George Soros, commonly known as “the man who broke the Bank of England,” has shocked the world again after going bearish and citing hard economic times in the future. Soros seems to feel negative about the future of the global economy and has also given a negative indication the U.S. economy will recover. He is the current chairman and the sole founder of the Soros Fund Management, which currently has over $24 billion under its management.
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At the end of the first quarter of 2016, Soros doubled his bet against the S&P 500 via a 2.1 million-share put option saying that he is not sure of the strength of the U.S.’s economic recovery plan. George Soros through his firm Soros Fund Management has cut its holding in the U.S. stock market by 37 percent just in the first quarter. This move has been taken by investors and analysts as caution while they invest in East countries like China.
In the first quarter of 2016, Soros bought $264 million worth of shares in Barrick Gold (ABX). The company is one of the world’s largest gold miner. Also, Soros bought 1.1 million options to for a stake in SPDR Gold Trust ETF, a firm that mirrors the price of gold. The price of gold so far has gained close to 21 percent. The rise in price has been attributed by the Brexit referendum where the British citizens voted to leave the European Union.
Indeed, the price of gold is known to rise when the world economies are volatile, and the good thing is that gold tends to retain its value over time due to its scarcity. Gold had an all-time high of $1900 in August 2011 after the recent 2008 financial crisis. As the price of gold rises so is the price of shares for mining companies. For instance, Barrick’s stock price have gone up by a massive 174% due to the weak jobs report. The company has also done some reorganization that has helped it improves its efficiency in its mining activities. Barrick has improved its internal efficiency, productivity, and reined in its debt.
It is possible that Soros would inspire many investors to be cautious in their investment considering he has made similar bets before and gained considerably. In September 1992 for instance, he placed a bet on the Great Britain Pound that the Bank of England would have to devalue the currency, and he turned out to be right. Soros is reported to have made a profit of $1 billion in that day of speculation. Investors who believe Soros is right in the current situation of the global economy are already taking bearish bets on the stocks.
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