Dear PGM Capital Blog readers,
In this weekend’s blog edition, we want to discuss with you some big moves in the portfolio of Billionaire George Soros, and why it is important for you to take a note.
ABOUT GEORGE SOROS:
George Soros born August 12, 1930, as György Schwartz, is a Hungarian-born American and the chairman of Soros Fund Management.
Black Wednesday, September 16 1992:
- Soros had been building a huge position in pounds sterling for months leading up to September 1992. Soros recognized the unfavorable position at which the United Kingdom joined the Exchange Rate Mechanism. For Soros, the rate at which the United Kingdom was brought into the Exchange Rate Mechanism was too high, their inflation was also much too high (triple the German rate), and British interest rates were hurting their asset prices.
- On September 16, 1992, Black Wednesday, Soros’ fund sold short more than US$10 billion in pounds (GBP), profiting from the UK government’s reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency.
- Finally, the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound. Soros’s profit on the bet was estimated at over US$1 billion. He was dubbed “the man who broke the Bank of England”.
- In 1997, the UK Treasury estimated the cost of Black Wednesday at £3.4 billion.
SOROS SELLING SHARES OF MAJOR USA BANKS IN Q1-2014:
According to a filing with the Securities and Exchange Commission, it became public that in the first quarter of 2014, that Soros Fund Management LLC, reduced its positions in US-Financial companies with 80 percent.
Soros sold all his holdings in the following US financial Institutions:
- Morgan Stanley (NYSE: MS)
- Capital One (NYSE: COF)
- SUN TRUST (NYSE: STI)
- J.P. Morgan-Chase (NYSE: JPM)
- American Express (NYSE: AXP)
- Goldman Sachs (NYSE: GS)
- Financial Services Group (NYSE: PNC)
- Bank of America (NYSE:BAC)
Besides this, he reduced his position in CITI Bank (NYSE: C) by 93.3 percent and sold two third of his stake in AIG (NYSE: AIG).
Between the three banks, Goldman Sachs, JP Morgan and CitiGroup, Soros sold more than a million shares.
SOROS BUYING GOLD MINERS:
Soros has been silently building positions in mining companies rather than the underlying commodity itself. Presumably, this is because mining firms stand to benefit even more if metal prices rally because of the inherent leverage in the business.
His latest SEC fillings shows that his Soros Fund Management has purchased the following Gold and Silver mining companies:
- Barrick Gold :
At the end of Q1-2014, he held 6,770,100 shares of Barrick Gold (TSX: ABX) valued at US$120,711,000. - Yamana Gold:
In Q1-2014, he purchased 2.2 million shares of Yamana Gold (TSX: YRI) valued at more than US$19 million, in the Canadian mining giant. - Silver Wheaton:
He initiated a new position in Silver Wheaton (TSX: SLW) by buying 400,000 shares of the company valued at US$9.1 million. - GoldCorp:
In Q1-2014, he added 42,000 shares of GoldCorp (TSX: G), bringing the total value of holding in this company at US$10.8 million. - Aurico Gold:
At the end of Q1-2014, he held 1,587,650 shares of Aurico Gold (YSX: AUQ) valued at US$6,906,000. - New Gold:
At the end of Q1-2014, he held 1,156,205 shares of New Gold (TSX: NGD) worth US$5,642,000. - Pan American Silver Corporation:
At the end of Q1-2014, he held 804,900 shares of Pan American Silver Corporation
(TSX: PAA) valued at US$10,824,000.
SOROS BOOTS BET ON USA MARKET COLLAPSE TO US$2 BILLION:
The legendary hedge fund manager has been raising his negative bet on the Standard & Poor’s 500 Index since late last year.
He lifted his position to 11.3 million put options on the S&P 500 ETF (SPY), boosting the short position from 2.96 percent to 16.65 percent. 
As can be seen from above chart, the dollar value of the short position against the S&P-500 has soared to U$2.2 billion at the end of Q2-2014, from around US$299 million at the end of Q1-2014.
Currently this short position on the S&P-500 represents in dollar value 16.65 percent of Soros total portfolio, which is also the biggest slice of his portfolio.
PGM CAPITAL COMMENTS:
Besides Soros a handful of billionaires are quietly dumping their American stocks and fast.
Warren Buffett,
who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson (NYSE: JNJ), Procter & Gamble (NYSE: PG), and Kraft Foods (NASDAQ: KRFT) and sold its entire stake in chipmaker Intel (NYSE: INTC).
Fellow billionaire John Paulson,
who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase according to a recent filing.
The fund also dumped its entire position in discount retailer Family Dollar stores
(NYSE: FDO) and consumer-goods maker Sara Lee (NYSE: HSH).
Beside this a filing with the U.S. Securities and Exchange Commission showed that at the end of Q1-2014, Paulson & Co, led by longtime gold bull John Paulson, owned 10.2 million shares of the Spyder Gold Shares (NYSE: GLD) worth US$1.27 billion, unchanged from its holdings on Dec. 31, 2013.
Regarding Soros it is also worth mentioning that although he has trimmed some of it holdings in Teva Pharmaceuticals, the value of his holding in the Israel drug maker was at US$381 million at the end Q2-2014. which is also the largest long holding in his portfolio.
The big question is:
Why are these high profile billionaires, with Soros on top of the list with a track record of being able to predict market movements and subsequently profiting from it are all running as fast they as the can, out of the US Stockmarket and are doing their utmost in putting their hands on as much Gold and Gold mining stocks as they can get?
In our opinion the answer is simple, the USA Stock markets are currently in a Huge Bubble a bubble even bigger than the ICT bubble at the end of the last millennium and that Gold and other precious metals are currently under-appreciated, similar like they were at the end of the last millennium.
The above mentioned billionaires, are all insiders and professional investors, who are aware of specific research that points toward a massive market correction in the US-Stockmarket with a probability of as much as 90%.
They also know that Gold which has proven itself as the only real money and ultimate safe haven, is currently extremely undervalued.
One such person publishing this research is Robert Wiedemer,
an esteemed economist and author of the New York Times best-selling book Aftershock. Before you dismiss the possibility of a 90% drop in the stock market as unrealistic, consider Wiedemer’s credentials. In 2006, Wiedemer and a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States.
They published their research in the book America’s Bubble Economy. The book quickly grabbed headlines for its accuracy in predicting what many thought would never happen, and quickly established Wiedemer as a trusted voice. In the interview for his latest blockbuster Aftershock, Wiedemer says the 90% drop in the stock market is “a worst-case scenario,” and the host quickly challenged this claim.
Wiedemer calmly laid out a clear explanation of why a large drop of some sort is a virtual certainty. It starts with the reckless strategy of the Federal Reserve to print a massive amount of money out of thin air in an attempt to stimulate the economy. Robert Wiedemer once said;
“These funds haven’t made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money hits the markets, that inflation will surge,”
“Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, and that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems.”
In case of a major market correction, over leveraged banks and financial institutions will be the most hurt, while Gold, Silver and other precious metals on the other hand will profit the most. However it is worth mentioning, that like Keynes said;
Markets can remain irrational longer, than you can remain solvent
Last but not least, before following any investing advice, always consider your investment horizon and risk tolerance and financial situation and be aware that stock prices don’t move in a straight line and that sharp corrections may happen in the short term.
Until next week.
Yours sincerely,
Eric Panneflek