George Soros’s warning needs to be taken seriously
Billionaire investor George Soros, who rose to fame and fortune by betting against the sterling in 1992, on Monday showed his latest hand: nearly doubling down on his bearish bet against the market.
In January, he warned, “When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.” He added, “The world is running into something that it doesn’t know how to handle.”
Soros is investing heavily in gold and positioning himself to profit from a major market collapse. George Soros also doubled down on his bet against the S&P, buying put options on just over 1.9 million shares the SPDR S&P 500 ETF, making it so he owns puts on just over 4 million shares. It’s his fund’s biggest holding in the filing too.
On June 30, the last day of the second quarter, Soros gave a grim speech to the EU Parliament where he highlighted these concerns.
Soros warned that the Brexit may be a “greater calamity” than the refugee crisis. He added that the UK’s shocking decision has “unleashed a crisis in the financial markets comparable in severity only to that of 2007/8.”
Markets initially sold off following the UK’s stunning decision to leave the EU. However, they have since rallied back. Stocks lately have been hitting all-time highs.
The global economy is weak. The U.S., Europe, Japan, and China are all growing at their slowest rates in decades.
Stocks are expensive. The popular CAPE valuation ratio, which gives a long-term view of the stock market, is 62% above its historic average. The S&P 500 has only been more expensive three times in history: before the Great Depression, during the dot-com bubble, and leading up to the 2008–2009 crisis.
Being George Soros, his comments and actions are bound to attract a lot of attention from market observers, and that in itself can have an impact. Soros is at his best in analyzing macroeconomics and political climates to predict large market swings, so his return to the market and conviction that a crisis is coming has a lot of people nervous about the future.
Soros seems to be right, as Yellen leaves door open to rate rise before year-end – as it happened
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