George Soros is investing like a crisis is around the corner.
You’ve probably heard of Soros. Thanks to his legendary track record, he’s one of the world’s most well-known investors.
From 1969 to 2001, he generated average annual returns of 20%…nearly beating the S&P 500 2-to-1. Soros also famously “broke the Bank of England” in 1992.
These days, he runs Soros Fund Management, which manages about $10 billion.
• Soros made a GIANT bet on gold last quarter…
According to Bloomberg Business, he “bought bullish options contracts on 1.05 million shares in the SPDR Gold Trust (GLD), which tracks the price of bullion.”
He also took a huge stake in Barrick Gold (ABX), the world’s largest gold miner. According to a recent company filing, this stake was worth $264 million at the end of March. It’s the biggest U.S. holding in the Soros Fund.
Soros also bought 1 million shares of Silver Wheaton (SLW), one of the world’s biggest silver companies.
Regular readers know gold and silver miners are leveraged to precious metals prices. A 10% rise in gold can cause gold stocks to jump 30% or more.
Although these stocks offer a lot of upside, they’re also very risky. Investors don’t buy them for safety. They buy them when they expect gold or silver prices to rise significantly.
• The price of gold is already up 18% this year…
It’s near its highest level since January 2015.
If you’ve been reading the Dispatch, you know we think this gold rally is just getting started. Casey Research founder Doug Casey thinks the price of gold could easily triple in the coming years.
Doug says a major financial crisis will fuel gold’s coming “mania”:
Right now, we are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge. It’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009…
The huge winner during this crisis will be the only currency that has real value: gold.
Investors will run to gold because it’s real money. It’s preserved wealth for thousands of years because it has a rare set of qualities: It’s durable, easily divisible, and portable. Its value is intrinsic and recognized around the world.
• Soros trimmed his stake in U.S. stocks by 37% last quarter…
In total, he sold about $2 billion worth of stock.
He sold his positions in McDonald’s (MCD), Delta Airlines (DAL), and Dow Chemical (DOW), which was worth $161 million at the end of 2015. He cut his stake in social media company Facebook (FB) in half. He also sold 10% of his shares in search engine giant Alphabet (GOOG), formerly known as Google.
Soros didn’t just sell U.S. stocks. He placed bets that they would fall. Bloomberg Business reported last week:
The firm disclosed owning bearish options contracts on 2.1 million shares of the SPDR 500 ETF Trust, an exchange-traded fund that tracks the Standard & Poor’s 500 Index, with a face value of $431 million as of March 31.
• Carl Icahn is betting against U.S. stocks too…
Icahn is another Hall of Fame investor. He made a name for himself buying “broken” companies…getting seats on the board…and then turning those companies around. His success as an “activist investor” has made him one of the world’s 50 richest people.
Today, he runs Icahn Enterprises. According to Barron’s, the fund oversees about $5.8 billion. Icahn owns 90% of the company.
At the end of 2015, Icahn Enterprises had a “net short exposure” of 25%. This means the fund had 25% more bearish bets than bullish bets. For example, if you own $100,000 worth of stocks, and also short (bet against) $125,000 worth of stocks, you’re 25% net short.
At the end of last quarter, the fund’s net short exposure jumped to 149%. In other words, Icahn’s bearish bets jumped sixfold in just three months.
As you may know, some hedge funds specialize in shorting. Icahn Enterprises isn’t one of those funds. According to ZeroHedge, “Icahn's never been anywhere near this short.”
When asked about the aggressive short earlier this month, Icahn Enterprises CEO Keith Cozza said, “We’re much more concerned about the market going down 20% than we are it going up 20%.”
• Icahn has been bearish about U.S. stocks for months…
In September, he put out a video called “Danger Ahead.” In it, he warned of many of the same dangers we write about in the Dispatch.
He said U.S. companies were addicted to debt…low interest rates have goosed U.S. stocks (the S&P 500 has more than tripled in value since 2009)…and companies are using “financial engineering” to make profits look bigger “on paper.”
If you’ve been reading the Dispatch, you know the Federal Reserve is largely responsible for these problems. The Fed has kept its key interest rate near zero since 2008. It thought this would “stimulate” the economy. All it really did was blow “bubbles” in the stock market and other parts of the economy.
Like us, Icahn worries about how the Fed’s grand experiment will end:
I've seen this before a number of times… And I think a time is coming that might make some of those times look pretty good.
• Icahn doubled down on this warning last month…
He told CNBC the market’s “day of reckoning” is coming. He added that he was “extremely cautious” about U.S. stocks right now.
Icahn’s putting his money where he mouth is. His aggressive short position suggests he thinks stocks will not only fall…but crash.
• E.B. Tucker, editor of The Casey Report, also thinks stocks are on the verge of a crash…
He encourages you to “crisis-proof” your portfolio.
E.B.’s been telling Casey Report readers to avoid most stocks and hold cash. He’s also shorting one of America’s most vulnerable companies, a major airline. And he owns gold and two gold stocks.
E.B.’s advice has paid off big for his readers.
His airline short has returned 14% since February. Gold, as we said earlier, is up 18% so far this year. One of E.B.’s gold stocks has jumped 35% since March. The other is up 29% since mid-April.
If Soros and Icahn are right, Casey Report readers could see much bigger gains in the coming years.
You can invest alongside E.B. by signing up for The Casey Report. Click here to learn more.
We also encourage you to watch this short video. In it, E.B. talks about an even bigger threat to your wealth than a stock market crash. This coming crisis will affect you even if you don’t own a single stock or bond. But there are ways to protect yourself and even profit.
Chart of the Day
This is the cheapest way to buy gold coins we’ve ever found…
If you’ve ever shopped around for a gold coin, you know prices can vary. Gold sellers don’t simply charge the market price for gold. Instead, they add a fee (called a “premium”) to the market price.
For example, gold currently trades for about $1,240/oz. on the market. But a 1 oz. gold coin will run you around $1,300. The $60 difference ($1,300 – $1,240) is the premium.
The lower premium you pay, the better deal you’re getting.
Many of us around the office buy our coins from Gainesville Coins, one of the largest U.S. coin dealers. The company offers exceptional service and some of the industry’s lowest premiums…especially if you’re a Casey Research reader.
Last month, E.B. Tucker worked out an exclusive deal with Gainesville Coins. For a limited time, the company will offer a special discounted premium to Casey readers. You can receive this special pricing by following this link.
Today’s chart shows the tiny premium Casey readers would pay with Gainesville. As you can see, it’s a fraction of what other gold sellers charge. Serious gold coin buyers could save hundreds or thousands of dollars by taking advantage of this offer.
Keep in mind, Gainesville Coins is not paying us a commission to recommend them. Instead of collecting a commission, we asked Gainesville to give Casey readers a special discount on gold coins.
Again, buying from Gainesville Coins through this special link is the cheapest way to buy gold coins we’ve ever found. Click here to take advantage of this special offer.
Delray Beach, Florida
May 23, 2016
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