Some believe Warren Buffet’s latest purchase is a hedge against recession

Many observers are warning of the potential for further economic downturn, with Clinton administration Treasury Secretary Larry Summers telling Bloomberg TV last month that it “is almost inevitable.”

Someone who might agree with that assessment is Warren Buffett, with Reuters asking last week if the billionaire is planning a move to prepare for recession. 

“A cash machine”

News service writer Liz Hampton noted in an article published this past Friday that Buffett currently owns nearly 20% of Occidental Petroleum and there is speculation that he may purchase the oil company outright.

Hampton quoted oil analyst Paul Sankey as saying that Buffett’s decision to buy an additional 4.3 million shares of Occidental Petroleum is an important sign.

Sankey described the company, which is expected to significantly reduce its debt by next year as “a cash machine of the kind Buffett favors.”

Hampton noted the potential significance of that given how Buffett “told shareholders earlier this year that cash is like oxygen.”

Meanwhile, Neal Dingmann of Truist Securities speculated that the company may be a way for Buffett to have an “offset for his rail and other businesses” in the event of economic contraction.

Recession in progress?

If Buffett does see storm clouds on the horizon, then he is far from being alone, as former Reagan-era economic adviser Art Laffer told Fox News host Harris Faulkner on Monday that he sees “nothing good” ahead.

During the interview, Laffer argued that the United States has already entered a recession and pushed back on President Joe Biden’s attempt to downplay fears.

“We’ve already had a recession [with] two quarters back to back with negative growth. [That] is the definition for a recession. That’s where it is now,” Laffer insisted.

“The question is, is it going to keep getting worse? That’s the relevant question, but it’s a recession already, and how long is it going to last?” the long-time Republican continued.

“And from what I see, I don’t see any end in sight. I don’t see anything that looks good on the horizon on the economy,” Laffer concluded.

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