Is George Soros Right?

17 August 2016 By PDSNET

Quarterly return in America show that the well-known speculator, George Soros has doubled his bet that the S&P500 will fall. Soros, who is known for betting against the British pound some years ago to make a cool $1bn has had a short position against the S&P for almost a year, but he recently doubled the size of that short.

Could he be right?

The S&P500 is a weighted average of the 500 largest companies trading on Wall Street – and it obviously projects the current and expected growth in the US economy over the next year to 18 months. And the US economy is showing signs of very strong growth, with job creation unexpectedly high and new housing starts and manufacturing rising nicely.

The only thing scaring investors in the S&P is the possibility of another 0,25% interest rate hike in September – so why is Soros so sure that the S&P will fall?

The 86-year-old now owns put options on 4 million shares in an ETF fund which tracks the S&P500 index. His logic must be that:  The  S&P was expensive in January 2016 and it is much more expensive now. Why else would he double down? Take a look at that S&P chart:

 

S&P500 Index: January 2009 - July 2016. Chart by ShareFriend Pro

 

This shows the 7-year-old bull trend in the S&P since April 2009. It has gone through a number of significant “wobbles”, especially over the PIGS crisis and over the last year it has moved sideways and even slightly down. But about a month ago it broke up to new record highs and it has been climbing ever since.

You will have to make up your own mind – but in our view, a protracted sideways movement like that which breaks to the upside, usually means a period of strong growth – and we are getting more and more excited by the evident growth in the US economy.


DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.



Share this article:

PDSNET ARTICLES

Bitcoin versus Gold

Cryptocurrencies cannot really be considered an investment because they have no fundamentals. Their value is derived exclusively from the belief of the people who invest in them. When belief in Bitcoin is strong the price rises and when it is weak, the price falls.

Bitcoin cannot be regarded as a “safe haven” asset

Uncertainty

Most investors would probably agree that there is a considerable amount of uncertainty in equity markets at the moment. From a fundamental perspective, that uncertainty has come about because of:

  1. The force with which the central banks of the world (especially the US Fed) will “stamp on the brakes” to reduce

Powells Punch

In November last year we wrote the following about the U.S. economy in the Confidential Report:

…what if the Fed is wrong about inflation and it persists at the current high levels or even increases? September was the 5th month where inflation was above 5%. If they are wrong, then they will need to raise interest

Lewis

Nineteen months ago on 2nd of September 2020 in the Confidential Report, we recommended buying Lewis shares when they were trading for just 1668c. The share has now moved up to 4670c – a gain of 180%. Amazingly, it remains excellent value today despite this substantial rise in its price.

The company has 817 stores with 84%

Linear vs Semi Log

Most charts of share prices or indexes that you will come across are linear. The date is measured on X-Axis (horizontal) and the price or index level is measured on the Y-Axis (vertical). For short term charts linear scales are fine, but the longer your chart, the more misleading a linear chart becomes, especially for data streams which generally increase over

Remgro

In recent times there has been a trend for investment holding companies to unbundle their assets into the hands of shareholders, thus releasing substantial value. The shares of investment holding companies traditionally trade at a significant discount to the market value of the assets which they hold, and this provides them with an opportunity to

Gold

Throughout history, in times of war or major crisis, investors have always sought a safe haven for their wealth. And that safe haven has inevitably been gold. The various assets available for investment can be arranged in order from the highest return and most risky to the lowest return and least risky. On that scale, gold is on the one extreme –

Buying Opportunity

Investors don’t like uncertainty, but investment is about predicting the future and, of course, that is all about assessing the impact of an array of uncertainties. As an investor you have to use your analysis, experience and understanding to reduce the level of uncertainty to an acceptable place.

Uncertainty is reflected in volatility.

Inflation

There can be little doubt now that inflation world-wide is gaining momentum. America recorded 7,5% in January 2022 and Europe had inflation of 5,1% in January 2022 which is expected to rise to 5,8% in February. If that happens it will the first time for many decades that I can recall inflation being higher in both Europe and America than it is here in South Africa.

Ukraine

When you buy shares, you are immediately in the business of forecasting the future. You believe that the shares you have bought will go up. If you thought that they were going down, you wouldn’t have bought them. Your prediction that the share will go up can be divided into two primary areas – the prediction that the share market as a whole will rise (systematic)