Billionaires Dump Equity Holdings, Time to Panic?

Over the past weeks, many economists have been predicting dire situations playing out for the U.S. economy. With a third round of open-ended easing announced, many fear that the long term ramifications of such an intense program will be catastrophic for stocks. Some, like Jim Rogers, have called for a recession to hit next year and deepen in 2014, while others believe that we are already in a recession. Analysis and commentary is all fine and dandy, but anyone of these esteemed investors can say anything they want; it’s the moves they make that you want to pay close attention to [for more economic news and analysis subscribe to our free newsletter].

The past few months have seen a rather worrisome trend among the nation’s most prosperous and well-known investors, as a number of them have abandoned a fair amount of equity positions. Starting with Warren Buffet, the Oracle of Omaha has been reducing positions that rely on consumer spending. This is an especially bad sign given that consumer spending is one of the first things to take a hit during times of economic uncertainty. Buffett’s Berkshire “reduced his overall stake in ‘consumer product stocks’ by 21%” writes Newsmax Wires.

But the trend does not end there. Next up we have John Paulson, the man who amassed quite a fortune after correctly betting on the subprime mortgage crisis that put us in the recession in the first place. Paulson dumped a whopping 14 million shares of JP Morgan Chase while completely exiting both Sara Lee and Family Dollar. A general distrust for banks is understandable, but a 14 million share decrease clearly points to a man who feels that the financial sector is headed for a pinch. Finally we have George “the man who broke the Bank of England” Soros who sold more than a million shares of banking/financial stocks, following the anti-financial trend [see also Peter Schiff: The Only Way To Fix The Economy Is To Let It Fail].

With three different rock star investors of three very different investment styles all making the same moves, there may be something to these massive position shifts. We already know that Paulson and Soros have been doubling down on gold, so does the exit from standard equities and financials put the icing on the “impending doom” cake? This, of course, could just be a coincidence, but you would be hard pressed to find many people willing to be against these investing juggernauts. A future recession may just be the invention of paranoid analysts, but investors should tread with caution in light of this news.

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Disclosure: No positions at time of writing.

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