One of the world’s most successful investors is so certain that the US stock market is set to crash that he’s betting $2.2 billion on it.
Financial records show that hedge fund titan George Soros is investing heavily in gold and positioning himself to profit from a major market collapse.
The moves are attracting attention because Soros has a long history of accurately predicting the collapse of market bubbles and profiting from them. In 2010 he bought large amounts of gold, predicting it was a bubble. Soros sold his gold investments in 2011, right before the price of gold peaked and cashed out.
“When I see a bubble forming, I rush in to buy, adding fuel to the fire,” Soros said in 2009. “That is not irrational.”
Soros’ actions indicate that he thinks stocks are in a bubble — and that the bubble is about to burst.
Why We Should Pay Attention
Soros is considered the most successful hedge fund operator in history, and his Quantum Fund has made $39.6 billion in profits in the last 40 years, according to The Irish Times.
Over the years Soros has demonstrated an almost uncanny ability for predicting what the market is going to do. In 1992 Soros successfully bet that the British Pound was going to fall and made $1 billion.
In 2007 and 2008 his Quantum Fund made a 32 percent profit during a massive economic meltdown.
More recently he made $1 billion by shorting the Japanese Yen.
So it’s easy to see why Wall Street types get nervous when Soros starts predicting a collapse. What’s more interesting is how Soros is acting aggressively to cash in on his instincts.
What Soros is Doing
Soros has bought 11.3 million put options (agreements that allow him to sell an equity at a certain price in the future) on the S&P SPDR(NYSE: SPDR) exchanged traded fund (ETF) – a move that would benefit him greatly if the market does fall. The SPDR is a fund that invests in the 500 most valuable publicly traded stocks in the United States, the famed S&P (Standard & Poor’s) 500.
Soros’ purchases were exposed by a recent filing with the Securities & Exchange Commission (SEC). SEC paperwork reveals that Soros’ bet has increased from $299 million to $2.2 billion in recent months.
Soros and Gold
The SEC paperwork also revealed that Soros is buying lots of gold and gold-related stocks.
Soros Fund Management has purchased 2.05 million shares in the Market Vectors Gold Miners ETF, which invests in gold mining companies. Soros also bought 1 million equity shares in a gold mining company called Allied Nevada Gold Group (ANV).
“It … suggests that Soros may be thinking gold prices are near the bottom of the range,” Bill O’Neill, partner at commodities investment firm LOGIC Advisors in New Jersey, told Reuters.
It’s not just Soros who is warning about a potential collapse. Another legendary investor, Carl Icahn, warned investors about a “major asset bubble that continues to grow.”
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