 |
Soros and Paulson Toe to Toe on Gold, Or Are They? (KGC, AU, GFI, GLD, IOC, HES, WFT, CVA, SU)
by Owen Vater | January 29th | Filed in: Hedge Fund and Institutional News
Two of the Street’s most prominent investors have voiced widely varying opinions on gold, but investors will be looking for their respective funds to do the talking for them. Earlier this month we noted that John Paulson and George Soros were among the few fund managers to earn gains in both 2008 and 2009, but strikingly different views on precious metals could end one manager’s winning streak in 2010. Paulson’s gold lust is unmatched among the upper echelon of money managers, and Soros recently called the metal “the ultimate bubble” amid historic low interest rates. The winning trade is to be determined, but investors will be privy to the managers’ end-of-2009 bets when the deadline for 13F filings arrives next month. During the third quarter, Paulson’s hedge fund had significant exposure to the precious metals market. Kinross Gold (KGC), AngloGold Ashanti (AU), Gold Fields (GFI), and a massive position in the SPDR Gold Trust ETF (GLD) were all among top U.S.-listed equity positions, and Paulson announced plans to launch his own gold fund back in November. Meanwhile, Soros Fund Management’s top-15 U.S.-listed equity positions had an energy bias. The fund, now primarily managed by Soros’ two sons, was adding stakes in oil and gas players Interoil (IOC), Hess (HES), and Weatherford International (WFT) as well as waste to energy firm Covanta (CVA) and oil sands giant Suncor (SU). However, Soros was hardly bearish on gold during the third quarter. He increased a previously paltry position in the SPDR Gold Trust to 2.5 million shares, making it one of the fund’s largest positions during the period, and investors will be eying that investment closely when the next batch of regulatory filings comes in next month. To see where your performance stacks up against Wall Street’s most prominent Pros, or simply to see some other stocks they’ve invested in, visit tickerspy.com. Pro portfolio performance is based on institutions’ top-15 holdings as disclosed in quarter-end filings with the SEC. Pro performance does not take into account additional holdings beyond the top 15 nor does it include positions that are not required to be disclosed by the SEC. As such, Pro portfolio performance should be considered an approximation and not a precise record of how an institution has performed over time. 
|
| Home | Find | Research | Track | Register | My Account | Logout | Web site design by LightMix |
| © 2010 Indie research Corp. All rights reserved. |
January 29th, 2010 at 6:52 pm
It will be interesting to see who “wins” this battle. It is not clear why “Soros recently called the metal “the ultimate bubble” amid historic low interest rates.” The reverse might also be true – at very high rates of interest, investors might sell gold to take advantage of high returns on paper. Whether gold or cash is the better option depends not on interest rates but on the spread between interest rates and inflation: if inflation runs close to or higher than interest rates, then investors might well prefer gold because it preserves value tax-free (until sale) while interest is taxable. The comparison depends critically on how inflation is measured – is that by the CPI (clearly understated and highly questionable) or by a more realistic gauge (whatever that may be).
Reminder: in the early 1960s, silver could still be bought for one dollar/oz. Now it is between $16 and $18/oz. According to the CPI, an oz of silver “should cost” only $7. By this measure, the CPI understates inflation by a factor of two on average over these 40+ years, and that does not even account for annual taxation of interest versus no taxation on precious metal holdings (until sold).
January 29th, 2010 at 10:00 pm
Soros may view Gold as the ‘ultimate’ bubble symbolically. A loss of confidence in monetary policy is a factor propelling Gold higher. If Central Banks keep funding failed attempts to restore prosperity, Gold’s price will become explosive as fear of currency inflation grows. Investment mania in the Precious Metal sector ultimately takes hold and a bubble forms. So, one interpretation is that Gold is a bubble in the making. A bubble under construction. With currency printing presses in high fear, in the debate of a ‘full faith and credit’ fiat currency versus a gold standard, gold will shine. Sprinkle in some fear, Gold could see $5000 per ounce within the next 5 years. maybe then it’s in a bubble. not at 1,100 per oz.
February 6th, 2010 at 12:04 am
Gold could see $5000 per ounce within the next 5 years. Maybe then it’s in a bubble, not at 1,100 per oz.
Yes, and the banks will gladly buy it from you between now and at $5000, as they mark it to $50,000 oz.