To begin, although I’ve been involved in equipment financing for most of my career and certainly steeped in most aspects of business accounting and money-management practices, I have very limited hands-on knowledge of securities markets. So, my thought’s for today are personal conclusions, reached from absorbing public information and since they’re my own, not to be relied upon as proven in any way, shape or form.
For quite some time now, it’s seemed to me that individuals owning securities have lost all touch with their investment’s routine performance whereas share prices rise and fall mercurially due to block traders moving billions of dollars in and out of markets continually. And as a result, as reflected by the major indexes, hundred point market swings in the Dow average are frequent occurrences.
Furthermore, the slightest input, positive or negative, will almost immediately touch off significant market swings, many times being disastrous for small-time players.
Consequently, just like precious metals, and gold in particular, it seems to me that securities markets have to some extent become places for some to simply park masses of funds until better alternatives become available. And therefore, they’re no longer true indications of the economy’s performance, nor do they accurately reflect business conditions, which I feel are far worse than market averages suggest.
I mention this today because of an article in Newsmax Wires, Money News, headlined, “Billionaires Dumping Stocks, Economist Knows Why.”
The opening line is, “Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast."
Then it goes on, "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.”
The article continues with, “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.”
Now, the article goes on to provide reasons for the massive sell-off by these three world-renown investors, including theories of Robert Wiedemer, an “esteemed economist and author of the New York Times best-selling book Aftershock” who thinks “It’s very likely that these professional investors are aware of specific research that points toward a massive market correction, as much as 90%.”
But, that’s not my point.
I think there’s a far simpler explanation, which is that there’s no real basis for expectations of true economic growth because the current administration's dedicatedly anti-business, which is something I’ve been writing about for almost three years now. And although the likes of Buffet was bought with a sweetheart deal in Citicorp stock, he certainly knows better than most when his tea leaves tell him to get out of the market.
So, although it took me quite a few words to get to the bottom line today, that’s really what this is all about. And I think the bottom line’s future isn’t looking so hot and evidently, I've got some pretty smart financial guys agreeing with me.
That’s it for today folks.