In this year’s second-quarter earnings, Warren Buffett’s Berkshire Hathaway Inc. revealed it had divested $8 billion in stocks.
Immediately, financial news reporters with their fingers on the market’s pulse began wondering what was up. Was this a hedge against an impending recession or possibly the precursor to a market nosedive?
Steve Hanke, a prominent economist and academic at Johns Hopkins University in Baltimore, weighed in on the financial maneuver to Business Insider. He pointed out that the Berkshire move is in line with preparing for an economic downturn, given the premium valuation of stocks.
“Buffett has a storied history of amassing reserves when economic storm clouds gather, ready to snag opportunities when the tempest strikes,” Hanke said.
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Kevin O’Leary Chimes In On The Buffett Move
Not every market savant interprets Buffett’s strategy as an omen of looming market turbulence.
Canadian businessman and “Shark Tank” TV personality Kevin O’Leary discerns potential challenges for the U.S. fiscal landscape. He credits this more to a potential surge in interest rates than Buffett’s significant stock offloading.
Downplaying the magnitude of Buffett’s sale, O’Leary quipped on X, previously known as Twitter, “Warren Buffett offloading $8 billion in stocks? That’s merely a tweak in his vast portfolio.”
O’Leary believes the move is less about foreseeing a market downturn and more about maintaining portfolio diversity. O’Leary further illuminated his stance on Fox News, saying, “In the grand scheme, $8 billion is nominal. Perhaps this is just one of his new team members fine-tuning a portfolio.”
O’Leary Foresees An Economic Roller Coaster
While the Federal Reserve remains noncommittal about prospective interest rate hikes this year, O’Leary projects a tumultuous period for the American economy.
He noted to Fox’s Larry Kudlow, “Given our sustained full employment, coupled with the lack of capital funneled into the pivotal small business sector (accounting for 60% of U.S. jobs), the latter part of the year could be marked by economic upheavals,” he told Fox Business’s Larry Kudlow.
O’Leary’s emphasis was clear: Major corporations might be enjoying their trillions, but the real backbone of the U.S. — small businesses — are being left out in the cold. O’Leary has invested heavily into small businesses over his decades as an investor. Most notably, the Shark Tank investor owns a sizeable stake in StartEngine, a retail startup investing site that has helped small businesses across the country raise hundreds of millions.
In wrapping up the financial quarter, apart from Berkshire’s $8 billion stock sale, the conglomerate showed a reduction in buybacks, settling at $1.4 billion — a drop from the previous $4 billion. Their liquidity swelled by 13%, bringing their cash reserves to an almost record-breaking $147 billion, according to Business Insider.
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This article Kevin O’Leary Has Strong Thoughts About Warren Buffett’s $8 Billion Stock Sale originally appeared on Benzinga.com
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Source: finance.yahoo.com