Yesterday, I saw hedge fund superstar George Soros speak at the London School of Economics (LSE). Soros, a graduate of the LSE, is in London to get his message out to the leaders meeting at the G-20 conference this week, and to push for them to increase the role of the International Monetary Fund (IMF) in bailing out smaller economies.
In his very first sentence, Soros said global financial markets “were on a knife’s edge” — using the very same words that I had used in describing markets in last week’s Global Guru. Soros said the center of the global financial system had “settled” since going into “cardiac arrest” after the collapse of Lehman Brothers. The real danger to the global economy now is from the “periphery” — in particular, smaller eurozone countries like Ireland that cannot print their own money, as well as overly indebted countries in Eastern Europe.
When asked about his favorite investments for the rest of 2009, he said, “I know exactly what markets are going to do in 2009. I am just not at liberty to disclose it.” Although Soros did not answer questions about the markets directly, his speech led me to believe that his own portfolio likely includes at least two positions that overlap with your Global Stock Investor portfolio.
First, because Soros believes that governments have to first “reflate” their way out of the collapse of the credit “super-bubble,” I believe that Soros is short U.S. Treasuries — as you are through the UltraShort Lehman 20+ Treasury ProShares ETF (TBT). Second, because he sees the greatest pressures on the global economy coming from the peripheral countries, I believe it’s highly likely that he is also short the euro — as you are through the UltraShort Euro ProShares (EUO).
Portfolio Update
The Chemical & Mining Co. of Chile Inc. (SQM) dragged this week, as it failed to keep up with the rest of the market. Nevertheless, this play on both agriculture and lithium remains a BUY.
The UltraShort Lehman 20+ Treasury ProShares ETF (TBT) fell this week, and now is as technically oversold as it has been since the beginning of January. But with the demand for Treasuries going through the roof and inflation on the horizon, TBT remains a BUY.
The UltraShort Euro ProShares (EUO) rebounded since you re-entered the position last week. With European economies weak and small eurozone countries like Ireland and Austria under pressure, EUO is a BUY.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) jumped sharply yesterday to a record high of $25.60, as the Chinese currency begins to acquire a higher profile on the world stage. CYB remains a BUY.
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