The economy is doing much better, right? That’s what many have believed as America has seen a recent increase in GDP this year and some of the other numbers such as unemployment seem to be improving. The stock market is seeing record numbers, things might be looking up finally for the economy.
Then why are investors starting to hedge their bets? It appears that a growing number of professional investors are preparing for a stock market crash, as hedge fund filings for the second quarter show a spike in defensive positions.
Billionaire George Soros, who has notoriously and successfully made huge bets against the market. He increased his short position on the Standard & Poor’s 500 by a startling 605%.
The 9.69 million new shares of SPDR S&P 500 ETF Trust put options gave Soros a total of 11.29 million shares and made it the biggest holding in his portfolio.
Others have been snapping up 10-year Treasurys and buying more put options than usual.
“You definitely are seeing managers reduce risk levels,” Robert Duggan, a managing director at Skybridge Capital, told The Wall Street Journal. “‘Cautious’ or ‘more defensive’ are clearly things you hear when you speak with managers.”
And yet these hedge fund managers don’t seem to be bailing on stocks altogether. Some even increased their long positions.
Soros, for instance – despite buying all those SPY put options – made big additions to several of his long tech positions, including approximately 1.2 million shares of Apple Inc., 1.79 million shares of Facebook Inc. , 2.4 million shares of Intel Corp., and 1.8 million shares of Microsoft Corp.
The thinking behind these moves involves preparing for a large market correction or a significant stock market crash while taking advantage of growth before such an event occurs.
From a biblical vantage point we are entering a period known as the shmita. The shmita has shown itself on the American and world economy many times. While the beginning of this year of release occurs on September 24th, the real date to watch is a year from now.
The American economy has not improved in the last seven years in fact, young American adults age 24-28 are holding more debt than the same age group from previous generations.
This segment of the population makes up more than 35% and have debts that exceed their assets, according to research from Dartmouth College assistant professor Jason Houle. That’s roughly double the proportion of their peers in the late 1980s and mid-1970s.
Younger Americans today are taking on far less mortgage debt and far more student and credit-card debt than the early and late boomers did at the same age. The type of debt affect the overall stability of that debt and extends to the bigger picture of the economy.
But we are now part of a global economy and things are not looking so good. Japan’s economy contracted in the second quarter at the fastest pace since 2009. Revised data released Monday showed that the country’s gross domestic product contracted an annualized 7.1% in the April-to-June quarter from the previous three-month period.
The global economy is slowing as capital spending in the quarter was revised down and that there was a jump in corporate inventories—a sign unsold goods are piling up on store shelves.
China’s trade surplus hit a record high in August for the second month in a row as imports fell on the back of domestic weakness in the world’s second-largest economy and exports grew on stronger U.S. and foreign demand. As China artificially limits the appreciation of it currency.
While much of the media is reporting a more rosy economic picture than what exists, it is important to watch those that actually influence the world economy. George Soros and others are not merely observers but participants in world events.e
