It has been just revealed that the famous Warren Buffett is selling $28.8 billion in stock these days. The fact is definitely a warning sign for the economy, according to expert opinions. Check out the latest reports about this below.
Economy warning revealed
Berkshire Hathaway, owned by the legendary investor and billionaire Warren Buffett, sold stocks worth $28.7 billion in the first three quarters of 2023. This move is widely interpreted by economists as a warning sign for the American economy.
The company’s earnings report reveals that it sold a net worth of $10.4 billion of stock in the first quarter of the year and close to $13 billion of shares in the second quarter, while buying less than $5 billion. In the third quarter, it sold about $5.3 billion worth of stocks.
Given Buffett’s stature as one of the greatest investors of all time and one of America’s richest men, his moves are being closely watched and analyzed.
Professor Steve H. Hanke, an applied economics expert at Johns Hopkins University and former member of President Ronald Reagan’s Council of Economic Advisers, believes that Berkshire Hathaway’s recent move to sell off stocks and accumulate a massive cash reserve of $157 billion is a clear indication that the stock market is currently overpriced.
However, more importantly, it’s also a sign that a recession may be imminent.
Hanke pointed out that the US money supply, when measured broadly (M2), has been shrinking since July 2022, and has been declining at a rapid pace. According to Hanke, the US money supply has contracted by 3.3% since last year.
Hanke identified only four significant periods in US history when the money supply contracted: 1920-21, 1929-33, 1937-38, and 1948-49.
“Each of those four episodes was followed by a serious recession,” he said.
“The current monetary contraction is clearly going to lead to precisely what monetary contractions always lead to: a recession.”
“He loves to fish in troubled waters,” Hanke said.
“And with the Fed putting the money supply in a nosedive the likes that we haven’t seen since 1933, Buffett is correctly anticipating that troubled economic waters are in the offing. He will then profitably deploy his cash hoard.
“Don’t forget that Buffett has made big bucks over the years by lending to and rescuing distressed financial institutions. And while Buffett waits for the coming economic dislocations and stresses, he is receiving a decent return on his cash hoard.”
