Warren Buffett Selling $8 Billion Worth of Stock Raises Economy Crash Fears

Warren Buffett’s firm Berkshire Hathaway sold a net $8 billion of stock between April and June in a move that suggests the U.S. economy is not out of the doldrums yet, despite consistently slower inflation.

According to Berkshire Hathaway’s second-quarter earnings, released earlier this month, the company sold close to $13 billion worth of shares and bought less than $5 billion. The Nebraska-based investor’s company spent only $1.4 billion in buybacks—a modest sum for the stock market and much less than the $4 billion it spent in the first quarter.

As Buffett is considered one of the greatest investors of all time and something of an oracle when it comes to the financial market, his moves and decisions are closely observed and analyzed.

The fact that his company also owns a vast array of businesses in many different industries makes Berkshire Hathaway’s moves something of a tell-tale sign for the entire U.S. economy for some investors.

When Buffett’s company dumped $13.3 billion worth of stocks in the first quarter, investors were concerned that the slowing U.S. economy was eventually heading towards a recession.

Buffett “has always acted as a voice of confidence for markets during turbulent times,” David Nicholas, president and founder of Nicholas Wealth Management, previously told Newsweek, commenting on Berkshire Hathaway’s first-quarter stock sales. “But this marks a significant departure in his tone and positioning towards U.S. equities.”

As a result of its stock sales in the second quarter, Berkshire Hathaway fattened its cash pile by 13 percent to reach $147 billion between April and June.

“When a recession is right around the corner, Buffett knows that cash is king, particularly when he can earn a decent rate of interest on it,” Steve H. Hanke, a professor of applied economics at Johns Hopkins University, previously told Newsweek.

“Apparently, Buffett anticipates that the U.S. economy is headed for troubled waters. I think he is correct,” Hanke, who served on President Ronald Reagan’s Council of Economic Advisers, told Newsweek on Wednesday.

“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%/yr., something we have not seen since 1938. Following significant changes in the money supply, the economy changes course with a lag of 6-18 months. At present, the economy is running on fumes and a 2024 recession is inevitable.”

Those concerns have been echoed elsewhere.

“Buffett is on the sideline with $147 billion, his money’s in short-term Treasurys,” entrepreneur Robert Kiyosaki, author of Rich Dad Poor Dad, told Fox Business’ Cavuto: Coast to Coast show on Tuesday. “Michael Burry of The Big Short, he’s shorting the market right now.”

“I just watch these guys waiting for the market to crash then go back in,” Kiyosaki added.

However, the likelihood of a recession in 2023 has been slowly decreasing in recent weeks, with Moody’s Analytics chief economist Mark Zandi giving it a one in three chance, as he told CNN. Earlier this month, JPMorgan declared that it is no longer expecting a recession this year as the economy expands at a “healthy pace.”

“Given this growth, we doubt the economy will quickly lose enough momentum to slip into a mild contraction as early as next quarter, as we had previously projected,” JPMorgan economist Michael Feroli wrote.

So what could Buffett see threatening the U.S. economy that others don’t?

In May, Nicholas told Newsweek that “the three big risks for Buffett were China, the U.S. banking sector and commercial real estate. These are very real risks for economic growth and just one would be enough to derail growth, yet we are dealing with all three at the same time.”

These three risks remain very much present, with China’s economy going into a tailspin and, concerning U.S. as well as local investors, a U.S. economy that keeps slowing down despite progress on some fronts—like inflation. American banks are also not completely in the clear after the turbulence caused by the collapse of Silicon Valley Bank earlier this year.

Update, 08/17/2023, 8:40 a.m. ET: This article was updated with comments from Robert Kiyosaki.