A Conversation with George Soros

Tuesday, March 16th, 2010

George Soros is interviewed in great depth at Hong Kong University, February 3, 2010. In this lecture, he shares his outlook, his thoughts on financial markets, and his philosophy.

A Conversation with George Soros at HKU from JMSC HKU on Vimeo.

Additional resources
Transcripts of Soros’ speeches from Central European University, October 2009:

Lecture 1 General Theory of Reflexivity
Lecture 2 Financial Markets
Lecture 3 Open Society
Lecture 4 Capitalism vs. Open Society
Lecture 5 The Way Ahead

Source: Hong Kong University, February 3, 2010

Tags: Additional Resources, capitalism, Central European University, Conversation With George, Financial Markets, George Soros, Hku, Hong Kong University, philosophy, Society Lecture, Soros George, Speeches, Transcripts
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Gold Market Highlights (3/15/2010)

Monday, March 15th, 2010

Gold Market

For the week, spot gold closed at $1,101.90 per ounce down $32.75 or 2.89 percent. Gold equities, as measured by the XAU Gold & Silver Index (XAU) fell 2.79 percent for the week. The U.S. Trade-Weighted Dollar Index (DXY) also slipped, losing 0.77 percent.

Strengths

• Hedge fund managers John Paulson and George Soros both made significant investments, at discounts to market, in a potential gold-mining company with significant mineral assets. These transactions point to an expectation of future economics in the gold mining sector which are deemed to be more attractive.
• John Embry, chief investment strategist at Sprott Asset Management, was recently interviewed on Mineweb.net and noted the public is becoming increasingly aware of the looming sovereign debt crises. He noted that historically they would counsel investors to have 5 to 10 percent of their assets in the precious metals sector, but now that suggestion is above 20 percent.
• A recent IMF Staff Position Note “Rethinking Macroeconomic Policy,” released this quarter, is making the argument that traditional inflation targeting of 2 percent may not be optimal and opens the discussion of inflation targets at 4 percent.

Weaknesses

• Some of the recent weakness in gold was attributed to liquidations of long position related to an upcoming hearing by the Commodity Futures Trading Commission to investigate speculative interest in the precious metal market.
• South African has fallen to the world’s fourth largest gold producer behind China, Australia and the United States. Falling production is partly being driven by declining ore grades, down 8 percent over the past year. Reportedly, China is very active within South Africa trying to secure supplies of industrial metals, but likely would not rule out opportunities to obtain production interest in the precious metals sector.
• The prime minister of Greece has been busy trying to find governmental allies to create regulations that would limit the use of credit-default-swaps in financial markets, which he blames for driving up the borrowing costs of issuing debt.

Opportunities

• Last year was the first time union membership in the public sector rose above private sector membership. The average hourly wage of public employees last year was $39.66, about 45 percent higher rate than the average hourly wage of $27.42 paid in the private sector. According to U.S. Bureau of Labor Statistics, businesses have cut 8.5 million jobs while government job losses are almost nil. Public spending to support these jobs could contribute to massive deficits that could weaken the dollar and benefit gold.

Threats

• RBC recently highlighted that the South African rand could rise 10 percent in the next three months as the country prepares to host soccer’s World Cup. Unless the gold price rises an equal amount, some of the miners could see a margin squeeze.
• Several reports have highlighted whether the days of big gold companies is over. While this can be an opportunity, uncertainty is more prevalent in the near term.
• The world’s biggest gold miner is planning to list its African assets as a separate company in London. In another case, the world’s third largest gold miner hinted the company could rationalize assets.

Tags: Chief Investment Strategist, China Australia, Commodity Futures Trading Commission, Futures Trading Commission, George Soros, Gold, Gold Equities, Gold Market, Gold Mining Company, Gold Producer, Imf Staff, Industrial Metals, Inflation Targets, John Embry, John Paulson, Ore Grades, Precious Metal Market, Precious Metals Sector, Prime Minister Of Greece, Silver Index Xau, Speculative Interest, Spot Gold
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George Soros lectures on Capitalism versus an Open Society

Friday, October 30th, 2009

This post features video recordings of a lecture series by George Soros at the Central European University in Budapest, discussing capitalism versus an open society.

Part 1:
Soros explores the “agency problem” and its impact on both markets and politics. The principal-agent problem, in which those who are to represent others tend to place their interests ahead of those they are supposed to represent, poses a risk to ethical considerations, and in Soros’s view undermines values necessary for the operation of an open society.

Click here or on the image below to view the video clip.

Part 2:
He analyzes the agency problem inherent in the American political system. He believes the main culprit is a decline in public mortality which he says is fostered by the rise of market fundamentalism.

Click here or on the image below to view the video clip.

Part 3:
Soros states that while capitalism is not directly opposed to an open society, it poses a major threat to its survival. Because of opposition, he believes market and political participants should operate in separate spheres. Soros summarizes the lecture with a postulate that a focus on the “cognitive function” and on focusing on the public good will allow representative democracy to function better, and even only a small number of adherents to this would allow a new middle ground to be rediscovered.

Click here or on the image below to view the video clip.

Click here for a transcript of the lecture.

Source: Financial Times (here, here and here), October 29, 2009.

Tags: Adherents, Advertisement, Budapest, capitalism, Cognitive Function, Culprit, Decline, European Capitalism, Financial Times, George Soros, Lecture Series, Market Fundamentalism, Mortality, Opposition, Participants, Principal Agent, Representative Democracy, risk, Separate Spheres, Survival, Video Clip, Video Recordings
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Face to Face with George Soros

Monday, October 26th, 2009

Chrystia Freeland, US managing editor of the Financial Times, interviewed George Soros, the legendary fund manager, about the state of the world economy, relations between the US and China, his investment performance and regulating bankers’ compensation. A link to the transcript of the interview follows at the end of the post.

Part 1: The world economy and currencies

Click here or on the image below to view the video.

Part 2: The 2008 crisis

Click here or on the image below to view the video.

Part 3: Financial reform

Click here or on the image below to view the video.

Click here for the transcript of the interview.

Source: Chrystia Freeland, Financial Times (click here, here and here), October 23, 2009.

Or view it here:
Soros Transcript

Tags: China, China Investment, Currencies, Emerging Markets, ETF, Face To Face, Financial Times, George Soros, Image View, Interview Source, Investment Performance, Managing Editor, Video Advertisement, World Currencies, World Economy
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Buttonwood Summit Yields Sharp Criticism

Monday, October 19th, 2009

The Economist’s Buttonwood Gathering, a conference bringing together global regulators and bankers to discuss and debate new ideas and develop a new set of guidelines moving forward, has just taken place in New York. Michael Panzer, was in attendance and has kindly shared some of the more interesting quotes on his blog, as reported below.

Secretary Tim Geithner, United States Department of the Treasury:

“Generally, we did not do enough.” (Referring to the failure to address growing concerns over excessive risk-taking in the period leading up to the financial crisis.) [Editor's note: understatement of the year?]

Stephen Roach, Chairman, Morgan Stanley Asia:

Those who are looking for a “V”-shaped recovery are in for “a rude awakening.”

“The imbalances going into the crisis were large to begin with. Now, they are bigger than ever.”

George Soros, Chairman, Soros Fund Management:

“Bankers have too much power.” (Referring to the hold that Wall Street has over Washington.)

The “globalization of financial markets is built on false premises: namely, that markets can be left to their own devices.”

Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation:

“Insured deposits are being used in ways that I don’t like to see.”

Wilbur L. Ross Jr., Chairman and Chief Executive Officer, WL Ross & Co.:

People were focused on “risk-ignoring rates of return.” (Describing one of the things that went helped bring about the financial crisis.)

If regulators had taken the time to visit a Countrywide Lending office, they would have seen something akin to “a Wall Street boiler room,” rather than a bank branch. (Referring to regulator’s unwillingness to go out into the field and see what was really going on during the housing boom.)

“Government is its own systemic risk in the mortgage market.”

Lawrence H. Summers, Director of the National Economic Council, The White House:

The root of most financial errors is “when you try to do today what you wished you had done yesterday.”

“I can assure you that on Main Street, it is a very different conversation.” (Referring to the contrast between the optimism on Wall Street and the more pessimistic mood of those struggling to get by in other parts of the country.)

“It is not the administrations’s view to bribe those who have been part of the problems we have experienced to do what is in the national interest.” (Referring to the suggestion that banks and other financial institutions need financial incentives to support proposed regulatory changes.)

Jeffrey D. Sachs, Director of The Earth Institute, Quetelet Professor of Sustainable Development, and Professor of Health Policy and Management, Columbia University:

“It was grotesque.” (Referring to fact that, despite its extraordinary size, the $62 trillion credit default swap market was essentially unregulated.)

“This was a crisis made in the U.S.” (Referring to the suggestion that China’s export policies played a key role in creating the credit bubble.)

Niall Ferguson, Laurence A. Tisch Professor of History, Harvard University, William Ziegler Professor of Business Administration, Harvard Business School:

“We are living though a gradual shift away from a dollar-centric system.”

“Is China the Germany of our time?” (Referring to the combination of economic dynamism and growing nationalism that stoked the aggressive ambitions of Nazi Germany.)

“The problem of being a declining empire doesn’t have a solution.” (Referring to the suggestion that a great many, if not all, of America’s problems are fixable.)

Robert J. Shiller, Arthur M. Okun Professor of Economics, Yale University:

“Look up ‘bubble’ in an economic textbook and it’s not there.” (Referring to the shortcomings of the traditional economic curriculum.).

People “are living in a ‘pretend-and-extend’ environment, waiting  for the economy to recover.” (Referring to the precarious state of the commercial real estate market and the wave of resets coming due between 2011 and 2013.)

Elizabeth Warren, Chair, TARP Congressional Oversight Panel:

“The reason banks lost confidence in each other is because they looked at their own books.” (Referring to the loss of confidence that roiled markets during the darkest days of the crisis.)

Source: Michael Panzer, October 16, 2009.

Tags: Boiler Room, Chief Executive Officer, China, Department Of The Treasury, Deposit Insurance Corporation, Emerging Markets, Excessive Risk, False Premises, Federal Deposit Insurance, Federal Deposit Insurance Corporation, George Soros, Lawrence H Summers, Michael Panzer, Morgan Stanley, Mortgage Market, National Economic Council, oil, Soros Fund Management, Stephen Roach, Systemic Risk, Tim Geithner, Understatement Of The Year, United States Department, United States Department Of The Treasury
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Joseph Stiglitz Interview on Economic Recovery

Tuesday, October 6th, 2009

Joseph Stiglitz is interviewed by Bloomberg during a visit to Istanbul. Stiglitz believes markets are “irrationally exuberant” about the global recovery.

Bloomberg reports: His comments echo New York University Professor Nouriel Roubini’s view that “markets have gone up too much, too soon, too fast,” and billionaire George Soros, who warned yesterday that America’s economic recovery will be “very slow.”

The U.S. has lost 7.2 million jobs since the recession began in December 2007, and the unemployment rate reached a 26- year high in September, a Labor Department report last week showed. Joblessness is likely to reach 10 percent by the end of the year, according to economists surveyed by Bloomberg News last month.

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It’s “pretty clear that the situation will continue to get worse,” Stiglitz said, citing elements of the jobs report such as the number of people who can’t find a full-time job and the pace at which Americans are dropping out of the labor force.

Economic growth this year and next will “fall well short of what we need to stop unemployment from growing,” he said. The likelihood that the U.S. economy will be “out of the woods” before most of the measures in the Obama administration’s stimulus package expire in 2011 is “very small,” he added.

Source: Stiglitz Says Markets ‘Irrationally Exuberant’ About Recovery, Francine Lacqua and Jeremy Torobin, Bloomberg, October 6 2009

Tags: Billionaire, Bloomberg, Bloomberg News, Economic Growth, Economic Recovery, Economists, ETF, Full Time Job, George Soros, Global Recovery, Jeremy Torobin, Joblessness, Joseph Stiglitz, Labor Department, New York University, Nouriel Roubini, Obama, October 6, Recession, Stimulus Package, Unemployment Rate, York University Professor
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George Soros: Reduces Potash and PetroBras, Increases Convertibles

Wednesday, August 26th, 2009

MarketFolly.com reports that according to 13F filings, George Soros’ Soros Fund Management made some notable changes to its portfolio. Among them, Soros completely exited from its positions in Conoco Phillips, Macy’s, reduced each of its holdings in Petrobras and Potash by about two-thirds and increased positions in convertible bonds. Despite the large reduction in Petrobras, it still remains the fund’s largest holding, and Potash remains a 4.4% holding.

Bloomberg reported -  Soros Fund Management LLC, sold 22 million U.S.-listed common shares of Petrobras, as the Brazilian oil company is known, according to a filing today with the U.S. Securities and Exchange Commission. Soros bought 5.8 million of the company’s U.S.-traded preferred shares.

Soros is taking advantage of the spread between the two types of U.S.-listed Petrobras shares, said Luis Maizel, president of LM Capital Group LLC, which manages about $4 billion. The common shares were 21 percent more expensive than preferred today, according to data compiled by Bloomberg.

“He knows he held a voting right in the common shares that would never translate to actual power,” Maizel said in an interview from San Francisco. “He’s just playing the spread.”

Petrobras preferred shares have also a 10 percent additional dividend, said William Landers, a senior portfolio manager for Latin America at Blackrock Inc.

Re: Potash - Bloomberg reported

Soros cut his stake in Potash Corp. of Saskatchewan Inc., selling 4 million shares of the fertilizer producer while investing in Monsanto Co., the world’s largest seed producer.

Hedge Fund managers like Soros are worth watching because their directional votes (positions) often constitute stringently researched decisions, that are beyond the grasp and willingness of most investors.

(MarketFolly.com) Some Reduced Positions (Some positions they sold some shares of)
Petroleo Brasileiro (PBR): Reduced by 68.9%
Potash (POT): Reduced by 65.2%
Macrovision (MVSN) Bonds: Reduced by 48.8%
Walgreen (WAG): Reduced by 22.7%

Removed Positions (Positions they sold out of completely)
Conoco Phillips (COP), Macys (M), Union Pacific (UNP), American Electric Power (AEP), Donnelley (RRD), Smucker (SJM), Kohls (KSS), Occidental Petroleum (OXY) Puts, iShares Mexico (EWW) Puts, and Arch Coal (ACI).

The rest of their sales were positions that were less than 0.25% of their portfolio each, including: Weyerhauser (WY), Coach (COH), Nabors (NBR), Public Service Enterprise (PEG), Crown Holdings (CCK), DPL (DPL), Emulex (ELX), PPL (PPL), Bluefly (BFLY), Frontier (FTO), Vishay (VSH), Northeast Utilities (NU), ICICI bank (IBN) Puts, Commercial Metals (CMC), Airgas (ARG), Formfactor (FORM), Vignette (VIGN), and Teradyne (TER).

It appears that while they reduced the position in Petrobras (PBR) they initiated a large position in Petrobras-A (PBR-A), and also added significantly to positions both new and existing in convertible bonds.

Bloomberg reported that Soros boosted his stake in oil company Hess Corp. to 5.1 million shares as of June 30 from 3.7 million at the end of the first quarter, according to the filing. Hess was Soros’s second- largest holding. He also added to stakes in Houston-based Plains Exploration & Production Co. and bought shares in Calgary-based Suncor Energy Inc. and InterOil Corp. in Sydney.

(MarketFolly.com) Some New Positions (Brand new positions that they initiated in the last quarter):
The major additions: Petroleo Brasileiro (PBR-A), Autozone (AZO), Goldman Sachs (GS) Puts, Interoil (IOC), Monsanto (MON), Vale (VALE) Puts, BPZ Resources (BPZ), and Suncor (SU).

The rest of their new positions were less than 0.5% of their portfolio each: Verizon (VZ), Diodes (DIOD) Bonds, SPSS (SPSS) Bond, Sandridge Energy (SD), Exar (EXAR), Apache (APA) Calls, Pioneer Natural Resources (PXD), Lawson Software (LWSN) Bond, Blackboard (BBBB) Bond, Novagold (NG), CSX (CSX), Brigham Exploration (BEXP), Comcast (CMCSA), CA (CA), Constellation Energy (CEG), Focus Media (FMCN), Wabtec (WAB), Covanta (CVA) Calls, Ultrashort Financials (SKF), Berry Petroleum (BRY), Exco Resources (XCO), and Teradata (TDC) Calls.

Similar to Soros’ Q1 2009 portfolio, their second quarter portfolio is heavily laden with convertible bonds. Seven out of their top 15 positions are in bonds, with LSI and Linear Technology their top picks in that regard. They boosed their Flextronics Bond position by 141%, their Tech Data Bond position by 77% and their LSI Bond position by around 20%. So, they were still liking those names over the course of the past quarter.

Some Increased Positions (A few positions they already owned but added shares to)
Allied Nevada Gold (ANV): Increased by 4,242% (was previously 0.01% of their portfolio and is now boosted up to only 0.45% of their portfolio)
Covanta (CVA): Increased by 1,185.5% (was previously a 0.11% position for them and is now 1.89% of their portfolio)
AT&T (T): Increased by 691% (boosted from 0.05% of their portfolio up to 0.47% of their portfolio now)
Allegheny Energy (AYE): Increased by 259% (from 0.13% of their portfolio up to 0.55% of their portfolio)
Flextronics (FLEX) Bond: Increased by 141%
Plains Exploration (PXP): Increased by 81.8%
Tech Data (TECD) Bond: Increased by 77%
Hess (HES): Increased by 40%
RF Micro (RFMD) Bonds: Increased by 37.9%
LSI (LSI) Bonds: Increased by 19.4%

Here is the latest list of Soros Fund Management Holdings:

Top 15 Holdings by percentage of long portfolio *(see note below regarding calculations)

1. Petroleo Brasileiro (PBR): 9.58% of portfolio
2. Hess (HES): 6.56% of portfolio
3. LSI Corp (LSI) Bond: 5.85% of portfolio
4. Linear Technology (LLTC) Bond: 5.2% of portfolio
5. Petroleo Brasileiro (PBR-A): 4.68% of portfolio
6. RF Micro Devices (RFMD) Bond: 4.42% of portfolio
7. Potash (POT): 4.4% of portfolio
8. Plains Exploration (PXP): 4.25% of portfolio
9. Tech Data (TECD) Bond: 3.96% of portfolio
10. RF Micro (RFMD) Bond 2nd set: 3.7% of portfolio
11. Flextronics (FLEX) 1%10 Bond: 3.2% of portfolio
12. Covanta (CVA): 1.9% of portfolio
13. Autozone (AZO): 1.9% of portfolio
14. Audiocodes (AUDC) 2% 24 Bond: 1.6% of portfolio
15. Entergy (ETR): 1.6% of portfolio

Tags: Blackrock Inc, Capital Group Llc, Common Shares, Conoco Phillips, Convertible Bonds, ETF, Fertilizer Producer, George Soros, Gold, Hedge Fund Managers, Monsanto Co, oil, Petrobras, Potash Corp Of Saskatchewan, Potash Corp Of Saskatchewan Inc, Potash Pot, Preferred Shares, Securities And Exchange Commission, Seed Producer, Soros Fund Management, Soros Fund Management Llc, Voting Right, William Landers
Posted in Gold, Markets | No Comments »

Video-Digest: Roller Coaster into the Long Weekend

Saturday, July 4th, 2009

The holiday-shortened week saw investors pondering the depth of the economic rabbit-hole. As investors vacillated, most financial markets were characterized by a roller-coaster ride. Friday’s worse-than-expected jobs data left no doubt that the economy was in recession.

The highlights of the week’s discussions were captured on video and are included in this video-o-rama compilation. Strutting their stuff was a star-studded cast including the likes of George Soros, Hugh Hendry, Dan Greenhaus, Paul Krugman, Bill Gross, Nassim Taleb, Jeff Immelt, Stephen Roach, Bob Prechter and Marc Faber.

As an aside, the weather in Europe - where I am spending two weeks with my family in Slovenia and Switzerland - has been characterized of late by endless thunderstorms. Strikingly, the economic mood is no less despondent than that of the holiday-makers trying to escape the ominous dark clouds. But wait, is that a forecast for better days ahead?

Elsewhere, the jail doors closed behind “evil” Bernie Madoff, sentenced to 150 years for his epic fraud.

The video clips kick off with Financial Times investment editor John Authers reviewing asset class movements of the past 12 months, and finishes with the delightful Yield curve mambo - swap spreads data pulled into Excel, mashed up a bit and set to music.

John Authers (Financial Times): A 12-month review
“John Authers, FT’s investment editor, reviews the last 12 months, looking across the asset classes, votality measures and default risks.”

Click here for the article.

Source: John Authers, Financial Times, July 1, 2009

The Wall Street Journal: Soros on market instability
“Soros Fund Management Chairman George Soros talks to WSJ Deputy Managing Editor Alan Murray about market instability and the difficulty for investors.”

Source: The Wall Street Journal, June 30, 2009.

CNBC: Hendry - print more money to avoid bigger slump
“Fears about inflation and hyperinflation could create another economic downturn, bigger than the one the world went through, Hugh Hendry, chief investment officer at hedge fund Eclectica, told CNBC.”

Source: CNBC, June 29, 2009.

Yahoo Finance, Tech Ticker: Fill or kill - strong case we don’t need Geithner’s toxic debt scheme
“PPIP, the Public-Private Investment Program, is the government’s controversial plan to spur buying of banks’ toxic debt. Since Geithner first floated the scheme in late March, bank stocks have rallied sharply and most big financial services firms have raised capital via equity sales - thanks, in part, to optimism about the PPIP.

“The irony, of course, is the plan hasn’t gotten off the ground and is hamstrung, most notably, by banks’ reluctance to sell their ‘assets’ at what they consider rock-bottom prices.

“There’s a strong case to be made we don’t need the PPIP anymore, says Dan Greenhaus, an analyst in Miller Tabak’s strategy group. At the same time, banks are going to be even less willing to participate now, since they’ve raised capital and the economy has shown signs of stabilizing.

“If Geithner’s goal was simply to inject confidence into the system so banks could raise capital, then PPIP really was ‘the greatest program that never occurred’, as Goldman managing director Scott Romanoff described it, according to The WSJ. Viewed in this light, Geithner might be wise to kill the program altogether.

“But if Geithner’s goal was really to get toxic assets off the banks’ balance sheets, the program has failed completely - or merits an incomplete at best. Against that backdrop, it will be interesting to see what Geithner says about PPIP this week, if anything.”

Source: Aaron Task, Yahoo Finance, Tech Ticker, July 1, 2009.

Charlie Rose: A conversation with Paul Krugman

Source: Charlie Rose, June 30, 2009.

CNBC: Bond king reacts to jobs data
“William Gross, co-CIO of Pimco, shares his reaction to Thursday’s jobs report.”

Source: CNBC, July 2, 2009.

CNBC: “Black Swan” on the economy
“Nassim Taleb, principal of Universa Investments and author of ‘The Black Swan’, shares his outlook on the economy.”

Source: CNBC, July 2, 2009.

The Wall Street Journal: Role of housing in economic recovery
“The economy will not recover until housing prices stabilize. Housing affects not just American families but banks, credit markets and construction business and jobs. Economics editor David Wessel explains.”

Source: The Wall Street Journal, June 24, 2009.

Charlie Rose: A conversation with Jeff Immelt, chairman and CEO of GE

Source: Charlie Rose, June 25, 2009.

CNBC: Roach - Asia won’t be the new engine of growth
“Hopes that Asia is going to be the new engine of the global economy are overblown at this point, cautions Stephen Roach, chairman at Morgan Stanley Asia. He tells CNBC’s Martin Soong, Karen Tso & Sri Jegarajah why.”

Source: CNBC, June 30, 2009.

The Wall Street Journal: China can’t save the world
“Chinese fiscal and monetary stimulus will boost domestic growth this year, but it won’t do much for the rest of the world. Chinese demand for foreign manufactured goods has been sliding. Instead, they’ve been buying commodities.”

Source: The Wall Street Journal, June 30, 2009.

The Wall Street Journal: “Evil” Madoff gets 150 years in epic fraud
“Following Bernie Madoff’s sentence of 150 years in prison, Kelsey Hubbard gets reactions from victims of the fraud and talks with WSJ’s Peter Lattman about what went on inside the courtroom.”

Source: The Wall Street Journal, June 30, 2009.

The Wall Street Journal:  Yearning for earnings? Hang in there
“Amid mixed economic data, the Street still expects an end to sliding corporate profits late in 2009, reports Barrons.com’s Johanna Bennett.”

Source: David Ranson, The Wall Street Journal, March 3, 2008.

CNBC: Deja yu Dow 10,000?
“Whether the alleged bear market rally will get us to Dow 10,000 ten years later, with Robert Prechter, Elliot Wave International president.”

Source: CNBC, June 30, 2009.

Bloomberg: Faber doesn’t see new stock market lows
“Marc Faber, publisher of the Gloom, Boom and Doom Report, talks with Bloomberg’s Erik Schatzker and Deirdre Bolton about the outlook for the US equity market. Faber, speaking from Seoul, also discusses his investment strategy, prospects for economic recovery and concerns about inflation.”

Source: Bloomberg, June 29, 2009.

CNBC: Roach - commodity prices won’t see deflation
“The deflation call for commodity prices is largely behind us, says Stephen Roach, chairman at Morgan Stanley Asia. He tells CNBC’s Karen Tso & Martin Soong that he does not see a pronounced downtrend in commodity prices like what was seen last fall.”

Source: CNBC, June 30, 2009.

The Wall Street Journal: Charts show USD could resume its downtrend
“The US Dollar Index may rise a little further towards the 81.50 to 82.00 resistance area, where it is expected to be capped by the March to June resistance line, before slipping back towards the 78.33 June low.”

Source: The Wall Street Journal, July 1, 2009.

John Authers (Financial Times): Chinese currency policy?
“John Authers says that while China sits on huge piles of dollars, it cannot push the dollar down.”

Click here for the article.

Source: John Authers, Financial Times, June 29, 2009.

You Tube: Yield curve mambo
“Three month to 30 year US swap spreads data from Bloomberg pulled into excel, mashed up a bit and set to music.”

Source: You Tube, June 27, 2009.

Tags: Bob Prechter, Commodities, Dark Clouds, George Soros, Greenhaus, Hugh Hendry, Jail Doors, Jeff Immelt, John Authers, Marc Faber, Market Instability, Nassim Taleb, O Rama, Paul Krugman, Rabbit Hole, Roller Coaster Ride, Soros Fund Management, Stephen Roach, Wall Street Journal, Weather In Europe, Yield Curve
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Rogers on commodities (Newsweek)

Monday, April 20th, 2009

“Jim Rogers, the legendary American investor, financial commentator and, along with George Soros, founder of the Quantum Fund, is the ultimate commodities bull. More than 10 years ago, he started the Rogers International Commodities Index, and in 2005 he wrote ‘Hot Commodities: How Anyone Can Invest Profitably in the World’s Best Market’. Below, he explains to Newsweek’s Rana Foroohar why oil is still black gold.

Foroohar: Inflation-adjusted, oil is the same price that it was in 1976, and in 1870. So why are you still a bull?
Rogers: It doesn’t matter. It’s also true that just about any stock you can think about is at or below where it was in the 1970s right now. So what? There are still 15- to 20-year periods when commodities, stocks and any other asset class goes up a great deal. In 1987 stocks collapsed by 40-80%. But people who were smart enough to stay in them made 1,000% returns in the next decade. The point is to take advantage of those periods and make some money.

What’s the fundamental case for commodities right now?
Supply is declining. There’s been 35 years of low investment in production capacity. The last lead smelter in the US was built in 1969! There’s been no major oilfield discovery in 40 years. Oil is in decline. According to the International Energy Agency, oil reserves are declining significantly. At this rate, in 20 years, there will be no oil left. The only people to make money in the next 20 years will make it in commodities. It’s the only asset class where the fundamentals are improving. I mean, look at Citigroup, look at GM. Those fundamentals are not improving.

Do you see commodities as an inflation hedge?
Absolutely. This is only time in history where you’ve got every central bank in the world printing money at the same time. Consumer prices are going to go way up. The public is already getting out of paper money, which is why you’re seeing gold go up.

Does the future growth of China factor into your bullishness?
China is tiny in comparison to the US economy. Anyone who thinks that the commodities story is driven by China needs to do more homework. In the 1970s, everyone was in recession, and you still had declining supply [in oil] and higher prices. Asia wasn’t even in the game then. China was run by Mao. But now, of course, there are those 3 billion people in Asia who are in the game. It’s just another factor.”

Click here for the full article.

Source: Rana Foroohar, Newsweek, April 11, 2009.

Hat tip: Investment Postcards

Tags: American Investor, asset class, Black Gold, China Factor, Financial Commentator, George Soros, Growth Of China, Hot Commodities, International Commodities Index, International Energy Agency, Jim Rogers, Lead Smelter, Oil Reserves, Paper Money, Printing Money, Quantum Fund, Rogers International Commodities Index, Time Consumer, Time In History, World Printing
Posted in Commodities, Gold | No Comments »

George Soros: Reuters Roundtable Interview

Saturday, April 11th, 2009

George Soros believes the US economy will not recover this year and that the recent rise in global stocks is a bear market rally, saying ‘the system was fundamentally flawed’.

Speaking at a Reuters roundtable, Soros answered questions on the G20, the banking system, and the prospects for the dollar:

You can read the report here.

Notes from Reuters:

The U.S. economy is in for a “lasting slowdown” and could face a Japan-style period of relatively low growth coupled with high inflation, billionaire investor George Soros said on Monday.

Soros, speaking to Reuters Financial Television, also warned that rescuing U.S. banks could turn them into “zombies” that draw the lifeblood of the economy, prolonging the economic slowdown.

“I don’t expect the U.S. economy to recover in the third or fourth quarter so I think we are in for a pretty lasting slowdown,” Soros said, adding that in 2010 there might be “something” in terms of U.S. growth.

Soros’ view contrasts with the majority of economists, who expect the U.S. economy to stop contracting in the third quarter and resume growing in the fourth quarter, according to the latest monthly poll of forecasts conducted by Reuters.

The recovery will look like “an inverted square root sign,” Soros said. “You hit bottom and you automatically rebound some, but then you don’t come out of it in a V-shape recovery or anything like that. You settle down - step down.”

The healing of the banking system and housing markets is crucial to recovery. “The banking system, as a whole, is basically insolvent,” Soros said.

Tags: Banking System, Bear Market, Billionaire, Dollar, Economic Slowdown, Economists, Economy, Financial Television, Fourth Quarter, G20, George Soros, Global Stocks, inflation, Japan Style, Lifeblood, Market Rally, Prospects, Reuters, Roundtable, Roundtable Interview, Shape Recovery, Square Root Sign, Style Period, Zombies
Posted in Markets | No Comments »

Five in a row for stock markets

Friday, April 10th, 2009

The holiday-shortened week witnessed relatively few news and economic reports, but the major US stock indices nevertheless scored their first five-week stretch of gains since October 2007.

A mixed bag of video clips was produced. First up is Pimco’s Mohamed El-Erian, saying, “Fundamentally we are in a volatile journey to what we call the new normal, the new destination. The world is changing.” Also featuring prominently are a series of must-see interviews by Aaron Task (Yahoo Finance, Tech Ticker) with George Soros about a wide-ranging number of issues.

Spicing up the week’s video footage was a fairly lively debate between UBS’s George Magnus and the G7’s Len Komileva, with another interesting discussion coming from Nouriel Roubini and Goldman’s Jim O’Neill.

Also make sure to watch Argentinean economist Adrian Salbuchi’s video clips, putting the financial collapse in context by referring to historical examples from Argentina.

CNBC: Pimco’s power player
“The markets are on a volatile journey to a ‘new normal’, says Mohamed El-Erian, Pimco CEO.”

Source: CNBC, April 7, 2009.

Financial Times: Roundtable - the road to recovery
“Nouriel Roubini of New York University and Jim O’Neill, chief investment economist at Goldman Sachs, talk to John Thornhill about the G20 summit, and the road to economic recovery.”

Source: Financial Times, April 6, 2009.

Face the Nation: Geithner talks recovery
“Bob Schieffer spoke with Treasury Secretary Timothy Geithner about economic recovery and a possible auto industry bailout.”

Source: Face the Nation, April 5, 2009.

Financial Times: A heated debate on G20 and fiscal stimulus
“In a special View from the Markets, Gillian Tett, capital markets editor, chairs a debate on what the G20 did and didn’t achieve. In the hot seats were George Magnus, chief economist adviser, UBS and Len Komileva, head of G7 market economics.”

Click here or on the image below for Part 1 of the interview.

Part 2: They agree the G20 didn’t go far enough in finding measures to fix the banks and end the financial crisis.

Click here for Part 2 of the interview.

Part 3: They discuss whether credit markets will follow glimmers of hope in the equity markets and if securitization has any future after the crisis.

Click here for Part 3 of the interview.

Source: Gillian Tett, Financial Times, April 6, 2009.

Yahoo Finance, Tech Ticker: Soros says Fed in a bind - beware stagflation, bursting of bond bubble
“After the financial market collapsed last fall, the Fed responded with a massive injection of liquidity and expansion of the monetary base. Eventually, Ben Bernanke & Co. will face the challenge of having to remove that liquidity from the system. ‘That’s a big and difficult task and probably the authorities will not be able to do it well,’ says legendary financier George Soros, chairman of Soros Fund Management. ‘That’s the fear that drives people into gold.’

“Soros wouldn’t say whether he’s actively trading gold but certainly implied it’s a good bet; more explicitly, he agreed with the view there’s a ‘bubble’ in Treasuries that’s likely to burst sooner rather than later.

“‘The moment this fear of deflation turns into a fear of inflation, you’ll find interest rates rise in the long end which is going to choke off the recovery,’ he says. ‘If we are successful [in reviving the economy] we are heading from the prospect of deflation to stagflation.’”

Source: Yahoo Finance, Tech Ticker, April 7, 2009.

YouTube: Elizabeth Warren introduces COP’s April report
“Elizabeth Warren introduces the April oversight report of the Congressional Oversight Panel: Assessing Treasury’s Strategy: Six Months of TARP.”

Source: YouTube, April 7, 2009.

Bloomberg: Geithner addresses mortgage fraud

Source: Bloomberg (via YouTube), April 6, 2009.

Business News Network: Richard Koo - Lost decade
“BNN interviews Richard Koo, chief economist, Nomura Research Institute.”

Source: Business News Network, March 23, 2009.

YouTube: Salbuchi - global financial collapse

“Part 1: An Argentine opinion on the Global Financial Crisis, describing the whole Global Financial System as one vast Ponzi Scheme. Like a pyramid, it has four sides and is a predictable model. The four sides are: (1) Artificially control the supply of public State-issued currency, (2) Artificially impose banking money as the primary source of funding in the economy, (3) Promote doing everything by bebt, and (4) Erect complex channels that allow privatizing profits when the model is in expansion mode and socialize losses when the model goes into contraction mode.”

“Part 2: How will the global financial collapse end? Are we on the way towards global war and world government?”

Source: YouTube, April 3, 2009.

Charlie Rose: A review of President Obama’s trip to Europe with Zbigniew Brzezinski & Henry Kissinger
“A review of President Obama’s trip to Europe with Zbigniew Brzezinski, United States National Security Advisor to President Jimmy Carter, and Henry Kissinger, former Secretary of State.”

[PduP: The duration of the video is 53 minutes.]

Source: Charlie Rose, April 6, 2009.

Forbes: Meredith Whitney predicts new crisis in consumer credit
“Star analyst Meredith Whitney warns Steve Forbes to avoid big bank stocks like Wachovia, Bank of America and Citigroup as she predicts a new crisis in consumer credit.”

Source: Steve Forbes, Forbes, April 3, 2009.

John Authers (Financial Times): Climbing the wall of worry
“The rally of the past month has been impressively broad. More impressive still, it has been achieved in spite of a string of awful superlatives, says John Authers.”

Click here for the article.

Source: John Authers, Financial Times, April 8, 2009.

Yahoo Finance, Tech Ticker: Soros - “danger of collapse has passed,” but stock rally not sustainable
“‘The real danger of collapse has passed,’ says legendary financier George Soros. But the ‘fallout of the collapse’ of the banking system ‘will linger’.

“In the wake of Lehman Brothers’ bankruptcy on September 15, 2008, authorities were forced to put the financial system remains on ‘artificial life support, which is where it is now,’ says Soros, the chairman of Soros Fund Management and author of several books, including most recently The Crash of 2008 and What It Means.

“As a result, the billionaire speculator says the stock market’s recent rally is doomed to fail. ‘Now we will face reality,’ he says, referring to a belief policymakers ‘did not succeed in recapitalizing the banks to the point where they can lend freely.’ He added, ‘talk of zombie banks - unfortunately that’s where we are now,’ Soros says. ‘Instead of providing lifeblood of credit, [banks] are effectively drawing the lifeblood of activity of profit to themselves.’

“That, in turn, will keep the economy from producing anything more than a fleeting bounce for the foreseeable future, says Soros.”

Source: Yahoo Finance, Tech Ticker, April 7, 2009.

Bloomberg: Marc Faber says stocks may see correct by 10%
“Marc Faber, publisher of the Gloom, Boom and Doom Report, talks with Bloomberg’s Susan Li, Arnold Gay and Patricia Lui about the outlook for global stocks. Faber, speaking from Singapore, also discusses his forecasts for the bond market, gold price, dollar and his investment strategy.”

Source: Bloomberg, April 7, 2009.

CNBC: Bear market rally is halfway through, says chartist
“‘All European markets are in the middle of a rally, which is probably about halfway through,’ Robin Griffiths from Cazenove Capital said. When analyzing the chart for the Xetra DAX index, he suggests the German index has another 20% higher to go.”

Source: CNBC, April 6, 2009.

Yahoo Finance, Tech Ticker: “The tide is turning,” says Prieur du Plessis
“There was a general sense of optimism this weekend in San Diego, where I attended a hedge fund conference and separate tribute dinner for newsletter legend Richard Russell. Among those in attendance - and feeling at least cautiously optimistic - was Prieur du Plessis, noted blogger and executive chairman of Plexus Asset Management, a South African-based firm with about $2 billion of assets.”

Source: Yahoo Finance, Tech Ticker, April 6, 2009.

Yahoo Finance, Tech Ticker: Soros - dollar’s strength a measure of system’s “sickness”, euro will remain viable
“George Soros is a man of many skills. The billionaire has been very successful as an author, philanthropist, and as a force in liberal politics.

“Arguably Soros’ greatest skill - and undoubtedly where he made his fortune - is as a speculator, specifically in the realm of currencies. Soros is best known as ‘the man who broke the Bank of England’ for his infamous short bet against the pound in 1992. Less known but nearly as successful was his 1985 ‘Plaza Accord’ bet that the dollar would fall against the yen.

“So when George Soros talks currencies, people listen. In the accompanying clip, he provides insights on three of today’s big currency questions:

Will the dollar maintain its status as the world’s reserve currency?

Is there are risk of a breakup of the Eurozone?

Is he still short the British sterling today?”

Source: Yahoo Finance, Tech Ticker, April 7, 2009.

John Authers (Financial Times): Gold loses lustre
“Gold is an inflation hedge but inflation expectations cannot explain its recent sell-off, says John Authers.”

Click here for the article.

Source: John Authers, Financial Times, April 7, 2009.

CNBC: Yergin - oil headed to $40?
“Investors should brace themselves for the long aftershock of oil trending towards $40 a barrel, says Daniel Yergin, Cambridge Energy Research Associates chairman.”

Source: CNBC, April 6, 2009.

CNBC: Irish Finance Minister cuts growth outlook
“Irish Finance Minister Brian Lenihan cut his growth forecast for the country’s economy on Tuesday, to -8% for 2009. Dan O’Brien from Economist Intelligence Unit has the analysis.”

Source: CNBC, April 7, 2009.

Tags: Adrian Salbuchi, Bob Schieffer, Chief Economist, ETF, Face The Nation, Financial Collapse, Fiscal Stimulus, G20 Summit, George Magnus, George Soros, Gillian Tett, Goldman Sachs, Hot Seats, John Thornhill, Market Economics, Mohamed El Erian, New York University, Nouriel Roubini, Stock Indices, Timothy Geithner, Yahoo Finance
Posted in Bonds, Credit Markets, Gold, Markets | No Comments »

George Soros: Interview

Friday, April 3rd, 2009

Maria Bartiromo interviews George Soros about the IMFs plan to make available as much as $750-billion in SDRs (Special Drawing Rights) to aid the poorest of developing countries.

Soros also discusses which places in the world are doing better than the rest, and the interview ends on the subject of China and its overtures about an alternative reserve currency. Watch it here or read the full transcript below.

Maria Bartiromo: You’ve seen the communiques, you’ve been in some of these meetings. What’s your reaction, what did you think of the communiques?

George Soros: They managed to get more than I expected. They really pulled a few rabbits out of the hat and I think it was a very impressive communique. And for Gordon Brown, it really was his finest hour.

MB: Why?

GS: Because he really did see the need for addressing this global problem, because you have the less developed world facing potential collapse as the banks don’t roll over their loans. So something had to be done and he did manage to bring it together. I would say that this is probably the first time they are actually ahead of the curve.

MB: Let’s talk about the money, for the IMF that could rise to $750-billion; is that enough and more importantly, Who should get the money?

GS: Well there, they managed to put together a bigger package than anybody expected, and very important is the issue of special drawing rights to $250-billion. That is effectively creating internationally new money, and, that will help to allow the countries that are not able to print their own money the way that we can, actually to stimulate their economies. And I think the way for the rich countries to transfer their allocations to the most needy countries can be worked out.

MB: So are you saying that the efforts as far as the IMF and the communique overall, has completely changed your mind? I mean a week and a half ago you were out very vocal, saying, look, the IMF is going to have to basically bailout the UK. Here we are sitting in one of the greatest cities in the world.

GS: No, that was a misleading headline given to an interview where I said it is most unlikely that England would need to go to the IMF. However the fact that its created such an outcry shows what a stigma there is attached about having to go to the IMF.

MB: A lot of people, when you were talking about the UK and the need for help, and really a bailout. People are saying, well wait a second, you know George Soros years ago, shorted the pound, and made money on this, and maybe he’s playing his book. In fact, Lord Mandelson, he basically said that to me in so many words earlier in the week. Are you shorting the pound right now?

GS: No, I’m not. First of all, I’m withdrawn from actually running the fund. I did it last year, we came through it, and I have handed it back to the people who can do it. So, I’m out of the markets as I was before, I came out of retirement and I’m back in retirement.

MB: Until you feel, I don’t know if you’re going to able to stay in retirement frankly, but let me ask you about the operations in terms of hedge funds, oversight, because this is another thing, the group said, they want more regulation of hedge funds. Did you agree with what they said, and where they’re going in terms of more oversight?

GS: Well I think you absolutely need more regulation, but you really need to have better regulation, and, yes, we have allowed the markets a free hand, and of course that was very unsound. But we don’t want to go overboard, now, with regulation because the fact that markets are imperfect, because they don’t anticipate the future correctly. Regulators are just as imperfect.

MB: Can you characterize the situation for us in Eastern Europe right now?

GS: What happened when Western Europe and America guaranteed the banking system, the other countries in Eastern Europe coudln’t provide similarly convincing guarantees, and the banks in the West started pulling their capital out of there, and the national regulators also encouraged the banks to lend at home, and not abroad, and that created a crisis for Eastern Europe.

MB: What are your thoughts on the developments surrounding mark-to-market? FASB coming out and saying that they do want to make it easier, a little more lax in terms of the regulation for mark-to-market? What are your thoughts on that?

GS: There I remain very critical, because I think the much more effective would have been to recapitalize the banks. And because of the history of the way the TARP money was spent, it was really messy and very badly done. And because of that there’s increasing reluctance by Congress to make new money available, and yet it would be much much better, to create clean banks. Banks that are able to lend. I think we missed the boat on that. And that means that we will be spending a long time allowing the banks to dig themselves out of the hole, and while they are doing that they will not be providing sufficient credit to carry on business. They’ll be charging a lot more, and generally it will weigh on the economy for a period of time.

MB: I know you saw the story about some hedge funds saying, look, we’re going to leave London; the tax situation is not favourable, we don’t like the business conditions here. What do you think about that?

GS: Where are they going to go? Another planet? I mean, you know, there is no alternative. Now with the tax havens being brought under control, I think hedge funds will have to get used to being regulated.

MB: Is there anywhere in the world doing well right now? I mean you where you would say, this is safety, this is where I want to be?

GS: I think that actually China stands to emerge faster and better than most other countries. I think actually, Brazil, that has been hurt by this financial crisis after Lehman, is also basically quite well situated. I think India, because it is less tied in with the rest of the world. So, I think that the global economy will probably start growing next year.

MB: George, the Chinese have said that there should be another option away from the US dollar as the reserve currency. Do you agree with that?

GS: In the long run, that may be appropriate. Its not in the cards now; the special drawing rights that are now being issued, those are not currency, those are bookkeeping entries at the IMF. You have to convert them into a convertible currency before you can use them. I think probably the Chinese Yuan will probably be made into one of the currencies into which you can convert, which is appropriate, because China is now very important. We are no where near the SDRs becoming an international currency.

MB: Long term what would the currency be? Would it be the Chinese Yuan?

GS: No, I think the dollar is the dominant currency, for a while to come, but in the long run it would be, it may be important that the US should be subject to the same discipline as the rest of the world.

Tags: Allocations, Bailout, Banks, Collapse, Communiques, Curve, Developing Countries, Emerging Markets, Finest Hour, Full Transcript, George Soros, Global Economy, Global Problem, Gordon Brown, Imf, Imf Plan, India, Maria Bartiromo, Needy Countries, New Money, Overtures, Places In The World, Rabbits, Reserve Currency, Rich Countries, Special Drawing Rights
Posted in Emerging Markets, India, Markets | Comments Off