Ah, what a day! Even George Soros has decided to throw in the towel, so difficult has it become to find a winner one can stick with and still satisfy the regulators. The $25 billion that Soros had working in the markets returned just 2.5% last year and has lost 6% so far this year. Judging from the numbers, it’s probably safe to say that he’s been underweighted in bullion. Very underweighted. But why? Does he perhaps know something that Rick’s Picks readers do not? Hard to say just what that would be, since the fundamentals that have been pushing gold higher were cemented in place when the Federal Reserve System was created in 1913. Soros doesn’t strike us as the kind of guy who would be unmindful of the dollar’s 95% depreciation since then – especially since some of his biggest scores have been leveraged bets against various currencies. And what easier bet could there be than to pile up ingots against the day when the most endangered currency of them all receives its coup de grace?
We don’t imagine he would have been socking it all away in real estate. Even a fool can see not only that real estate prices, both commercial and residential, are being propped up by government bailouts, Fed sleight-of-hand and malfeasant accounting, but that they still have a long way to fall. Not the kind of thing that would interest someone as savvy as Soros. Anyway, we don’t envy him the task of managing all of his billions privately, since one false move could wipe out 20% of his net worth overnight. Imagine the stresses of having to keep jockeying huge sums of cash around when it’s an absolute given that only the bold contrarian will win in the end. Not that we wish Soros success, given his well-documented hatred for America. As far as we’re concerned, if he is bankrupted by the violent economic swings that seem all but ordained over the next few years, it would be an act of grace — not to mention, the best news that Rupert Murdoch and Glenn Beck will have heard in a while.
Chinese Armada
Soros’ bombshell was not yesterday’s big headline, though, nor was the scary news that Dunkin Brands’ IPO was up 50% (!!) in its first day of trading. Scarier still was China’s reassurance that its first aircraft carrier would be used only for “research, experiments and training.” You can bet that when the Mandarin Armada someday steams up to the Gate of Gibraltar, China will promise Europe that they’re only going to put the tip in. All of these news items were secondary, however, to Speaker Boehner’s urgent scurrying around. We wish him well, but it must unnerving for him to see that “don’t pass” bets are starting to emerge on the debt-limit title bout. Is it possible that Congress will produce no sausage at all and that the U.S. will actually go into default? This still seems extremely unlikely to us, although we’re not so sure it’s the 100-to-1 bet we’d have offered just a few short weeks ago. Oddsmaking aside, if America’s credit rating were to fall, it would not merely raise borrowing costs for all of us, as the mainstream press would have it. Rather, it will be the shock that sends the stock market and the economy plummeting to depths that will make the 1929 Crash and the Great Depression look like a surrey ride in the park.
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I’m just going to enjoy today’s extra feisty forum!