Article By: Adam Sarhan
Soros Fund Management Chairman George Soros during the World Bank- International Monetary Fund Spring Meetings April 17, 2015 in Washington, DC. (Photo by Chip Somodevilla/Getty Images)
George Soros made his fortune, over the last few decades, from his prescient macro views on markets. When Mr. Soros speaks, people listen. Mr. Soros is still bearish on stocks and sold some of his gold. In his quarterly 13-F filing, Mr. Soros bought a lot more bearish puts on the stock market and sold some of his gold positions. Remember, this filing tells us what he did in Q2 2016, before the S&P 500 and other indices all broke out and hit fresh record highs. It does not tell us what his positions are right now.
1 SPX- 20 years
Mr. Soros, and several other large billionaire investors have come out in recent months and expressed bearish views on stocks. Meanwhile, the market continues to rally. Why? The short answer, continues to be easy money from global central banks. It’s one thing to be a large player in the global marketplace but it is another thing to be the largest player. These billionaire investors are very large players, but the central banks, are the largest players. For now, markets continue to listen to central banks and conventional wisdom takes a back seat. Eventually, markets will fall and we will enter another bear market. But until we do, why fight this very strong tape? Earlier this year, Mr. Soros publicly made the case that China is in trouble and it reminds him of the U.S. in 2007-early 2008- before the big 2008 financial crisis. To hedge against a market collapse, Mr. Soros, bought puts, which profit as the market declines, and bought gold, which is considered a risk-off investment.
At the end of the second quarter, Soros Fund Management owned puts in a variety of exchange traded funds that track the S&P 500 and the small-cap Russell 2000 index, among other positions. It is important for investors to note that Mr. Soros is expressing a bearish view on stocks but he is controlling his risk. The worst case scenario for Mr. Soros is that his puts expire worthless which means the most he can loss his the premium he paid to buy the puts. Theoretically, if the market doubles from here, his risk is capped. Another benefit of buying puts, instead of shorting the indices outright, is that time is on his side. He doesn’t need the market to go straight down, right away. He took a bearish view, controlled his risk and will make money if the market falls. If it doesn’t, big deal, it will another losing trade. Anyone in this business knows that losing trades are common and successful traders know how to manage their risk, when wrong. He is also free to exit the position at anytime. The media is bashing Mr. Soros but I want to take the other side of the trade. From a trading perspective, there is nothing inherently wrong with what he’s doing. In fact, I would argue, he is doing the right thing: He had a view, placed a trade that expressed his view, and controlled his risk in the process. What more can you ask for in this business?
Disclaimer© 2010 Junior Gold ReportJunior Gold Report’ Newsletter: Junior Gold Report’s Newsletter is published as a copyright publication of Junior Gold Report (JGR). No Guarantee as to Content: Although JGR attempts to research thoroughly and present information based on sources we believe to be reliable, there are no guarantees as to the accuracy or completeness of the information contained herein. Any statements expressed are subject to change without notice. JGR, its associates, authors, and affiliates are not responsible for errors or omissions. Consideration for Services: JGR, it’s editor, affiliates, associates, partners, family members, or contractors may have an interest or position in featured, written-up companies, as well as sponsored companies which compensate JGR. JGR has been paid by the company written up. Thus, multiple conflicts of interests exist. Therefore, information provided herewithin should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. No Offer to Sell Securities: JGR is not a registered investment advisor. JGR is intended for informational, educational and research purposes only. It is not to be considered as investment advice. Subscribers are encouraged to conduct their own research and due diligence, and consult with their own independent financial and tax advisors with respect to any investment opportunity. No statement or expression of any opinions contained in this report constitutes an offer to buy or sell the shares of the companies mentioned herein. Links: JGR may contain links to related websites for stock quotes, charts, etc. JGR is not responsible for the content of or the privacy practices of these sites. Release of Liability: By reading JGR, you agree to hold Junior Gold Report its associates, sponsors, affiliates, and partners harmless and to completely release them from any and all liabilities due to any and all losses, damages, or injuries (financial or otherwise) that may be incurred.
Forward Looking Statements
Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward looking statements are usually identified by our use of certain terminology, including “will”, “believes”, “may”, “expects”, “should”, “seeks”, “anticipates”, “has potential to”, or “intends’ or by discussions of strategy, forward looking numbers or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts, and include but are not limited to, estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the effectiveness of the Company’s business model; future operations, products and services; the impact of regulatory initiatives on the Company’s operations; the size of and opportunities related to the market for the Company’s products; general industry and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future performance. Junior Gold Report does not take responsibility for accuracy of forward looking statements and advises the reader to perform own due diligence on forward looking numbers or statements.