Monday, May 23, 2016

Stock Market: Soros Will Lose His Bets Against The S&P 500

(Drivebycuriosity) - George Soros is betting big against the U.S. stock market.  The hedge fund manager doubles his bet against the S&P 500, writes Marketwatch ( marketwatch ). He disclosed in a regulatory filing that he had bought 2.1M-share "put" option in SPY during Q1. These puts rise when the stock market drops and fall when the US stock market climbs.

It seems that Soros is doing this for a while. "Soros Fund Management has doubled up a bet that the S&P 500 is headed for a fall", reported MarketWatch already in February 2014 (marketwatch). Then the hedge fund manager had doubled "a bearish bet on the S&P 500, to the tune of $1.3 billion". I commented Soros´s anti-SP500-bet in a blog post in February 2014 and that he will lose his bet ( why-soros-will-lose-his-bet).

Then the S&P 500 hovered around 1,840 points ( goog finance ). Since then the S&P 500 gained about 10% which led to loses for Soros` puts. The losses might even be higher because puts, as any options, are losing each day some time value which is part of the option price ( investopedia).

I reckon that chances are high that Soros will lose more money. He is betting against the odds. History shows that in the long run the stock market, represented by the S&P 500, is gaining around 7% annually on average (ritholtz  ritholtz). On the average every day is in the green, though just marginally. Dips, corrections & crashes are anomalies and just aberrations from the long term upwardly trend. And they are unpredictable. You cannot predict when they will occur, nor how long they will last and how deep the stocks fall.

I also reckon that the rally (bull market) that started in spring 2009 is still alive and will continue for a while. Inflation & interest rates are still very low (even if the Fed will hike her interest rates in the coming months). The global economy is still getting a lot of tailwinds from cheap commodities. Last year`s price collapse for oil, industrial metals and some agricultures works like a gigantic tax cut. Companies have lower costs, meaning more money to invest (including into a rising labor force), and consumers have more money in their wallets. More jobs, faster rising wages and still cheap gasoline should speed up consumer spending in the US which will foster the global economy (US imports = rising European & Asian exports). Companies also are benefitting from the technological progress - evolution of Internet and other software (including AIs), robotics, 3D-printing and more - and are getting more efficient which will translate into rising earnings. The technological progress is fostering globalization as well. Emerging countries like China and India have easier access to new technologies which is promoting their transformation into modern economies. These processes are working together, creating global economic growth in the decades to come.

Sorry Mr. Soros.

No comments:

Post a Comment