, the Nobel prize winner in Economics in 2013, believe another stock market bubble is forming. And, it seems that the Big Money, including Warren Buffet and other prominent billions, are dumping stocks. Just looking at a chart of the S & P 500 makes me dizzy. Since 2009 SPX has risen over 177%. This year alone it’s over 27% higher. That’s simply too much increase in too short of a time. If you look at the chart from late 2011 to the present there has been barely any downward adjustment, which to me is indicative of an incredible amount of overconfidence among so-called “investors.”

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.

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, Big Money can see that the Fed’s free money party is over and it’s now time to pay the liquor bill. They’re leaving before they end up with the bill.

About Mike
A resident of the “30 square miles surrounded by reality,” I spend most of my time teaching economics and statistics to undergraduate students. I enjoy, naturally, economics and business, but also science (I was once an astronomical observatory assistant), politics, photography, food, travel and sports. Madison has grown quite a bit since 1978 when Governor Lee Dreyfus made that remark. According to Wikipedia, Madison is 67.3 square miles of land and 16 square miles of water. Visit https://thisgotmyattention.wordpress.com/about/ for one of my favorite views of the isthmus. Or, why not come visit us! http://visitmadison.com

One Response to Buffet and other billionaires are dumping stocks

  1. Pingback: Has anybody else noticed that stock market bubbles are beginning to pop? | This Got My Attention

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