This Investing Legend Just Doubled His Bet Against U.S. Stocks
George Soros just doubled his bet against U.S. stocks.
You’ve probably heard of Soros. After Warren Buffett, he’s likely the world’s most well-known investor.
Soros is a household name because of his incredible track record. From 1969 to 2011, he generated average annual returns of 20%. He nearly beat the S&P 500 2-to-1 over that stretch.
Soros also famously “broke the Bank of England.” In 1992, he made a giant bet that the pound sterling, Britain’s currency, would crash. When it did, Soros pocketed $1 billion.
For the last few years, Soros has been on a bit of a hiatus. But two months ago, he came “out of retirement” to run Soros Fund Management, which manages about $29 billion.
That's because Soros thinks there's big money to be made right now…
But Soros isn’t betting stocks will go higher—he’s betting they’ll crash.
In the first quarter, Soros cut his stake in U.S. stocks by 37% and placed a HUGE bet on gold.
Today, we’ll tell you about Soros’ latest move. And we’ll tell you about another investing legend who’s also betting big against stocks. Plus, we’ll show you the #1 way to protect your wealth from a stock crash.
• Soros bought 1.9 million “puts” on the SPDR S&P 500 ETF (SPY) last quarter…
The SPY tracks the performance of the S&P 500. And a put is a way for an investor to make money if a stock falls.
As of March 31, the Soros Fund owned 2.1 million puts on the SPY. At the end of June, it owned 4 million. In other words, Soros doubled down on his bet against U.S. stocks.
• Soros thinks we’re heading for a repeat of the 2008–2009 financial crisis…
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.”
According to Soros, this crisis has been "unfolding in slow motion.” But since the “Brexit,” the world is now racing toward it.
As you probably know, Great Britain voted to leave the European Union in June. The unprecedented decision caught investors by surprise. It erased more than $3 trillion from the global stock market in two days.
In its aftermath, we warned that the Brexit was a “taste of what’s to come.” Soros agrees. He recently said the Brexit “unleashed a crisis in the financial markets comparable in severity only to that of 2007/2008.”
• Paul Tudor Jones is betting against U.S. stocks too…
Jones might not be a household name like Soros. But he’s a legend on Wall Street.
He’s a “big-picture” trader who’s nailed several market tops and bottoms. He’s best known for calling the “Black Monday” stock crash of October 1987. As you may know, the Dow Jones Industrial Average plunged almost 23% on this day. It was the darkest day in the history of the U.S. stock market.
Today, Jones runs the Tudor Investment Corporation, which manages $32 billion.
Like Soros, Jones is betting U.S. stocks will fall. Last quarter, his fund bought 5.95 million puts on the SPY, more than doubling its bearish bets against the S&P 500. The fund now owns 8.34 million puts on the SPY, making it his biggest position.
• There are plenty of reasons to be nervous about the stock market right now…
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.
Corporate America is also struggling to make money. Corporate profits are on track to decline for the fifth straight quarter. That hasn’t happened since the 2008–2009 crisis.
• The stock market has another big problem…
Share buybacks just hit a four-year low. MarketWatch reported on Tuesday:
Through Monday, announced share repurchases during the second-quarter earnings season beginning five weeks ago has averaged just 3.3 announcements for about $1.8 billion in sum each day, the lowest level since the summer of 2012.
A buyback is when a company buys its own stock from shareholders. This can lift a company's stock price.
According to investment bank Goldman Sachs (GS), buybacks have been the biggest driver of U.S. stock performance since the financial crisis.
With the global economy slowing and profits on the decline, buybacks have been about the only thing keeping stocks afloat. If this trend continues, the stock market could lose its biggest buyer. And that could be the last straw for this incredibly fragile stock market.
• If you’re nervous about the stock market, we encourage you to take action today…
Step #1 is to own physical gold.
As we like to remind readers, gold is real money. It’s preserved wealth for centuries because it’s unlike any other asset. It’s durable, easy to transport, and easily divisible.
Gold’s also a safe haven asset that investors buy when they’re worried about stocks or the economy.
This year, gold is up 28%. According to the World Gold Council, it’s off to its best start to a year since the 1979–1980 gold market, when it soared 254%.
Casey Research founder Doug Casey thinks gold will head much higher than that in the coming years. According to Doug, the financial system is held together by “chewing gum and bailing wire” right now. When the public realizes this, they’ll dump stocks and buy gold.
Doug says this mad rush could cause the price of gold to hit $5,000 an ounce, more than triple today's price.
If you don’t own gold yet or would like to buy more, watch this short presentation. It reveals what could possibly be the cheapest way to buy gold in America. Most mints, gold dealers, and online merchants can’t offer prices anywhere close to this good.
We encourage you to take advantage of this deal ASAP. It may not be available a few months from now.
Click here to learn more.
Chart of the Day
Corporate America is cashing out of the stock market.
Today’s chart shows the value of new monthly stock buybacks since August 2013. You can see buyback activity has plummeted over the past couple months. According to MarketWatch, it’s now at the lowest level in four years.
What’s worse, corporate insider selling has surged. According to CNBC, corporate insiders, which includes CEOs and CFOs, are selling stock at the fastest pace since June 2015.
Corporate insiders know their companies better than anyone. They know if business is picking up or getting worse long before it shows up on the quarterly income statement. They also know if their stock is a good deal or overvalued.
The big drop in buybacks and the surge in insider selling tells us Corporate America doesn’t like stocks right now.
If you’re nervous about the stock market, we encourage you to own gold. But before you spend another dollar on gold, you need to first watch this short video. It could save you thousands of dollars. Click here to see why.
Delray Beach, Florida
August 19, 2016