Submitted by John Rubino via DollarCollapse.com,
The list of heavy hitters who are saying bad things about this world and its financial markets - while acting aggressively on their pessimism - is growing to alarming proportions. A few examples:
Stan Druckenmiller: The bull market is exhausted; move to gold
(MineWeb) – Legendary investor Stan Druckenmiller, founder of Duquesne Capital Management LLC, told the Sohn Investment Conference in New York last week that he is bullish on gold and bearish on the stock market. Gold, he told the conference, “is our largest currency allocation.”
Druckenmiller recommended that investors sell their equity holdings. “The bull market is exhausting itself,” he told the conference. A major factor has been the Federal Reserve’s easy money policy, which has resulted in “reckless” corporate behavior.
Growing corporate debt is increasingly used for financial engineering, rather than in R&D that could lead to productivity improvements, Druckenmiller said. According to him, from 2012 to 2015, use of debt for U.S. nonfinancial firms for stock buybacks and M&A increased from $1.25 trillion to $2 trillion, while debt for R&D and office equipment grew from $1.55 trillion to only $1.8 trillion.
“The corporate sector today is stuck in a vicious cycle of earnings management, questionable allocation of capital, low productivity, declining margins and growing indebtedness,” Druckenmiller added.
The slowing Chinese economy as another reason to sell equities, according to Druckenmiller. He believes that stimulus measures by China have “aggravated the overcapacity in the economy.” While he had hope two years ago that the Chinese were willing to accept the tradeoff of a slowdown to gain reform, the Chinese “have opted for another investment-focused fiscal stimulus, which may buy them some time but will exacerbate their problem. They do not need more debt and more houses.”
Instead, Druckenmiller has made a move to gold. “It has traded for 5,000 years and for the first time has a positive carry in many parts of the globe as bankers are now experimenting with the absurd notion of negative interest rates,” he said. “Some regard it as a metal, we regard it as a currency, and it remains our largest currency allocation,” he added. Among his investments are holdings in the SPDR Gold Trust.
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A Bearish George Soros Is Trading Again
(Fox Business) – Worried about the outlook for the global economy and concerned that large market shifts may be at hand, the billionaire hedge-fund founder and philanthropist recently directed a series of big, bearish investments, according to people close to the matter.
Soros Fund Management LLC, which manages $30 billion for Mr. Soros and his family, sold stocks and bought gold and shares of gold miners, anticipating weakness in various markets. Investors view gold as a haven during times of turmoil.
Mr. Soros’s recent hands-on approach reflects a gloomier outlook than many. His worldview darkened over the past six months as economic and political issues in China, Europe and elsewhere have become more intractable. While the U.S. stock market has inched back toward records after troubles early this year and Chinese markets have stabilized, Mr. Soros said he remains skeptical of the Chinese economy, which is slowing.
The fallout from any unwinding of Chinese investments likely will have global implications, Mr. Soros said.
“China continues to suffer from capital flight and has been depleting its foreign currency reserves while other Asian countries have been accumulating foreign currency,” Mr. Soros said in an email. “China is facing internal conflict within its political leadership, and over the coming year this will complicate its ability to deal with financial issues.”
Mr. Soros also argues that there remains a good chance the European Union will collapse under the weight of the migration crisis, continuing challenges in Greece and a potential exit by the United Kingdom from the EU.
“If Britain leaves, it could unleash a general exodus, and the disintegration of the European Union will become practically unavoidable, ” he said. Still, Mr. Soros said recent strength in the British pound is a sign that a vote to exit the EU is less likely.
Mr. Soros’s bearish firm bought over 19 million shares of Barrick Gold Corp. in the first quarter, according to securities filings, making it the firm’s largest stockholding at the end of the quarter. That position has gained more than $90 million since the end of the first quarter. Soros Fund Management also bought a million shares of miner Silver Wheaton Corp. in the first quarter, a position that has increased 28% so far in the second quarter.
The last time Mr. Soros became closely involved in his firm’s trading: 2007, when he became worried about housing and placed bearish wagers over two years that netted more than $1 billion of gains.
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If the Markets Crash Then Carl Icahn Could Win Big
(Barrons) – If financial markets crash, one of the biggest beneficiaries could be billionaire investor Carl Icahn.
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