Over the past several months, since the Federal Reserve has been purposefully printing more than $85 billion per month to prime markets, the primary stock exchanges have all reached new highs, with little risk to push equities down against the trend. However a new analysis of trading by some of the wealthiest men in the U.S. shows that many of the elite have been quietly selling their shares into the rally, even as business analysts promote the belief that stocks will continue to go much higher.
Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and 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, 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.
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. – Newsmax via Money News
The key element here, that should bring cause for concern to many when one analyzes the stocks these top investors are dumping, is that nearly all of the equities being sold are in stable consumer goods companies that tend to fare well in both good and bad economic times. Even during recessionary downturns, such as in 2001, 2003, and 2009, consumers bought necessity brands like Johnson and Johnson, while paring off purchases of luxury or non-discretionary items. Now it appears however, that consumer spending trends are forcing many Americans to cut down on everyday goods, rely upon cheaper generics, or even to go without due to limited spending power.
It is well known in the world of investing that since the destruction of capital in the markets that took place from 2008-2010, many retail investors, including those who used the markets to grow their retirements, have pulled out completely from stocks, and invested in other forms of assets like gold, bonds, and real estate. This money held on the ‘sidelines’ was one of the driving factors that led the Federal Reserve to go against their mandates, and pump liquidity into equities to prop up stocks, even as unemployment and business growth fell. This of course allowed the wealthy, with investing knowledge far beyond what normal investors have access to, to profit greatly from the free money policy that is currently driving the markets.
There is an old adage that says, if you want to be rich, do what the rich do. And today, with stock markets at all-time historical highs, the rich are quietly and efficiently selling shares in many companies, and inevitably will leave most investors holding the bag when the Fed turns off the spigot, and the markets crash far worse than they did four years ago.