Charles Hugh Smith has a post that is both entertaining and foreboding. He believes that the stock market is acting like a drug addict. He believes the market is addicted to and is high on the drug known as Quantitative Easing (QE). The drug pusher, of course, is the Federal Reserve Chairman, Ben Bernanke. Please do read the whole article. The following quote comes from near the end of Charles’ post:
The more Ben talks about eventually decreasing the injection of financial smack, the more panicky the addict becomes. The more he increases QE, the less effect it has. The Fed is backed into a corner: increasing QE has no positive effect but decreasing it unleashes a catastrophic breakdown in the stock market.
It does seem that even a hint that the Fed will soon begin tapering off on Quantitative Easing causes a negative response from the market. Maybe that is why Money News is reporting that certain billionaires are dumping stocks related to consumer goods and the financial sector. For example, Warren Buffett:
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.
And, John Paulson:
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.
And even, George Soros:
Finally, billionaire George Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.
As we say here at Asylum Watch, the player play and the payers pay. The good news is that gold is near a three-year low.
Well, that’s what I’m thinking. What are your thoughts?