Soros doubles a bearish bet on the S&P 500, to the tune of $1.3 billion
February 17, 2014, 7:23 AM
Soros Fund Management has doubled up a bet that the S&P
500 SPX is headed for a fall.
Within Friday’s 13F filings news was the revelation that the firm,
founded by legendary investor George Soros, increased a put position
on the S&P 500 ETF SPY +0.01% by a whopping 154% in the fourth
quarter, compared with the third. (A put or short position basically
gives the owner the right to sell a security at a set price for a
limited time, and in making such a bet, an investor generally believes
the security is going to decline.)
The value of that holding, the biggest position in the fund, has
risen to $1.3 billion from around $470 million. It now makes up a
11.13% chunk of all reported holdings. It had been cut to 5.14% in the
third quarter, from 13.54% in the second quarter, which itself marked
another dramatic lift on the bearish call. The numbers can be found
at Whalewisdom.com, which makes them slightly easier to digest than
the actual SEC filing.
Writing on the Bullion Baron blog, Joseph has been quick to alert
readers to the hedge fund’s bets on the S&P 500, offering up a
summary of changes to that call from mid-2011 onward. For the four
quarters of 2013, that short has followed a pattern of big highs and
Of course, Joseph said, the bearish S&P call could be a hedge
and, as it’s six weeks into the next reporting period, it may have
already been reduced or increased. But he said it could also be
indicative of jitters: In January, Soros highlighted risks coming out
of China and drew a comparison with the lead-up to the crash of 2008.
“It’s possible that the SPY puts are just a hedge, weighed against
other long positions he holds in specific stocks. However, the views
he expressed in this article lead me to believe he thinks another
crisis is brewing (led by China on this occasion) and the SPY put
position could be an attempt profit from it,” says Joseph.
The second- and third-biggest positions in the 13F were a fresh put
on the Energy Select Sector SPDR fund and a big jump in holds of
Israeli pharmaceutical maker Teva TEVA . Read about more changes in
Soros’s quarterly holdings here.
Soros and his hedge fund aren’t alone if they’re feeling unease at
the bull run for markets. It’s been roughly 28 months since a
substantial correction for the S&P 500, which is down 0.5% for the
year after having endured a pullback earlier this month, triggered in
part by jitters over emerging markets. Strategists have been debating
about when and how the correction is going to happen.
As for whether investors should ape the 13F followings of others,
MarketWatch’s Bill Watts pointed out last week that the 45-day lag in
the holdings is particularly tricky when it comes to calls like a huge
bearish bet on the S&P 500. And he found that while hedge funds
outperform on the upside, they do far worse on the downside.
It was Soros himself who famously once said: “I rely a great deal
on animal instincts.” And as we all know, George’s made some big,
crazy, winning bets in the past.
– Barbara Kollmeyer writes for MarketWatch. Follow her @bkollmeyer.
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