People tend to take notice when well-known professional investors make big trades, and they’re doing just that after the most recent filings from Berkshire Hathaway could be a sign that one of the most famous investors doesn’t have confidence in the future of the U.S. economy.
From April through June, Berkshire Hathaway – the firm run by billionaire investor Warren Buffet – sold a net of $8 billion worth of stock. This has many people believing that the American economy might not quite be bouncing back fully yet, even if inflation has begun to slow.
The second quarter earnings that Berkshire Hathaway released in early August show that the company sold almost $13 billion worth of stock shares, buying less than $5 billion in that time. Buffet’s company also only spent about $1.4 billion on buybacks, which is considered to be a small sum overall, and much lower than the $4 billion it spent on buybacks in the first quarter of this year.
Buffett – referred to as the Oracle of Omaha – is widely considered to be one of the all-time greatest investors. So, moves he makes are naturally closely analyzed and observed.
One of the main reasons why people respect what he does so much is that Berkshire Hathaway owns a vast array of companies in many different industries. In other words, the moves that the company makes in terms of buying and selling stocks are often looked at as a tell-tale sign of where the U.S. economy might be headed.
After Berkshire Hathaway sold $13.3 billion of stock during the first quarter of 2023, many investors started to become concerned about a looming recession that might come from the slumping U.S. economy.
When the company released its first quarter earnings, David Nicholas, who serves as the founder and president of Nicholas Wealth Management, commented to Newsweek:
“[Buffet] has always acted as a voice of confidence for markets during turbulent times. But, this marks a significant departure in his tone and positioning towards U.S. equities.”
Following the sales of stocks it made during the second quarter, Berkshire Hathaway extended its amount of cash by 13%, going all the way up to $147 from April through June.
Johns Hopkins University professor of applied economics Steve H. Hanke recently commented:
“When a recession is right around the corner, Buffet knows that cash is king, particularly when he can earn a decent rate of interest on it. Apparently, Buffet anticipates that the U.S. economy is headed for troubled waters. I think he is correct.
“The money supply is fuel for the economy, and it has been contracting over the last year. Now, the rate of contraction is -3.6% per year, something we have not seen since 1938. Following significant changes in the money supply, the economy changes course with a lag of six to 18 months. At present, the economy is running on fumes and a 2024 recession is inevitable.”
