Billionaires Dumping Stocks, Economist Knows Why
Wednesday, 06 Feb 2013 01:59 PM
By Newsmax Wires
Despite the 6.5% stock market rally over the last threemonths, a handful of billionaires are quietly dumping their American stocks . .. and fast.
Warren Buffett, who has been a cheerleader for U.S. stocksfor quite some time, is dumping shares at an alarming rate. He recentlycomplained of “disappointing performance” in dyed-in-the-wool Americancompanies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.
In the latest filing for Buffett’s holding company BerkshireHathaway, Buffett has been drastically reducing his exposure to stocks thatdepend on consumer purchasing habits. Berkshire sold roughly 19 million sharesof Johnson & Johnson, and reduced his overall stake in “consumer productstocks” by 21%. Berkshire Hathaway also sold its entire stake inCalifornia-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 isworrisome.
Unfortunately Buffett isn’t alone.
Fellow billionaire John Paulson, who made a fortune bettingon the subprime mortgage meltdown, is clearing out of U.S. stocks too. Duringthe second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped14 million shares of JPMorgan Chase. The fund also dumped its entire positionin discount retailer Family Dollar and consumer-goods maker Sara Lee.
Finally, billionaire George Soros recently sold nearly allof his bank stocks, including shares of JPMorgan Chase, Citigroup, and GoldmanSachs. 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 itshistoric rally. Real estate prices have finally leveled off, and for the firsttime in five years are actually rising in many locations. And the unemploymentrate seems to have stabilized.
It’s very likely that these professional investors are awareof specific research that points toward a massive market correction, as much as90%.
One such person publishing this research is Robert Wiedemer,an esteemed economist and author of the New York Times best-selling bookAftershock.
Editor’s Note: Wiedemer Gives Proof for His Dire Predictionsin This Shocking Interview.
Before you dismiss the possibility of a 90% drop in thestock market as unrealistic, consider Wiedemer’s credentials.
In 2006, Wiedemer and a team of economists accuratelypredicted the collapse of the U.S. housing market, equity markets, and consumerspending that almost sank the United States. They published their research inthe book America’s Bubble Economy.
The book quickly grabbed headlines for its accuracy inpredicting what many thought would never happen, and quickly establishedWiedemer as a trusted voice.
A columnist at Dow Jones said the book was “one of thoserare finds that not only predicted the subprime credit meltdown well inadvance, it offered Main Street investors a winning strategy that helped avoidthe forty percent losses that followed . . .”
The chief investment strategist at Standard & Poor’ssaid that Wiedemer’s track record “demands our attention.”
And finally, the former CFO of Goldman Sachs said Wiedemer’s“prescience in (his) first book lends credence to the new warnings. This bookdeserves our attention.”
In the interview for his latest blockbuster Aftershock,Wiedemer says the 90% drop in the stock market is “a worst-case scenario,” andthe host quickly challenged this claim.
Wiedemer calmly laid out a clear explanation of why a largedrop of some sort is a virtual certainty.
It starts with the reckless strategy of the Federal Reserveto print a massive amount of money out of thin air in an attempt to stimulatethe economy.
“These funds haven’t made it into the markets and theeconomy yet. But it is a mathematical certainty that once the dam breaks, andthis money passes through the reserves and hits the markets, inflation willsurge,” said Wiedemer.
“Once you hit 10% inflation, 10-year Treasury bonds loseabout half their value. And by 20%, any value is all but gone. Interest rateswill increase dramatically at this point, and that will cause real estatevalues to collapse. And the stock market will collapse as a consequence ofthese other problems.”
See the Proof: Get the Full Interview by Clicking Here Now.
And this is where Wiedemer explains why Buffett, Paulson,and Soros could be dumping U.S. stocks:
“Companies will be spending more money on borrowing coststhan business expansion costs. That means lower profit margins, lowerdividends, and less hiring. Plus, more layoffs.”
No investors, let alone billionaires, will want to ownstocks with falling profit margins and shrinking dividends. So if that’s whyBuffett, Paulson, and Soros are dumping stocks, they have decided to cash outearly and leave Main Street investors holding the bag.
But Main Street investors don’t have to see their investmentand retirement accounts decimated for the second time in five years.
Wiedemer’s video interview also contains a comprehensiveblueprint for economic survival that’s really commanding global attention.
Now viewed over 40 million times, it was initially screenedfor a relatively small, private audience. But the overwhelming amount offeedback from viewers who felt the interview should be widely publicized camewith consequences, as various online networks repeatedly shut it down andaffiliates refused to house the content.