One recurring theme we've been seeing time and again in the news lately has been more big-name (and deep-pocketed) investors coming out and warning about an imminent market downturn. The list has grown from Stanley Druckenmiller and George Soros to include other investing luminaries such as Carl Icahn and Sam Zell.
Big Bets on Gold
As you might expect, wealthy billionaire investors who are pessimistic about the outlook for the global economy are most likely to turn to one specific safe haven: gold.
Back at the much-watched Sohn Investment Conference earlier this spring, the famous investor Stanley Druckenmiller directly advised attendees to dump their holdings in equities in favor of holding gold. He blamed myopic and ineffective monetary policy from the Federal Reserve for encouraging "reckless" corporate behavior. Druckenmiller only sees the situation getting worse before it improves.
Another legendary investor who has been making news for dreary predictions about the economy is George Soros. Early in his career, Soros made a name for himself by essentially betting against the Bank of England—and winning. He has a reputation for bearish predictions and for putting his money where his mouth is by making sizeable investments that match this bearishness. This time, Soros sold stocks and purchased 19 million shares of the world's largest gold miner, Barrick Gold (ABX) and a million shares in miner Silver Wheaton (SLW). Barrick has doubled in value since Soros made his bet in the first quarter.
Economist Mohamed El-Erain points to six "Black Swan" events that could prove helpful to Soros's positions:
- Brexit passes and disrupts markets;
- More cracks show in the Chinese economy;
- The U.S. remains isolationist economically;
- Extreme volatility in the forex market;
- European banks continue to underperform;
- Mismatched investment allocations unwind.
Moreover, according to news site Gold-Eagle.com,
But Soros is just one investor. As it turns out, others are beginning to see the yellow light when it comes to gold. Rick de los Royes who helps manage metals and mining at T. Rowe Price, told the Wall Street Journal that “It’s been an unbelievably quick change from despair to euphoria since the beginning of the year.” Moreover, Jeffrey Gundlach of DoubleLine Capital sees gold going to $1,400.
Meanwhile, another famous name we can add to this list is Carl Icahn. While Icahn is known more for contentious public squabbles as an activist investor than he is for being particularly bearish, Dollar Collapse explains,
An investment fund run by the 80-year-old Icahn had a net short position of 149% at the end of the first quarter. Icahn is considerably more bearish than he was at the end of 2015, when the fund’s net short position was 25%. A year ago, the fund had a net long position of 4%. It’s rare to see a fund outside a dedicated short fund with such a large bearish stance.
Billionaire Sam Zell famously sold off his real estate empire prior to the housing collapse. Some are taking notice that Zell is again selling off these assets.
In many cases these investors are turning toward gold mining stocks—both the major and junior miners—to establish their positions, which is also what Marc Faber from the Gloom, Boom and Doom report has suggested. Yet Faber has recommended physical gold as a way to "short the central banks" in the past.
Overall, if the wide range of potential causes for a significant market downturn aren't enough evidence, the behavior of these billionaire investors ought to catch the attention of the markets as to the benefits of owning gold, especially during times of economic turmoil.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.