After the massive crash that rocked global markets in 2008, as Congress, central bankers and major financial institutions met in secret to mitigate the crisis, billionaires like Warren Buffet were buying up shares of some of the hardest hit companies.
At the time, the world was literally on the brink of an unprecedented economic collapse. It was so serious, in fact, that members of Congress were told that should they fail to come to an agreement the fallout would leave the United States in such a state of disarray that martial law would be declared and tanks would be deployed to major American cities.
In the midst of it all, as if they had a private pipeline into the bailout meetings, the big boys were positioning themselves to profit. And profit they did, as the stock market rose from 6500 points in late 2008 to record highs as recently as last month. They made billions of dollars on the backs of bailouts funded by taxpayers who were themselves struggling to pay their mortgages and put food on the table.
They knew then what their friends at the Federal Reserve, Treasury and investment banks were planning to do. And they took the opportunity to make a killing.
Now, with the stock market indicating to the masses that the promised recovery has taken hold, and with mainstream analysts arguing that happy days are here again, those same moguls of finance who were undoubtedly tipped off in 2008, are making some very big moves yet again.
But these particular moves are exactly the opposite of what you might expect given that we’re at the beginning of a supposed recovery:
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 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.
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.
So why are these billionaires dumping their shares of U.S. companies?
The simple answer is… they know.
They know that this market has been propped up by trillion dollar infusions from the Federal Reserve.
They know that Americans have lost 55% of their wealth since this crisis started.
They know nearly 25% of Americans are out of work (as opposed to the official 7.5% figures from the BLS) and that no meaningful jobs are being created.
They know that the economic growth rates being disseminated to the people are completely bogus because they fail to account for the inflationary impact of the Fed’s monetary expansion.
They know this is wholly unsustainable, and they are getting out of Dodge before the next phase of this crisis takes hold and hammers the world yet again.
Ben Bernanke’s magic show will soon come to an end, and all of his tricks will be exposed for the statistical illusions they really are.
Billionaires know this and they are preparing for the inevitable. The government, likewise, is preparing for financial collapse and the potential for widespread violence that will follow.
You should be doing the same.