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Archive for the ‘George Soros’ Category

Rich valuations for the stock market’s global elite

The news that Paul Walsh, the CEO of Diageo, has unloaded a huge amount of stock (£16m) after exercising a raft of share options draws attention to the extent that the prices of high quality companies with strong global business franchises and the ability to generate cash have been bid up to very rich levels. The veteran market-watcher Richard Russell has observed something similar on the other side of the Atlantic.

What do billionaires Warren Buffett, John Paulson, and George Soros know that you and I don’t know?  I don’t have the answer, but I do know what these billionaires are doing.  They, all three, are selling consumer-oriented stocks.  Buffett has been a cheerleader for US stocks all along. But in the latest filing, Buffett has been drastically cutting back on his exposure to consumer stocks.  Berkshire sold roughly 19 million shares of Johnson and Johnson.  Berkshire has reduced his overall stake in consumer product stocks by 21%, including Kraft and Procter and Gamble.  He has also cleared out his entire position in Intel.  He has sold 10,000 shares of GM and 597,000 shares of IBM. Read the rest of this entry »

Time to watch that basket closely

An interesting range of views from market-watchers in this story from the Financial Times today.  Investors are slowly waking up to the lopsided nature of the currrent global market dynamics, in which there is an apparently real risk of a severe negative market event – either in Europe or in the United States – but one which still falls short of being a likely outcome.

How to position yourself  if you rate the probability of this occurring at say 20%? Is that high enough to justify taking extreme defensive action in anticipation of just such an outcome? That will ultimately depend on your tolerance for risk. A number of well regarded fund managers whose opinions I track have taken their holdings of cash to higher than normal levels in recenet weeks, although few have taken it as far as George Soros, whose Quantum Endowment Fund,  as I noted yesterday, is reported to be 75% in cash (although this is likely to include a range of currencies, which these days are often treated as proxies for other types of investment).

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Written by Jonathan Davis

July 29, 2011 at 6:08 PM

A $100 billion dollar warning

There is an interesting profile in the latest issue of the New Yorker about Ray Dalio, the founder of Bridgewater Associates, one of the world most successful macro hedge fund businesses, in the tradition of George Soros and Julian Robertson. Mr Soros has meanwhile just announced that he is closing his Quantum Endowment Fund to outside investors, ostensibly because of the impact of new regulations, and will in future run it solely as a family office.

Bridgewater Associates has around $100 billion under mangement and both anticipated and weathered the credit crisis with some success. Unlike the Quantum Fund, which until it changed its objective in 2000 from aggressive return-sekking to wealth preservation was famous for its big concentrated bets, the firm’s Pure Alpha fund is up around 10% this year while most hedge funds have struggled to make any money at all. Its style is to make a wide range of bets, many of them paired – buying platinum or selling silver, for example – in an effort to do what hedge funds were originally designed to do, which is to reduce correlation to the market’s overall movement. Dalio’s speciality is making calls on bond and currency markets.

While a lot of the New Yorker article is devoted to the unusual way in which Bridgewater Associates is run, it also contains Dalio’s judgment on current market conditions. “We are still in a deleveraging period” he says, and “we will be in a deleveraging period for ten years or more”. The article continues:

Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. “There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,” he said.

Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo “classic depressions,” Dalio said. The recent deal to avoid an immediate debt default by Greece didn’t alter his pessimistic view. “People concentrate on the particular thing of the moment, and they forget the larger underlying forces,” he said. “That’s what got us into the debt crisis. It’s just today, today.”‘

But he also makes the obvious point that timing is the key to getting these big calls right. “I think late 2012 or early 2013 is going to be another very difficult period” is his reported view. That has always been my expectation too, but recent events – the muted response to the latest Greek bailout plan and the ongoing stalemate over the US debt ceiling (which Soros dismissed last week as “theatre”) -  may of course be bringing the point of crisis nearer.

That may of course also be one reason why the Quantum Fund is currently reported to be sitting with 75% of its assets in cash. However if the debt deal is done, which still looks the more likely outcome, there could be a decent rally in risk assets over the last few months of the year.

Written by Jonathan Davis

July 28, 2011 at 12:31 PM