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Professional Investors Are Preparing For A Stock Market Crash

September 10th, 2014

george sorosDavid Zeiler:  It looks like a growing number of professional investors are preparing for a stock market crash, as hedge fund filings for the second quarter show a spike in defensive positions.

In particular, legendary billionaire George Soros made a huge bet against the market. He increased his short position on the Standard & Poor’s 500 by a startling 605%.

The 9.69 million new shares of SPDR S&P 500 ETF Trust (NYSE Arca: SPY) put options gave Soros a total of 11.29 million shares and made it the biggest holding in his portfolio.

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Soros also added significantly to several gold positions, a “safe haven” move that’s typically made when investors suspect a stock market crash is on the horizon.

And Soros wasn’t the only hedge fund manager making defensive moves.

Several, such as Carl Icahn, increased their holdings in energy stocks, and in particular energy stocks that pay a healthy dividend. That’s also a type of hedge against a stock market crash.

Others have been snapping up 10-year Treasurys and buying more put options than usual.

“You definitely are seeing managers reduce risk levels,” Robert Duggan, a managing director at Skybridge Capital, told The Wall Street Journal. “‘Cautious’ or ‘more defensive’ are clearly things you hear when you speak with managers.”

And yet these hedge fund managers don’t seem to be bailing on stocks altogether. Some even increased their long positions.

Soros, for instance – despite buying all those SPY put options – made big additions to several of his long tech positions, including approximately 1.2 million shares of Apple Inc. (Nasdaq: AAPL), 1.79 million shares of Facebook Inc. (Nasdaq: FB), 2.4 million shares of Intel Corp. (Nasdaq: INTC), and 1.8 million shares of Microsoft Corp. (Nasdaq: MSFT).

That certainly doesn’t look like a hedge fund manager planning for a stock market crash – but if you dig a little deeper it becomes clear exactly what Soros and his fellow hedge fund managers are up to – and it makes perfect sense.

These Moves Show How to Survive a Stock Market Crash

The apparent contradiction really isn’t that much of a contradiction – it’s Hedge Fund Investing 101. And right now it’s the kind of smart move all investors need to be watching.

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  1. WALLSTJUNKIE
    October 11th, 2014 at 10:45 | #1

    Keep your eyes on this this!

  2. Mark Talmont
    September 11th, 2014 at 18:56 | #2

    I’m afraid coincident with this “brave new world” of fed-onomics is the brute reality that globalization has put almost almost unimaginably concentrated power in the hands of a very few. I speak of the sovereign wealth funds and whoever it really is that gets to play with all that fed money (remember the fed open market operators have the authority to wave a wand and deem ANY security to be worth whatever they say it is–they got this from the 1980 “Monetary Control and Financial Deregulation Act”.)

    I think our current situation is “hidden in plain view”. The real economy of jobs, production, and wages stinks for the vast majority of people. You don’t get any return on saved money and are expected to turn your savings over to people who just demonstrated that are totally corrupt and untrustworthy, yet are “too big to fail”. Also possibly criminally insane. I am betting on the crash scenario if for no other reason than these megalomaniacs think they are so smart they can “manage” anything but more likely that the power elite want us all reduced to uniform ThirdWorldization.

  3. Rick
    September 11th, 2014 at 17:41 | #3

    This will domino and affect the housing market. I feel sorry for these people who are overpaying for property. After the stock market crash, they will be stuck like Chuck will unsellable real estate.

  4. mackie
    September 11th, 2014 at 09:56 | #4

    Bet you soon as israel needs a few billion the market will crash, just like every other time.

  5. sunnyd55
    September 11th, 2014 at 05:18 | #5

    Please. Could someone tell me what happens to precious metals if the market does crash? Thank You, I appreciate it.

  6. Jim
    September 11th, 2014 at 00:27 | #6

    Soros always short-sells the market. He is the world’s largest economic saboteur.PNR

  7. GCT
    September 10th, 2014 at 15:14 | #7

    I’ve been in the investment business for 31 years and an article like this could have been written at anytime in that period. Chicken Little’s of the world are mostly Gold Bugs and End of the World cranks from the Left and Right.

    Long term investors with reasonable asset allocations will continue to do just fine.

  8. Mick Russom
    September 10th, 2014 at 14:49 | #8

    When in debt, print more money and increase debt and deficits to get out of trouble.

    Sounds like a plan? Sure right sure.

  9. Ted Cruz 2016
    September 10th, 2014 at 13:32 | #9

    “I’m a strong believer that you have to be in it to win it,” Gilani said. “You need to stay in because after that crash there’s nowhere to go but up.”
    Actually Mr. Gilani, for the inexperienced market investor or the average Joe (which is about 85% of the population) none of this makes a difference because the average person wouldn’t know where or how to invest, and these are the people who get slaughtered. For the average person this can mean another place to go the homeless shelter after there money gets wiped out.

  10. jcd0101
    September 10th, 2014 at 13:16 | #10

    Liberals like these love to play the market
    actually RIG is the correct word to use here..

    so they bet against the market and they have enough money and infuence to make a crash happen..

    in the end nations and people loose everything
    while these people make billions..

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