A Repeat of Black Wednesday? Soros Bets $2 Billion On Stock Market Collapse: Massive

A Repeat of Black Wednesday? Soros Bets $2 Billion On Stock Market Collapse: Massive Inflation Ahead

Chris Carrington August 22, 2014


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September 16^th, 1992, is the day that the British government had to withdraw the pound sterling from the European Exchange Rate Mechanism because it was unable to keep the pound above its agreed lower limit. The reason for the turmoil in 1992 was George Soros, who made over a billion pounds sterling by short-selling sterling on the markets.


Definition of short-selling:

The sale of borrowed securities. In a short sale, one borrows securities, usually from a brokerage, and sells them. One then buys the same securities in order to repay the brokerage. Selling short is practiced if one believes that the price of security will soon fall. That is, one expects to sell the borrowed securities at a higher price than the price at which one will buy in order to return the securities. Selling short is one of the most common practices of hedge funds. This is also called establishing a bear position.

Soros became known as the man who broke the Bank of England. The devaluation of the sterling cost the United Kingdom over £3.3 billion. As early as spring 1992, Mr. Soros had decided that the pound would have to be devalued because it had been pushed into the ERM at too high a rate. He knew that the Bundesbank favoured a devaluation of both sterling and the Italian lira and believed it would have to happen because of the disastrous impact that high British interest rates were having on asset prices. Mr Soros spent the next few months building up a position from which he would profit from that devaluation. He borrowed sterling heavily, reportedly to the tune of £6.5 billion, and converted that into a mixture of Deutschmarks and French francs.

On Black Wednesday, Mr. Soros's bet paid off. In the following days, he unwound his positions, paying back his original borrowings and ending with a profit of around £1 billion. As a parallel play, Mr. Soros bought as much as £350 million of British shares at the same time, gambling that equities often rise after a currency devalues. (source)

Regulatory filings show that Soros has increased his bet against the US stock market by 600% in the second quarter. He has taken out a $2.2 bn bet that the S&P will fall.

From Newsmax:

Billionaire investor George Soros has increased his financial bet that U.S. stocks will collapse to more than $2 billion. The legendary hedge fund manager has been raising his negative bet on the Standard & Poor's 500 Index since late last year. The latest 13-F filing with the Securities and Exchange Commission shows that Soros Fund Management increased its position in "puts" on the SPDR S&P 500 exchange-traded fund by a staggering amount in the second quarter from the first. The chairman of Soros Fund Management lifted his position to 11.3 million put options on the S&P 500 ETF (SPY), boosting the short position from 2.96 percent to 16.65 percent. The dollar value of the position soared to $2.2 billion from around $299 million. At 16.65 percent, that position is the biggest slice of the Soros firm's portfolio. Many experts see such a put position as a wager that the price of the stock market (in this case the S&P 500) will tumble. However, some experts warn that such tactics might be part of some long-term trading strategy.

Given what the reported positions are as of June 30, Soros may have made changes since that time.

Friday, the S&P 500 pared earlier declines in the late afternoon, ending the day little changed at 1,955.06. It earlier fell as much as 0.7 percent. The S&P 500 rose 1.2 percent during the week and ended the week 1.7 percent below its all-time high of 1,987.98, reached July 24. However, Soros' fund bought 182 new stocks in the second quarter. Soros also lifted positions in Apple and Facebook in a portfolio loaded up with stocks, "so he can't possibly be all that gloomy," MarketWatch reported. Soros nearly doubled his ownership in a U.S. gold-mining companies ETF and initiated new stakes in other gold producers, suggesting the big names in hedge funds continued to have confidence in the yellow metal, Reuters reports.

According to the Telegraph Soros has also increased his stake in Argentinian oil by purchasing 8.5 million shares in the state-owned oil company YPF, this is in addition to shares he already holds in the company.
Combine these things with Soros, Warren Buffet and John Paulson dumping American stocks like their life depended on it and you have a very good reason to believe that any financial crash that's coming is coming soon.
If you have not prepared financially for your family, now is the time to do it. With a huge market correction heading our way, some experts say up to 90%, inflation is going to soar. Once inflation soars to 10% then the value of Treasury bonds falls to about half their value. At 20% inflation their value is practically zero. Interest rates will increase massively and real estate markets will collapse…all these things lead to a total collapse of the stock markets. Hyperinflation is a distinct and real possibility.

The time to step up your prepping is now. When a loaf of bread costs a wheelbarrow full of money, it will be too late. Take a long, hard look at your personal preparations and plug any holes while you can, because if Soros and his multi-billionaire cronies have their way, then the time you have left to do so is a lot shorter than you may have anticipated.

Source
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Soros not only investor playing defense

By William Watts
Published: Aug 23, 2014 7:19 a.m. ET
http://ei.marketwatch.com//Multimedi...8-00212804637c
NEW YORK (MarketWatch) — George Soros isn’t the only big-shot investor who seems to be suffering from a bit of a backache. The question is whether it’s just a twinge or something more serious.

Soros, whose astounding long-term success as a trader has reportedly been shaped at least in small part by his reactions to physical discomfort, raised eyebrows when a mid-August regulatory filing showed he had significanty upped his holdings of puts on the SPDR S&P 500 ETF SPY, -0.16%
As you may recall, Soros reported that he held nearly 11.3 million puts on the ETF as of June 30, a position with a market value of more than $2.2 billion. That was a 605% rise from the end of the first quarter and made the stake his largest single position, constituting nearly 17% of his total portfolio. See also: Big investors dump GM, but love Ally and Why Ally Financial may be a better bet.

http://ei.marketwatch.com//Multimedi...8-00212804637cBloomberg
George Soros

That is the biggest such put position Soros has had since 2008, noted Raul Moreno, chief executive of iBillionaire, an index that tracks investment choices by big investors, including the likes of Soros, Warren Buffett and Carl Icahn.

So in a portfolio that’s around 80% long equities, the position appears clearly to be a hedge rather than an outright bet on a market fall,

Moreno said. Still, the size of the position would seem to indicate Soros had grown more worried about the potential for a pullback, Moreno said in a phone interview.

Maz Jadallah, founder of AlphaClone, a research firm that collects, aggregates and clones data from 13F filings, emphasized that while the shift indicates Soros believes the risk of a pullback has increased, it shouldn’t be read to indicate he is betting on one. In fact, the data shows Soros’s long exposure increased by 9% over the second quarter, a time when the S&P 500 rose 5%.

Michael Vachon, the spokesman for Soros Fund Management, said the increase in put holdings was “not a story.”

Moreno also flagged a new, bearish position on home builders reported by Chase Coleman’s Tiger Global Management. The fund’s 13F showed that it held 23.5 million put options on the S&P Homebuilders ETF XHB, +0.35% as of June 30. The position, with a market value of nearly $770 million, is the fund’s top holding, accounting for 9.8% of the total portfolio value. See:

Want to invest like Buffett and Soros? Try this.

Plenty of investors, including Icahn and Appaloosa Management’s David Tepper, have issued warnings about potentially frothy stock values. Icahn warned last week of a “major asset bubble,” while Tepper suggested earlier this year that it might be appropriate for bulls to take some money off the table. But overall, those investors had largely maintained their positions, at least through the second quarter, Moreno said.

Not ‘running for the hills’

Indeed, Jadallah argued that big investors showed little sign of a defensive bias, noting that in addition to Soros, other big hedge funds also saw their long exposure rise. Ray Dalio’s Bridgewater Associates saw long exposure increase by 9%, he said, while John Burbank’s Passport Capital increased long exposure by 44%.

“That doesn’t look like they’re running for the hills,” Jadallah said in emailed comments.

Still, there were some signs of defensiveness in the overall 13F patterns, Moreno said, including increased interest in the traditionally defensive energy sector.

Icahn, for example, boosted his stake in CVR Energy Inc. CVI, +0.49% by 8% to a total of nearly 77.2 million shares as of the end of the second quarter. The stock was the fourth-largest holding in Icahn’s portfolio with a value of around $3.58 billion.

“We have seen an increase in energy stocks, particularly those with a high dividend yield, and we see them as some protection against a potential downfall,” Moreno said.

At the same time, Moreno said the billionaire investors he tracks don’t seem to be as worried about the economy or a downturn in consumer discretionary spending. In addition to energy, big investors are still placing bets on the information technology and consumer discretionary sectors, two sectors that are particularly sensitive to economic swings.

http://www.marketwatch.com/story/soros-not-the-only-big-investor-getting-defensive-2014-08-18