As Dow soars, billionaires are dumping stocks

[aristocles]

Last edited Wed Mar 6, 2013, 02:16 PM - Edit history (2)

Link: http://investmentwatchblog.com/market-collapse-in-process-billionaires-continue-to-dump-u-s-stocks-traders-are-betting-against-u-s-economy/

Dateline, February 16, 2013, Investment Watch Blog:

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
….
No investors, let alone billionaires, will want to own stocks with falling profit margins and shrinking dividends. So if that’s why Buffett, Paulson, and Soros are dumping stocks, they have decided to cash out early and leave Main Street investors holding the bag.

See also:

http://www.examiner.com/article/high-profile-billionaires-dump-us-stocks-as-obama-resists-budget-cuts

http://caps.fool.com/Blogs/someone-is-lieing-how-can/802109

[thelordofhell]

1. Sell High

Honestly, if you have your 401k tied to stocks..........get out now.......learn the lesson of the last market crash and stop gambling with your retirement.

[jsr]

2. Yep, they're cashing out big time

[yourout]

3. The reason is simple......real disposable income for the vast majority of the worker bees has....

not improved at all. In most cases it continues to slide downwards do to increasing prices for food, gas, housing, etc.

And while they will never admit it the Wall Street folks know full well that the only truly sustainable economic progress requires a vibrant and economically progressive lower and middle classes.

[magical thyme]

4. Link please? nt

[dipsydoodle]

6. Random link here

http://www.moneynews.com/MKTNews/billionaires-dump-economist-stock/2012/08/29/id/450265?PROMO_CODE=110D8-1&utm_source=taboola

[R. Daneel Olivaw]

12. ...

Newsmax?

[onenote]

19. Typical Newsmax BS

From the article, you would think (and a number of posters clearly have been misled into doing so) that Buffett and Paulson just recently ran out and dumped a bunch of their stock holdings. In fact, the information about Paulson and Buffett selling off various stocks relates to transactions that occurred in the second quarter of 2012 -- almost a year ago. The second quarter of 2012 was something of a bit of a bump in the rally -- stocks for that quarter were down a couple of percent from the first quarter of the year. And its not as if Buffett was exiting the market completely. He was shifting investments -- selling Intel buying IBM

Plus, as noted above, more recent activity by Buffett shows confidence in the economy, such as his purchase of HJ Heinz.

There's a reason why anything reported by NewsMax should be viewed skeptically.

[Cirque du So-What]

5. In case the general public hasn't yet realized this

for wealthy insiders, the stock market is nothing more than a pump for extracting wealth from the economy. They will make money whether the stock market rises or falls, and the only way a layperson can make money is by sheer luck. I haven't kept up with the message currently trumpeted in the corporate media, but I have a feeling they're saying, 'BUY! BUY!'

[Loudly]

20. The media don't need to say Buy. All they need to say is

the Dow has reached a new high. That's like the Nth rollover of a powerball jackpot in its excitement of late entrants.

[dmallind]

22. What can they do that you cannot on a smaller scale?

JNJ is up notably since Buffett sold, and you can buy and sell to your heart's content for $2.50 a trade. Your "luck" can be the same as Buffett's if you can pick them as well. You will buy a few shares wher he will buy a few million, but your percentage gains or losses will be identical.

About the only real answer to my question is that insiders get a shot at restricted IPOs before the rest of us. Irrelevant to the stocks or strategies mentioned though.

I've gained on the last 81 trades I've made (real gains - you only get money when you sell). I'm certainly a layman in trading terms and my research doesn't go beyond MSN Money and SEC filings, so I'm far from an insider too. Luck doesn't hit 81 times in a row (and by the way that's my whole history since I started keeping a log, not since the last loss which was a $2k delisting in IIRC 2003). Nor does it take exceptional skill or business acumen really. I have four very simple rules, and I'm not even hawking for money - here they are free and in toto:

1) Don't buy a company that isn't profitable, and prefer ones with long-standing dividends
2) Don't buy at or very near 52 week high
3) Buy after a 3+% drop especially on transient news like disappointing results, FDA findings, etc
4) Sell as soon as they are up 2%, rinse and repeat

You can certainly make more gains than I do by knowing more or taking more risk, but I'm up well over 10% - real money not paper gains - in 2013 alone, after more than 33% in 2012, just by being that steady and simple. No inside knowledge or major wealth needed. Could I lose money? Obviously, but only if a stock is eventually delisted and has no dividend. The only time I'll sell for a loss is if I'm facing bankruptcy/eviction so never happened yet. I've held stocks for 6 months before I could sell them in the past. The oldest I have now was bought in mid Jan and I'm "down" 4-5%, but just like you don't gain until you sell, you don't lose either. On average I'm selling about 12 days after buying. If that stock never gains back I'll just take the 2.4% dividend it pays - far better than a savings account - in perpetuity (a chance to point fingers if you want to keep track - my bad boy right now is COH bought at 51.50). No biggy. ANYBODY with more than say $1000 to invest can make money on stocks, and that limit is only to cover the trading fees with a reasonable % gain

[dmallind]

25. And another bad boy reformed

just sold at 52.51. Picked up a .58% dividend too for a total NET of fees gain of 2.4%.

This is one of my poor if not quite worst case events - it took about 10.5 weeks to gain that. Bit better than mattresses or savings accounts though to say the least (about 12% a year even if they all take that long!) and again takes almost no financial acumen and simple widely known websites. No calculus, no algebra, no inside man. Again I absolutely admit it's possible to lose doing this, but only if I am unlucky enough to buy a stock that falls at a greater rate than its dividend and never, ever, recovers. So far that's been 10 yrs. Why am I not a billionaire? because I don't have enough to generate huge returns in raw dollars, and am too risk averse/sensible to borrow it. But my percentage returns are beyond the wildest dreams of those who are scared of the stock market, and these gains have bought my last few new cars.

I'll put my money where my mouth is again. My current losers are JBL Jabil Circuit bought 3/21 at 18.55 and losing me 2% right now, and WFM Whole Foods bought 2/14 at 88.52 and currently down about 1+%. Anybody can look good claiming winners when there is no proof they picked them in advance. I'm telling you where I'm losing (on paper - again no losses till sold) right now. If you think the stock market is only for insiders, tell me again when these have sold at 2% up and tell me how my rules are so arcane and difficult for amateurs, especially as I very much am one.

[Nye Bevan]

7. Makes a lot more sense than dumping stocks in a panic in 2009 with the Dow at 7000.

There is a reason these folk are billionaires.

[zbdent]

18. Dumping stocks (not all) at a low does make some sense when you consider

(DRIPs) that some stocks were "purchased" when the dividend re-invested when the stocks were still priced high.

That way, without selling too many, you could actually claim a "loss" on the taxes. Say you bought a bunch of stocks at $10. Over the years, it rises to $100. Re-investing the dividends at, say, $90 a share. Stocks go down to $65. You sell the stock you "bought" at $90, report the loss on your taxes.

[marybourg]

8. If you're a billionaire you don't need the volatility

and risk of stock. You already have more than you need. Most regular investors lessen their stock holdings as they age, One popular formula is to hold 100 minus your age as your percentage of stock. So-75 years old: only 25% of your holdings should be stock. Don't let the sour grapes fear mongers or the say anything media dissuade you from regularly investing during your working years; it's the only way to a comfortable retirement. I know.

[Initech]

9. You know what would be divine justice? If Occupy started buying up every available stock.

[Arctic Dave]

10. Pump and Dump.

Not a suprise at all.

[avaistheone1]

28. ^5

Me either.

Most of this market for the last couple years has been churn between the big brokerages, banks and investment houses.

[Baitball Blogger]

11. Was this another bubble?

[onenote]

13. Didn't Buffett just buy Heinz? And he "dumped" Intel last year.

It always pays to look behind the big scary headline. Buffett trimmed his holdings in Intel, Kraft, J&J in the second quarter of 2012 -- yes, almost a year ago. At the same time he was doing that, he was buying into other companies, such as IBM. Out of Intel and into IBM -- how exactly does that signal anything about consumer spending?

And he just bought Heinz.

As posted above, this is a BS NewsMax story.

[OldDem2012]

14. That should be a MAJOR red flag for investors who are not in the Top 1%...run, don't walk! nt.

[geek tragedy]

16. The market is outperforming the real economy.

So, yeah, one would figure this can't last.

[WhaTHellsgoingonhere]

17. you've been watching too much Rachel...

In fact, you need to and quotation marks since you're stealing her line. She's been the biggest Dow cheerleader on the left. And I think she finally got the message this week that she's been behaving irresponsibly. I'm sure you caught Joseph Stiglitz last night...

[HCE SuiGeneris]

21. Crap post without a credible link (source). n/t

[onenote]

23. Yep: the two worst sources for investment advice

Newsmax. And DUers who believe Newsmax.

[bvar22]

24. WOW. I better get busy and dump a few $Billion.

[no_hypocrisy]

26. Where they putting their money then? Private prisons and/or debtors prisons?

[Warpy]

27. I'm wondering exactly where that money is going

because I'm not seeing many spikes out there that would indicate large sums of cash being moved from one investment instrument to another.

Surely they have to realize that Asian stocks are shaky as hell and that China is teetering on the brink of a crash led by hyperinflated housing. European stocks aren't much better, the healthy countries saddled with bailing out the weaker ones.

American treasury bills aren't even that safe a bet since the GOP is talking openly on defaulting on those held by the American people as IOUs for all that stolen Social Security money from 1986-2010.

However, that there's a rush out of poorly performing US stocks is not the stuff of mystery. Retail stocks have all been doing badly and the ripple effect is starting to hit manufacturing. Financial institutions have been a bad bet since 2007.

I just haven't seen where the money is going unless it's being stashed in tax havens in numbered accounts. I have to doubt that anything but retail stocks are being dumped right now and they'd be dumped even without a high market causing widespread panic among the plutocracy.

I honestly don't think that writer knows what he's talking about.