SEC Filings Show Soros Is Bearish S&P 500, Bullish Gold

George Soros

The fund manager said in January China’s debt had an “eerie resemblance” to the 2008 crisis.

Soros Fund Management doubled its bet against the S&P 500 stock index and turned positive on gold according to the company’s filings to the U.S. Securities and Exchange Commission on Monday.

The asset management company founded by the billionaire George Soros said that the company owned a put option on the SPDR S&P 500 exchange-traded fund (ETF) amounting to 2.1 million shares during the first quarter of 2016. The SPDR tracks the benchmark U.S. index and the put options signal a bearish outlook that allows the holder of the option to sell the asset at a certain price.

The fund is confident about the decline in the index and increased its bet to more than double from its 1 million share put option on the ETF in the fourth quarter of 2015.

In February, the S&P 500 index jumped up sharply, followed by a cut in its gains this month.

Currently, the U.S. and the global economy is experiencing mixed signals as U.S. economic expansion slowed to 0.5 percent per annum in the first quarter compared to 1.4 percent in the fourth quarter. Nonfarm payrolls have also turned out less-than-favorable results in terms of job creation.

China’s economic data continued to show disappointing numbers as the world’s second biggest economy released subpar numbers in industrial production, retail sales and investment over the weekend even after stimulus measures were taken.

Soros warned last month that the growth of China centering in debt has an “eerie resemblance” to the events that led up to the 2008 financial crisis.

The performance of Chinese and other Asian economies, which are closely tied to the demand for gold, are large markets for bullion resulting in a surprising move from Soros as his exposure increased in the first quarter.

In times of market volatility, gold is traditionally a “safe haven” similar to the U.S. Treasuries or German Bunds. The increased exposure might be tied in with the volatility of the Chinese economy.

Since the commodities collapse, the positive correlation between gold prices and risk aversion has toned down. Spot gold prices increased 20 percent to $1,274 per ounce since the beginning of the year, but still under the $1,800 highs of 2011.

The privately owned family office bought 19.4 million shares in Barrick Gold after dissolving its stake in the world’s top gold mining company during the third quarter last year.

Silver Wheaton, the world’s largest precious metals streaming company, also gained a 1 million share stake from the Soros fund in the first quarter.

Another company that gained a 1.1 million share-call option from Soros is SPDR Gold Trust—the world’s largest ETF tracking physical bullion. Call options, on the other hand represent bullish bets allowing investors to buy assets at a certain price.

Paulson & co., led by one-time gold bull John Paulson, is taking the opposite bet on the gold market from Soros. The company pulled out some investments in the SPDR Gold Trust according to their filing in the U.S. Securities and Exchange Commission. Its 5.8 million shares in the last quarter of 2015 were down to 4.8 million shares last quarter.

Soros’ fund pulled back some of its stakes in the world’s biggest technology companies, which shows a slowdown in the U.S. or global economy.

Among the companies that Soros pulled out from are Alphabet, Google’s parent company, down to 6,637 from 65,570 shares, Facebook to 442,696 shares from 816,761 and Alibaba had its call dissolved. However, it added 3,100 shares in Apple.

Berkshire Hathaway, Warren Buffett’s company also bought 9.8 million shares from Apple in the last quarter according to Monday’s regulatory filing.

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