Warren Buffett’s company, Berkshire Hathaway, sold $28.7 billion worth of stock in 2023. Some economists see this as a warning bell for the U.S. economy.
The company’s earnings report reveals that Warren Buffett’s firm, headquartered in Nebraska, sold $10.4 billion in stocks during Q1. It purchased fewer than $5 billion worth of shares and sold over $13 billion worth of shares during the second quarter. It made roughly $5.3 in sales during the third quarter.
Buffett is seen as a top investor and wealthy American. People closely watch and analyze his actions.
Steve H. Hanke, an economics professor at Johns Hopkins University, served on President Ronald Reagan’s economic advisory council. Hanke believes that stock prices have recently risen, and Buffett and Berkshire Hathaway have accumulated $157 billion in cash. This suggests that stocks are still expensive.”
“The U.S. money supply, which is roughly measured by [M2], began to contract in July 2022 and is falling like a rock,” Hanke said. “The U.S. money supply has fallen 3.3 percent since last year.”
Hanke claims that there have only been four times in American history. history—1920–21, 1929–33, 1937–38, and 1948–49—in which there has been a significant contraction in the money supply.
“After each of those four episodes, there was a severe recession,” he said. “The current monetary contraction will clearly lead to the same thing that monetary contractions always lead to: a recession.”
With a recession on the horizon, Hanke said Buffett’s recent moves are “classic Buffett.”
“He likes to fish in troubled waters,” Hanke said. “And with the Fed crashing the money supply to a degree we haven’t seen since 1933, Buffett is correctly anticipating that a crisis-ridden economic situation is coming. He’ll then deploy his cash hoard profitably.”
“Don’t forget that Buffett has made a killing in recent years by lending to and bailing out troubled financial institutions. And while Buffett is waiting for the coming economic turmoil and stress, he’s getting a good return on his cash hoard.”
Others who view Berkshire Hathaway’s stock sell-off as a warning about the state of the US economy are more circumspect.
David Wagner, a portfolio manager at Aptus Capital Advisors, told Newsweek that Buffett is likely to have more cash on hand because insurance costs have gone up, and “historically, Buffett has said that his company likes to keep cash on its balance sheet to cover potential insurance losses.”
“The billionaire could also be holding on to cash for optionality if there is weakness in the market,” Wagner said.
“And right now, cash is earning relatively healthy nominal returns. If the market does fall, he’ll be ready to buy when valuations are lower, like he did in 2008.”
