An SEC filing on Tuesday detailing Berkshire’s portfolio at the close of the second quarter revealed significant cuts to holdings in Johnson & Johnson, Procter & Gamble and Kraft Foods, all stalwarts of Warren Buffett’s portfolio.
Maybe that’s got something to do with the changing of the management guard at Berkshire as Warren eases out…after all, he’s no spring chicken anymore (was he ever?). But the reductions were big. J&J, P&G and Kraft were three of 14 equity positions worth more than a billion dollars at the end of 2011.
So, maybe it’s just trimming or maybe it’s more. We love companies like JNJ, PG and KFT but not at these prices. They are way too rich for our valuation metrics at Craven Capital. We prefer JNJ and PG under $60 and KFT way under $40 but we see them as bulwark companies that can and will stand the test of turbulent times.
Why is Warren taking profits? What is he going to do with that money? Maybe he’s raising cash to buy another railroad (great inflation hedges that they are) or cash to rescue Goldman Sachs (again).
Or maybe the 2nd richest man in America is thinking about buying that ultimate inflation hedge…the same thing he allegedly called a barbarous relic some years ago. After all, that’s what the 7th richest man in America, Golden George Soros is doing.
In a recent SEC filing for the quarter ending June 30, 2012, it was reported that Soros had sold all of his equity positions in major financial stocks, including Citi, JPM and Goldman Sucks (sic). All up, he dumped around $50 mill.
But what is really interesting is what he bought with that money.
Yep…Golden George is buying gold…in the form of shares of the preeminent gold ETF…GLD.
Hence, the man who broke the Bank of England is trading paper for gold. Personally, if we had that sort of money we’d buy bullion but that’s our opinion. It’s his money.
In the meantime, another very smart fellow, the 17th richest man in America, John Paulson has been loading up on more gold himself, at the expense of a significant amount of paper assets, mainly in tech stocks.
So what does all this mean?
When major players like Buffet and Soros, with their direct ties to the White House, Wall Street, and the banking system generally start dumping stocks (and stashing gold in the case of Soros and Paulson), it may suggest a very serious market move is set to happen.
Despite what they say to the contrary, if there’s anyone with an inside track of where things are headed next it’s Warren and George. And John is no slouch either.
For his part, Soros even wrote about it. In his book The Crash of 2008 and What It Means, he referred to the current economic and political model the “end of an era”. He even intimated that the financial and economic situation across the world is so serious that Europe could soon descend into chaos and conflict and that the world is entering “one of the most dangerous periods in modern history”. Worse still, he foresees violent riots in America and a brutal clamp-down by the government that will dramatically curtail civil liberties. You mean…even more than we’ve seen already.
Maybe that’s why the folks at Homeland Security felt a need to order 400,000 rounds of ammunition. Could we see shoot outs when checking in?
Soros publicly gave the governments a roadmap to follow but maybe he believes that Gentle Ben, Tiny Tim and Super Mario are off course, so he’s getting out of those companies which are most at risk in another 2008-type meltdown, this time with sovereign nations also being squeezed like over-ripe tomatoes in a Safeway store.
So George and John…and maybe Warren…are moving from paper to something a bit more solid. When three of the world’s richest men are doing similar things, it pays to pay attention.
Got gold?
