Yesterday’s employment report was awful.
The Bureau of Labor Statistics said 38,000 jobs were added in May. Wall Street was expecting 168,000. A miss by any measure.
There was some good news though. The “official” unemployment rate dropped 0.3% to 4.7% and should finally have lost all remaining credibility.
Normally, we’d say this is just one data point. Then detail the absurdity of the process and sample size used to arrive at a such an estimate, note there are two more revisions to this number, and write off.
This report though is indeed one data point, but it’s along a much larger and worrying trend.
Some big money investors are taking action too.
One of those investors -- probably history’s best “big picture” investor -- has positioned himself nearly perfectly for this trend to carry on.
Out With The Old, In With The New
George Soros is a lot of things. Not all of them good.
For today’s purposes, we’re focusing on Soros’ money and what he’s doing with it now.
You see, Soros is a great market timer. Probably one of the greatest in history.
He’s not a stockpicker. He bets on overall markets, currencies, and asset classes.
He’s a “big picture” guy and what he’s seeing (and doing!) now shouldn’t be a surprise to anyone who saw yesterday’s market action.
A few months ago Soros made two big moves.
First, he bet against stocks.
Soros’ firm bought put option contracts (these are the kind of options that that profit if the price goes down) on the S&P 500 Index ETF.
The value of the options bet against the overall market was $431 million when they were reported at the end of March.
That’s a big bet on anything. It’s enormous considering the volatility of options.
Second, Soros jumped into gold.
He bought call options (these are the kind of options that profit if an asset increases in price) to purchase 1.05 million shares of SPDR Gold Trust (GLD).
Since GLD is priced at about 1/10th the price of an ounce of gold, that’s basically a bet on the equivalent price of a 100,000 ounces of gold.
Soros also took a sizeable stake in top gold miner Goldcorp (GG). If he still holds the position or has added to it, it would be worth well north of $300 million today.
A Tale Of Two Trends
These two big moves are surely set to capitalize on one overarching trend.
That is the economy is worsening, more debt is not producing any returns, and the Fed will do whatever it must to inflate debt away.
The combination, historically, is good for gold and bad for stocks.
This trend is a big reason major stocks indices have consistently failed to break out to new highs and the S&P 500 has corrected 10% or more three times in the last two years.
As for gold, bad news is good news. And if you think there’s more bad news coming, gold is set to shine even brighter.
Here’s the bad part though.
The only thing which could realistically turn this trend around is a sharp economic rebound.
With the seventh consecutive “Recovery Summer” approaching, invest accordingly.