Do What Soros Does, Not What He Says

By Greg Hunter
Feb 19 2010 10:21AM

The Federal Reserve raised the discount rate yesterday to 3/4% from 1/2%. That’s the interest rate the Fed charges banks in an emergency. The Fed insisted that rates for consumers and companies would not rise. So why did the Fed raise rates? Some say this is an interest rate hike warning shot across the bow. It could also be because the Fed is looking straight down a double-barreled shotgun of trouble? In one barrel, it sees a huge amount of debt it must sell this year (as much as $5,000 billion in new and old debt). In the other barrel, it sees rising inflation. Could that combination blow the brains out of the economy? Yes!

Other big financial players are seeing trouble too–that’s why they are buying gold. John Paulson, the hedge fund manager who made billions shorting the housing sector just as the subprime mortgage crisis got underway, started a gold fund late last year. David Einhorn, another investment guru who made a mint shorting Lehman Brothers long before it went under, bought thousands of ounces of physical gold for his fund early last year.

So, when I heard George Soros, a hedge fund manager with a net worth exceeding $9 billion, say, “The ultimate asset bubble is gold,â€