Posted on: Monday, May 13, 2013
Written By:"The Elemental Economist" Jim Purnell
Moneynews.com reports: [ Despite the 6.5% stock market rally over the last 3 months, a handful of billionaires are quietly dumping their American stocks . . . & FAST.
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, & 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, & Goldman Sachs. Between the 3 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, & for the first time in 5 yrs. 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 & author of the New York Times best-selling book Aftershock.
Before you dismiss the possibility of a 90% drop in the stock market as unrealistic, consider Wiedemer’s credentials.
In 2006, Wiedemer & a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, & consumer spending that almost sank the United States. They published their research in the book America’s Bubble Economy.
The chief investment strategist at Standard & Poor’s said that Wiedemer’s track record “demands our attention.”
It starts with the reckless strategy of the Federal Reserve to print a massive amount of money out of thin air in an attempt to stimulate the economy.
“These Federal Reserve magically created funds haven’t made it into the markets & the economy yet. But it is a mathematical certainty that once the dam breaks, & this money passes through the reserves & hits the markets, inflation will surge,” said Wiedemer.
“Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, & that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems.”
And this is where Wiedemer explains why Buffett, Paulson, & Soros could be dumping U.S. stocks:
“Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, & less hiring. Plus, more layoffs.”
No investors, let alone billionaires, will want to own stocks with falling profit margins & shrinking dividends. So if that’s why Buffett, Paulson, & Soros are dumping stocks, they have decided to cash out early & leave Main Street investors holding the bag. ]
So you have some of the most successful multi-billionaire investors who are very rapidly dumping every US stock they own that has anything to do with US retail spending habits . . . . . should we maybe take note of this pattern? If you take into account the fact that US unemployment is painfully lofty (even though the magical number has dropped to 7.5% thanks to millions of citizens finally giving up on the search for employment) coupled with the sequester that has cost another 850,000 jobs, then sprinkle that with another 350,000 furloughed govt. workers who have been cut from 5 day work weeks down to 4 day weeks (which is in affect a 20% reduction of income) add on the fact that applications for disability benefits have never higher and you see a spending reduction below the almost nonexistent level we have now. Add onto that the fact that 1 in 5 Americans are depending upon food stamps to feed their families & 1/4 US children are now starving & you begin to see a retail mess that doesn’t align with the booming DOW 15,000 that is being coined as proof the economy is roaring ahead at full speed?
Might want to consider that ahead of the FED’s most recent announcement we saw the DOW selloff as investors sat in suspense waiting to hear if the fed would continue to print new dollars into infinity, once they announced they would in fact keep pumping out monopoly money the DOW then bounced up to the 15,000 mark for the first time ever on the news. This should prove that the DOW’s lofty performance has absolutely ZERO to do with the actual economy itself, but instead everything to do with whether or not the fed will keep pumping the bubble up. I can assure that if the fed said they were going to stop printing money out of thin air investors would have dumped their stocks because they know they are making money playing the bubble game & when the pump stops pumping the bubble goes away. When that day comes, and it will soon enough, the joke will be on those who are playing the suicidal bubble pumping game because the high frequency trading computers will beat them to the punch & dump stocks at such a rapid rate the average Joe wont be able to pick up the phone to call their broker before the HFT algorithms drag the market down below their stop losses which will trigger a cascading selloff that wont be stopped until the NYSE suspends market activity. Unfortunately that wont happen until all the Wall Street banks have cleared their books of all their stocks so they don’t get collateralized when their bubble pops. You wont get the same privilege so play at your own risk. Remember the “May Flash Crash” as they affectionately refer to it when the HFT computers began to battle with each other & the DOW lost 1,000 in a whopping 6 minutes
Does anyone care that the first bank holiday in 100 years just happened in Cyprus? The last time a bank holiday was sprung on the unsuspecting public the Americans had their gold stolen & the US dollar devalued by 65%. It didn’t go well 100 years ago & I’m willing to bet that if you ask the Russian oligarchs that got robbed of their fortunes which conveniently forces them back into the loving bankers arms for financing to keep their businesses alive they would probably say the same. Or if you asked the Cypriot people who just had more than 1/2 of their life savings stolen at gun point (yes at gun point, when the govt. finally had the nerve to reopen the banks they conveniently flew in British mercenaries to guard the banks & tellers with sub machine guns in case anyone thought they had the right to be upset about the redistribution of their life savings to the banks who hired the mercenaries to keep them quiet) to bail out the banks they wouldn’t be very happy either. I’m just guessing here though.
Bank holidays, European pensions cut in half, starving children in Greece dumpster diving for scraps of food, Merkel encouraging EU countries to “cede their sovereignty to Germany”, 1/5 Americans on food stamps, the biggest retailer who profits from food stamp purchases WalMart reporting the worst monthly sales ever, Obamacare doubling insurance prices, a global currency war, the dollar slowly losing world reserve currency status, worldwide shortages of physical precious metals, Israel kicking off the western war with Syria, and on and on and on. Have you ever been in a more unstable world than we see today? Now the richest & most successful investors in the world are dumping stocks at an alarming rate & the guy who predicted the housing crash with 100% accuracy when everyone else was saying that housing prices would rise forever is predicting a 90% correction in stocks very soon? You never want an insurance policy until you need one & then it becomes your saving grace. Do you have an retirement plan insurance policy? If you owned gold & silver bullion you would have just that, an insurance policy to protect your life savings & retirement investments. Just remember the closer you get to the storm making landfall the higher the premiums go for the insurance policies, if you can even get one when you wait too long. Food for thought.
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