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Warren Buffett’s Berkshire Hathaway dumped $8 billion in stocks last quarter, stoking fears that the legendary investor sees trouble ahead for the U.S. economy.
The Omaha-based conglomerate sold nearly $13 billion in shares between April and June but bought less than $5 billion, according to second quarter earnings. Berkshire spent just $1.4 billion on buybacks, a modest amount compared to $4 billion in Q1.
Buffett’s trades are closely watched for clues about market sentiment. Nicknamed the “Oracle of Omaha,” he is renowned for his investing acumen and long track record of success.
“Buffett has always been a voice of confidence during turbulent times,” said David Nicholas, president of Nicholas Wealth Management. “But this marks a significant change in his outlook on U.S. equities.”
The sales beefed up Berkshire’s cash stockpile by 13% last quarter, bringing it to a whopping $147 billion.
“When a recession looms, Buffett knows cash is king when it earns decent interest,” said Steve H. Hanke, professor of applied economics at Johns Hopkins University and former Reagan advisor.
“The money supply is fuel for the economy and it’s been contracting. Following major money supply shifts, the economy changes course in 6–18 months. The economy now runs on fumes and a 2024 recession looks inevitable,” Hanke said.
Other experts share Buffett’s dim view. “He’s on the sidelines with $147 billion in Treasurys,” said entrepreneur Robert Kiyosaki. “Michael Burry of ‘The Big Short’ is shorting the market now.”
“I just watch these guys waiting for the crash to go back in,” Kiyosaki told Fox Business.
However, some are more optimistic, citing signs of resilience. The chance of a 2023 recession has fallen to 1 in 3, per Moody’s chief economist Mark Zandi. JPMorgan no longer expects a downturn this year as growth continues at a “healthy pace.”
“We doubt the economy will quickly lose momentum and slip into contraction soon, as we had projected,” wrote JPMorgan economist Michael Feroli.
So what does the Oracle see that others don’t? In May, Nicholas cited “the three big risks” for Buffett as China, U.S. banking, and commercial real estate.
“Any one would derail growth, yet we’re dealing with all three simultaneously,” he said.
China’s economy is spiraling while indicators of U.S. slowdown persist despite some progress on inflation and jobs. And banks face uncertainty after Silicon Valley Bank’s collapse.
Buffett’s Big Stock Sale: Key Takeaways
- Berkshire Hathaway dumped $8 billion in stocks last quarter, raising recession fears.
- Legendary investor Warren Buffett’s moves are seen as a barometer of market sentiment.
- His massive cash positions suggest he is bracing for economic turbulence ahead.
- Some economists dispute recession forecasts, citing signs of resilience.
- But risks remain, including China, U.S. banks, commercial real estate.
- Buffett’s defensive stance signals he sees challenges in the near future.
Will the Oracle’s Warnings Come True?
While differing views remain on the economy’s trajectory, Buffett’s reputation for prescience gives investors pause. His growing cash hoard implies he anticipates headwinds.
According to Yale finance professor Roger Ibbotson, Buffett even topped the S&P 500 during the Great Depression. If anyone can steer through coming storms, it’s the Oracle of Omaha.
But prudent investors should hope for the best while preparing for the worst. Though forecasts vary, risks lurk. Building savings, trimming debt and diversifying portfolios can help weather turbulence.
Buffett’s wisdom: “Be fearful when others are greedy and greedy when others are fearful.”
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