CNBC.com recently published an article about George Soros and his “bearish” positions on the stock market. It was reported that Soros has taken an active interest in his $30 billion hedge fund that he had previously left in control of others in his organization. He is divesting his stock market positions and investing in gold and a mining company pursuing gold in South America.
On the “Street” Soros is considered a bear. Anyone interested in market action, and who has read the book by Jesse Livermore, Reminescences of a Stock Operator, knows that huge sums of money can be made when markets collapse. Bears are those investors who see trouble ahead for one or many stocks and then take short positions, betting on a devaluation of the stocks. Bulls, on the other hand, see markets as continuing in an upward direction, which is the usual thinking on the street. Livermore and other bears know that when everybody is in on a buy position for a particular stock, that is the time to sell their holdings and look for another stock. Simply said Bulls see markets conditions favorably while Bears see devaluation ahead. Soros, in fact, made billions betting on the devaluation of the British Pound on the Forex markets. Forex markets trade within a range, unlike the stock market where upward gains are expected by investors. Soros was able to see the intricate economic problems in Britain in 1992 and put his money where his mouth was. He made a $1 billion as manager of a fund and his fund made even more.
Financial writers and economists are seeing problems ahead for the financial world; it’s not just George Soros. The American economy has changed from a producer economy to a service oriented economy, while the Chinese economy seems to be driving global markets at present. The Presidential elections are coming up, and a continuing immigration crisis in Europe is adding fuel to a possible economic firestorm. In troubling times, gold is often the commodity sought out by savvy investors to hedge against an economic crisis and devaluation of currencies.
While George Soros is buying gold mines, maybe we should be heeding his advice and changing risky stock market investments into more secure vehicles in anticipation of another possible collapse. The lessons of the 2008 crisis are hard lessons learned and the January stock market downward spiral; a so-called readjustment remains fresh in our collective memory.
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