In the 13F form filed with the U.S. government for the first quarter of 2016, former hedge fund manager George Soros revealed he anticipates economic problems, and intends to profit from them. An article by Bloomberg reveals the details.
George Soros reduced his holdings of U.S. publicly listed stocks by 37%, bought put options on the stock market, loaded up on Barrick Gold, one of the world’s major gold companies and bought calls on the SPDR Gold Trust exchange traded fund.
He sold off his shares of Delta Airlines, Level 3 Communications, Dow Chemical and Endo International. Therefore, he no longer faces any downside risk if their share prices fall sometime in the future.
He now owns put option contracts on 2.1 million shares of the exchange traded fund SPDR 500, which tracks the S&P 500 Index of the New York Stock Exchange. This means that he will profit if the top 500 stocks on the New York Exchange fall in price below the option strike price, which the article didn’t reveal. The article on https://twitter.com/georgesoros also didn’t specify how long the put contracts were for.
Soros bought shares of Barrick Gold, a stake worth $264 million as of March 31, according to the 13F form. That’s 1.7 percent of Barrick. Barrick is now the largest single company owned by the Soros fund. Located in Toronto Canada, Barrick Gold is one of the largest gold mining companies. It should continue to profit and go up in value for as long as the price of gold continues to rise.
George Soros now owns calls on 1.05 million shares of the exchange traded fund SPDR Gold Trust. Each share of that ETF consists of a tenth of an ounce of gold bullion. Therefore, just as the SPDR 500 ETF tracks the price rises and drops of the S&P 500, the SPDR Gold ETF tracks the price rises and drops in the price of gold. If the price of Gold Trust rises higher than the option strike price, Soros will profit from that without having to buy actual gold bullion. However, Bloomberg again did not specify the strike prices or terms of the call contracts.
Read more on: Billionaire Soros Cuts U.S. Stocks by 37%, Buys Gold Miner
In January this year, Soros warned that the economy reminded him of the months leading up to 2008. George Soros believes China has created far too much debt, and that its collapse would lead to deflation that would lower the price of stocks. Generally, in hard times people see gold as a safe harbor, causing its price to rise.
The price of gold rose 16 percent in the first three months of 2016. According to Bloomberg, that’s the largest quarterly price jump in 30 years. The share price of Barrick Gold has doubled in 2016.
Soros has also warned about the many problems facing the EU. Investing in gold could be one way of profiting if the EU fails.