When an iconic market figure steps out of the shadows and starts to get active in a high-profile manner, investors had better take notice.
Today it was billionaire hedge-fund founder, philanthropist and big-money political player George Soros. I’m paying close attention to what he’s doing right now. And I believe you should, too.
Now, I know that just the mention of George Soros may get some readers fired up. This controversial money man is a favorite target of globalist conspiracy theorists, anti-Democratic Party activists and anti-left-wing activists.
I’m certainly not a fan of Soros’s political views; however, I am a fan of Soros when it comes to his investing prowess. I am also a fan of his book, "The New Paradigm for Financial Markets," which I recommend to all investors.
So, what has Soros done now to merit our attention?
Well, he’s getting back to being a hands-on investor, and he’s doing so by betting against stocks … and betting on gold.
His reasoning here is that the global economy is in trouble. And in his view, we’re headed for big shifts in the investment landscape that could spell trouble for the world.
News of Soros and his bearish stance came out today in a widely read Wall Street Journal article. The WSJ reported that, after a long hiatus, Soros had returned to actively managing the portfolio holdings in his Soros Fund Management LLC.
The fund has some $30 billion of Mr. Soros’ personal and family wealth. Here’s how the WSJ describes it:
Worried about the outlook for the global economy and concerned that large market shifts may be at hand, the billionaire hedge-fund founder and philanthropist recently directed a series of big, bearish investments, according to people close to the matter.
Those "big, bearish investments" include selling stocks, and shorting the S&P 500 Index via a 2.1-million-share "put" option.
They also include buying into the ultimate fear and crisis asset, gold.
Soros has recently also disclosed that his firm bought over 19 million shares of precious metals mining giant Barrick Gold Corp. (ABX) during Q1 (according to securities filings).
That position was the largest equity holding at the firm at the end of the quarter. But it wasn’t the only mining stock holding.
Barrick Gold (ABX, blue line) gained nearly 1.9% today
According to the WSJ:
That position [ABX] has gained more than $90 million since the end of the first quarter. Soros Fund Management also bought a million shares of miner Silver Wheaton Corp. (SLW) in the first quarter, a position that has increased 28% so far in the second quarter.
Those gains are strong indeed. And while Soros most likely hasn’t had much luck betting against this resilient stock market, his rationale behind a bet that there will be more downside for the broader market is based on sound logic.
According to the WSJ, Soros’ "worldview darkened" over the past six months. Economic and political issues in China, Europe and elsewhere have become, in his view, have become more intractable.
As per the story:
The fallout from any unwinding of Chinese investments likely will have global implications, Mr. Soros said in an email.
"China continues to suffer from capital flight and has been depleting its foreign currency reserves while other Asian countries have been accumulating foreign currency," Mr. Soros said. "China is facing internal conflict within its political leadership, and over the coming year this will complicate its ability to deal with financial issues."
In addition to China, Soros also is concerned with Europe. There, the migration crisis, continuing challenges in Greece and a potential "Brexit" by Great Britain from the European Union could cause the EU to collapse.
"If Britain leaves, it could unleash a general exodus, and the disintegration of the European Union will become practically unavoidable," he said.
As any student of history knows, Soros has a track record of being right far more than he’s been wrong … especially when it comes to betting on big macro outcomes.
His most famous win was the big wager against the British pound in 1992, a trade that Soros made about $1 billion on.
Most recently, Soros bet against the housing sector in 2007. This reportedly netted him north of $1 billion profit.
The question now is will his bet against the S&P 500, and for gold, be an equally big winner?
For my Crisis Options Trader subscribers, that means current open gains of 82.3% and 29.5% in two fast-moving gold positions. And I think there’s even more upside ahead. It’s not too late to get in on gold. Find out how >>
What do you think of George Soros and his bet against stocks, and his bet in favor of gold? Is he just "talking up his book" here, or do you think he is on to something?
Investors might have been paying attention to Soros’ bearish message after all. Stocks stayed in the red for the entire Thursday trading session. The Dow slid 0.1% lower, closing below 18,000.
• A day for activist investors in the news. Carl Icahn famously sold his Apple (AAPL) shares in April on worries about the company’s prospects in China. He said he would buy back in if he "felt more secure about China." AAPL shares gained 0.7% today.
• Bill Ackman is "dead wrong" about Herbalife (HLF), according to Icahn in another headline-grabbing comment. Like AAPL, HLF saw a gain on an otherwise down day in the markets. It ended 1.3% higher after Icahn criticized the Pershing Square Capital Management head for shorting HLF.
• Surprise rate cut from South Korea. The Bank of Korea’s 1.25% base rate is a record low.
• Guess who’s getting a big chunk of Prince’s estimated $300 million fortune? The Feds. The trust appointed to handle Prince’s estate went before a judge recently to say taxes on the estate could be more than half its cash value. The judge said the trust could seek entertainment industry experts to help it act in the best interest of the potential heirs.
• Tesla (TSLA) price drop. The electric carmaker is bringing back its Model S with a smaller battery and a smaller price tag of $65,000 to jumpstart demand. The company is also offering an optional battery upgrade (from 60 to 75 kWh). The current Model S sports an 80 kWh battery and sells for closer to $80,000. The news didn’t help shares, which slumped 2.6%.
Good Luck and Happy Investing,
Uncommon Wisdom Daily