JimBowie1958
Old Fogey
- Sep 25, 2011
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Billionaires Dumping Stocks, Economist Knows Why
The Bearish Call to End All Bearish Calls - MoneyBeat - WSJ
What happens when you turn off the money spicket that has been inflating the stock markets since 2008?
A crash. When will it happen? Anybody's guess is as good as the next, since markets can stay irrational longer than most of us can wait it out.
Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast.
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 Buffetts 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, Buffetts apparent lack of faith in these companies future prospects is worrisome.
Unfortunately Buffett isnt 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, Paulsons 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 why are these billionaires dumping their shares of U.S. companies?
The Bearish Call to End All Bearish Calls - MoneyBeat - WSJ
In what may be the bearish call to end all bearish calls, one technician believes 2014 will be the year of major reversals, with the Dow Jones Industrial Average expected to start a two-year decline that could eventually take it down more than 70% to below 5000.
United-ICAP chief market technician Walter Zimmerman said the Dow Industrials could still rally another 4% or so first, to a high around 17150, before the great reversal begins. And for those who thought 2008 was the worst bear market they will ever see, just wait.
Based on our longer-term time cycles the present stock market rally must be considered the bubble to end all bubbles, Mr. Zimmerman wrote in a note to clients.
He doesnt believe the Dow Industrials will hit a long-term cycle low until 2016, somewhere in the 5770 to 4650 range. The Dow hasnt seen those levels, which are 65% to 72% below current prices, since late-1995 to mid-1996
What happens when you turn off the money spicket that has been inflating the stock markets since 2008?
A crash. When will it happen? Anybody's guess is as good as the next, since markets can stay irrational longer than most of us can wait it out.