The Fearless Forecast: 10 Stone Cold Lead Pipe Locks for 2009 / George Soros is a liar
To borrow a line from ESPN radio's Mike and Mike in the morning, these are my
Top Ten "Stone Cold Lead Pipe Locks" for Investing in 2009.
Write them down because they will come true.
1) Oil will easily average over $100/barrel for the year.
2) The U.S. dollar will resume its multi-year decline after the current bear market rally.
3) Chinese stocks on average will significantly outperform U.S. stocks.
4) Investment banks are garbage and anyone who buys stock in them at this point will be sorry.
5) The disgusting Fannie Mae and Freddie Mac fiasco will finally be brought to a painful end for current shareholders (not bond holders).
6) The U.S. economy will be a mess, with several quarters of low to negative GDP growth, but it will never completely fall off of a cliff.
7) Despite recent sarcastic claims to the contrary, anyone who buys builder stocks in calendar year 2008 will regret doing so.
8) General Motors and Ford will not have to file for bankruptcy and their stock will bottom out late in the year, but Chrysler will cease to exist in its current form. It will either be sold or enter a major partnership with another automaker.
9) Power companies that use anything other than coal, i.e. natural gas, wind, solar, geothermal, nuclear, will significantly outperform the S&P 500.
10) The New York Jets will make the playoffs.
I won't post any explanations about why I think these things will happen here, but I would be glad to discuss them in the comments section.
No, that's not me in this picture.
George Soros is a liar
A couple of months ago I read George Soros' newest book "The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means." I can't say that I enjoyed it very much. It contained a lot of theoretical psychobabble garbage on Soros' pet theory of reflexivity, but even though I didn't enjoy the way that it was written I get his point that markets are often irrational and that statistical modeling doesn't work well because investors' personal beliefs often distort the market causing them to overshoot on both the up and down side.
Here's my problem with Soros. In the book he calls situation that we find ourselves in “the worst financial crisis since the 1930s.” He states that this is not just a popping of the housing bubble, but it is the end of a twenty-five year period of unprecedented credit-driven economic expansion. Yet when one looks at his current holdings (link), one of his largest positions is a stake in Lehman Brothers (LEH), which he increased by 94629.7% during the second quarter to a substantial 9,472,967 shares, nearly 8% of his total portfolio. What?!?!
Given the content of his recent book, I find Soros' position in Lehman absolutely mind boggling. In the book he talks about how the markets need additional regulation and that leverage and credit creation need to be reigned in, but without these things investment banks like Lehman Brothers won't come even close to having the earnings power that they've had in the past.
Perhaps he was just looking for a short-term bounce in financials, but the sheer size of his position here would make it a risky bet when looking for a bounce.
Perhaps he expects Lehman to implode and for the Fed to bail it out, but one would think that any bailout of LEH would come at a much lower price per share than Soros paid, which is estimated to be $37.10 (Lehman closed yesterday at $13.07 HAHAHAHAH).
GoruFocus does not list short positions, so perhaps Soros is short a ton of financials and he believes that Lehman is the best run of the bunch so he is using it as a pairs trade.
I'm calling him out. If he isn't short a ton of stuff, then he's either a liar or he now believes that everything that he wrote in his recently published book about the current situation that we find outselves in was just flat wrong. Does anyone out there see this differently? If so, please explain his position in Lehman to me.