Market collapse in process? Billionaires continue to dump U.S. stocks, traders are betting against U.S. economy

Billionaires Dumping Stocks, Economist Knows Why
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.

...

Google Inc Executive Chairman Eric Schmidt is selling roughly 42 percent of his stake in the Internet search

Google Inc. chairman Eric Schmidt plans to sell up to $2.51 billion of his share in the company, according to a Securities and Exchange Commission filing late Friday.

Venezuela devalued its currency, the bolivar, the country's Finance Minister Jorge Giordani said Friday. President Hugo Chavez ordered the move from Cuba, the minister said.

Could these be the signs of the upcoming market collapse people have been talking about? I don't know, but things could start to get interesting.

An ominous contemporary warning

Something happened this week that brings back haunting memories of the 2001 put options of airline stocks, except this "bet" is against the entire U.S. economy. This week, an anonymous trader bought 100,000 put options on the ETF, which is an acronym for an exchange-traded fund. One commonly traded ETF is XLF, which, in the most unscientific and basic terms, is a group of funds that is like a barometer for the stock market.

Now, such trades involving ETF-XLF are common, except when the put options (bets that the value of an asset is going to go down) are so large and so significant that they scream of insider knowledge with big flashing lights and arrows. This is one of those. In this case, it is a bet against the stock market, although this is admittedly a rather oversimplified explanation - but you get the idea.

According to professionals who watch this activity for a living, normal single trades involve maybe 500 contracts at most. That's why certain professionals took notice of an order this week of 100,000 put options, or 200 times the high trade volume of 500. It become even more curious when one considers that the trader is "betting" that the market will take a significant hit by the end of April. (The put options are dated for April 20 and 25, 2013, right around Hitler's birthday, for those of you who follow things like that.

High-Level Executives Suddenly Dumping JP Morgan Stock En-Masse

Over the last week and a half, high level JP Morgan executives have dumped over $6 million in shares in what experts have described as 'unusual activity'.

Anyone believe JPM's October 12th earnings report which beat expectations? Looks like accounting BS engineered to dump legacy positions on the general public.

A chorus of high-level executives inside JPMorgan (JPM) are selling down their stakes in the company, in what some experts are citing as "unusual" activity within the nation's largest bank by deposits.

CNBC reports that JPM execs have dumped $6 million in the past 10 days!

Reader Comments

Honda · 2013-02-11T14:54:21Z

Well,

let's just wait and see. However I suggest you don't panic yet.

Ruth · 2013-02-11T17:07:33Z

It's all looking kind of inevitable. Which is unfortunate as it suggests there is actually no way out - for anybody except the rich.

gdpetti · 2013-02-12T12:47:40Z

But money only goes so far.

Money can't buy your letter into Hogwarts, but it is a great means of control and distraction until the new term begins. The entire game is based in lies which have a shelf life before any further telling of them becomes ridiculously useless, thus the apparent need for the usual end-game scenario of crashing the market, either fast or slow, as the
devaluation game begins to the advantage of the few which will no doubt
lead to the usual 'bank holiday' that the infamous Jon Corzine of MF Global fame helped the new to office in Jan '09 Obama regime help plan out after that weekend 'run on the bank' in late '08.

Need one mention the chart of the money velocity? Worst than the Depression? Throwing money at your friends/patrons on Wall Street doesn't help the economy any does it? Seems our current slip back into recession shows that, same as in the '30s, my, and doesn't history just repeat itself? Guess Homeland Defense will have a use for all those billions of hollow point bullets after the squeeze is put on the little people and they start to complain about all that 'cake'. Now Wall Street billionaires are planning to take away the icing as usual, which means 2 to 3 months after they exit the gambling table, the game goes 'belly up'. Should be interesting to watch.

Tukaluk · 2013-02-12T19:31:15Z

It is so exciting!

President Obama, will not be run by people like Warren Buffett. Buffett will soon learn a hard but a well deserved lesson. When he is unable to find the right mix to stash his loot into, he will panic and flee to the hills crying "mountians fall on me". Way to late richman, you had your opportunity to do the right thing and you blew it. You are a good man President Obama; keep the faith.

Niall · 2013-02-13T04:40:12Z

Obama and Buffett are on the same team: [Link]

Amazed by the Lunacy · 2013-02-14T09:44:54Z

Exciting is not quite the word I would use Tuk. You might want to ask some of the innocent civilians in Afghanistan, Pakistan, Mali, and Iraq what they think about the "good man".

Snowalker · 2013-02-13T08:45:45Z

Gaming the Game

Taking the two large bets - one a put on the Financil ETF and the other a call on the VIX - I would not consider these defacto proof of impending collapse of the DOW or the economy in general. The level of control by the elite over the prices of these two indices not to mention the market as a whole is overwhelming. The current trading volume of the DOW should make that clear.

What I think may be afoot is a meme in the form of these large bets to get the investing public and blogosphere repeating this message. The market will then be dropped just enough for the bets to bear fruit and then the manipulators will ease prices back up cutting the rug out from under the doom sayers all the while sucking more wealth from the system.

Honda · 2013-02-13T13:10:06Z

That's what I just about thought too.

Rabelais · 2013-02-14T08:05:30Z

Buffett

As Niall said above, Buffett is a team player. Why else would he noisily buy up a huge tranche Goldman Sachs shares as the to-big-to-fail banks teetered on the edge before the 2008 quantitative easing bailed out the major banks' toxic derivatives paper? It was a PR move to keep the investment sheep from fleeing the casino en masse. That the financial media is now trumpeting an imminent collapse tends to make me think that we are being asked to look in the wrong direction, again. A classic head fake which Wall Street and the media are so good at. Buffett was at one time a bellweather indicator of market trends. Today he plays insider sock puppet to be allowed to keep his fortune. For the past few years his investment advice has been deplorable.

gdpetti · 2013-02-14T11:30:19Z

Oops, forgot to mention that Heinz is a food company, and with inflation concerns worldwide starting to show up in depressed economies, that alone should provide some food for thought.

gdpetti · 2013-02-14T11:29:12Z

Yes... but.

If you watch the so-called 'business news', the marketing is on what Buffet buys, not sells.... as the buyout of Heinz today well illustrates. Typical con game of getting you to focus on one hand and ignoring the other... which is doing the damage.

farang · 2013-02-15T03:47:27Z

Ooops! Bad Timing....

" 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%."

Oh yeah? So that is why he and an investment company just bought (50/50 stake) Heinz for $25 Billion? Because he is reducing his stake in "consumer product stocks?"

Bet someone feels silly today....like the author of this article.

Not to say this financial house-of-cards isn't going to crumble under the lack of regulation and Fraud and money printing: it will. Count on it like you count on the sun rising in the east.

I wonder if the boys that have sex with their teachers get Straight A's? as a reward.

Kimster

"Parsi also claims to have heard from a Western-friendly "senior Global South diplomat" that "whatever agonizing claim the US had to lead a...

ReRan

Their spelling is wrong. Shouldn't it be attack'ems ?

Needless, wanton violence. So sad.

Depopulation agenda is well under way....less stupid humans might be better.

Gator

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Market collapse in process? Billionaires continue to dump U.S. stocks, traders are betting against U.S. economy

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