What This Controversial Billionaire Is Doing With His Money
It all begins tomorrow... Last call for Sjug's No. 1 investment opportunity... Soros sounds the alarm on Europe... What the controversial billionaire is doing with his own money now...
We'll begin today with a reminder...
$484 million.
That's how much money our colleague Steve Sjuggerud says is set to flow into just two little-known stocks in the final minutes of trading tomorrow afternoon.
And that's just tomorrow.
All told, Steve says as much as $19 billion is legally required to move into these two stocks over the next several years... And investors who get their money there first could easily earn triple-digit gains as it does.
Of course, longtime Digest readers should be familiar with this story...
We're referring to index provider MSCI's decision to include domestic Chinese stocks – known as "A shares" – in its global stock market indexes for the first time.
We've discussed this move dozens of times in the Digest over the past couple years. In short, more than $12 trillion – including assets at 94% of U.S. pension funds and 99 out of the top 100 global money managers – is currently benchmarked to MSCI indexes. Said another way, MSCI essentially dictates how a huge amount of institutional money is invested.
But until recently, there was something unusual about MSCI's global stock market indexes...
China was nowhere to be found. According to these indexes, it was as if the world's second-largest economy and second-largest stock market simply didn't exist.
As Steve has explained, this made no sense... How can you possibly claim to have a legitimate global index if you leave out the world's second-largest stock market?
Well, MSCI finally decided last June to "right" this wrong. And after months of planning, the decision officially goes "live" tomorrow at 3:59 p.m. Eastern time.
At that time, the first "wave" of institutional money will be required to start moving into Chinese A-shares. And Steve has identified two specific Chinese stocks that are set to benefit the most.
This is truly a once-in-a-lifetime opportunity...
MSCI has occasionally made changes like this before, but never on this scale.
For example, it decided in 2008 to add both Serbia and Lithuania to its global indexes, followed by Pakistan in 2009. And each of these markets soared as a result.
In fact, their entire stock markets rallied 39%, 129%, and 400%, respectively, as millions and millions of dollars flooded in. And many individual stocks in these countries soared multiples more.
But we've never seen an "inclusion" the size of China – again, the second-largest stock market in the world – and we're unlikely to see one again.
Literally hundreds of billions of dollars will be legally forced into Chinese stocks over the next several years – with the "lion's share" going to two stocks in particular. And until tomorrow, you still have the chance to get your money there first.
It's no wonder Steve believes this is the single-greatest investment opportunity of his career to date. Click here to learn more about this urgent opportunity now. (This link does not lead to a promotional video.)
Yesterday, we warned about new troubles in Europe...
In short, for the first time since the 2011-2012 European debt crisisthe markets are once again questioning the future of the euro and the European Union.
But we weren't alone. In a speech in Paris on Tuesday morning, billionaire investor George Soros was also sounding the alarm. As Bloomberg reported...
A surging dollar and a capital flight from emerging markets may lead to another "major" financial crisis, investor George Soros said, warning the European Union that it's facing an imminent existential threat...
The stark warning from the billionaire money manager comes as Italian bond yields have jumped to multiyear highs and major emerging economies, including Turkey and Argentina, are struggling to contain the fallout from runaway inflation. Soros, who has been the object of ire by the government of his native Hungary, saved his gloomiest outlook for the EU.
"Everything that could go wrong has gone wrong," he said, citing the refugee crisis and austerity policies that catapulted populists into power, as well as "territorial disintegration" exemplified by Brexit. "It is no longer a figure of speech to say that Europe is in existential danger; it is the harsh reality," he said.
Now, we know many Digest readers generally aren't too interested in hearing what Soros has to say about anything...
Simply mentioning him today is likely to lead to several cancellations tomorrow morning.
But whether you're interested in what Soros had to say about the problems in Europe, you should be interested in what he's doing with his money because of them. As our colleagues Ben Morris and Drew McConnell explained to DailyWealth Trader subscribers yesterday...
Soros is likely the greatest trader to have ever lived. Together with investment legend Jim Rogers, Soros managed their Quantum Fund to a 3,365% return over 11 years. Now, he manages $5.4 billion in his Soros Fund.
After hearing Soros' concerned outlook, we wanted to see how he's positioned in the markets. And what we found may help you in your own trading... especially if you're worried about where the markets are headed.
As they noted, Soros – like other elite investors who manage at least $100 million – is required to file '13Fs'...
These forms – which are filed with the U.S. Securities and Exchange Commission every three months – detail which stocks they've bought and sold from one quarter to the next. They also show exactly which stocks they held at the end of the most recent quarter. More from the issue...
The latest round of 13Fs – for the quarter ending March 31, 2018 – came in this month. And Soros has his money where his mouth is. But maybe not in the way you'd expect...
Soros holds billions of dollars' worth of stocks. He owns real-estate businesses, banks, entertainment companies, semiconductor firms... even high-flying "FANG" stocks Amazon (AMZN) and Netflix (NFLX).
But at the end of last quarter, Soros held 7% of his portfolio – worth nearly $400 million – in put options. Specifically, Soros' 13F shows a 5% stake in puts on the SPDR S&P 500 Fund (SPY) and a 2.2% position in puts on the PowerShares Nasdaq 100 Fund (QQQ).
Now, those puts are bets that the broad market will fall...
But given Soros' mostly bullish portfolio, it's clear that he's holding those puts as "hedges," or insurance against a decline, rather than an all-out bearish bet.
In other words, like us, it appears Soros is cautious, but not yet bearish, on the broad market. Stay long, but if you don't yet own any "hedges," Soros' strategy is one simple way to do so...
In this market, it makes sense to follow Soros' lead... The trend in stocks is still up, so you want to own them. But holding some insurance is always a good idea.
Now, we don't recommend holding 7% of your portfolio in puts. That's a big position. And we don't know the duration of his puts, either. So they could expire at any time.
But as we said earlier, Soros is primarily long stocks. And he's hedging some of that exposure with put positions in the big index funds. If you're not holding any insurance in your portfolio today, it's worth considering.
New 52-week highs (as of 5/29/18): Amazon (AMZN), Monsanto (MON), Okta (OKTA), Sysco (SYY), and Verisign (VRSN).
The feedback on Porter's Friday Digest on beleaguered automaker General Motors (GM) continues to roll in. Send your notes to feedback@stansberryresearch.com.
"Porter, to the best of my knowledge, a large portion of GM's added debt in recent years was required to fund the growth of GM Financial's auto loan and lease portfolio. Since acquired by GM in 2010, GM Financial has significantly increased its share of GM's business which now represents about 75% of GM Financial's total consumer loan and lease originations. As you know, auto loan default rates are generally low — i.e., around 1%-2% in non-recessionary times. Therefore, the incremental debt liability is mostly offset by loan assets. Do you see it the same way?
"For me, a fair critique is that GM has been unable to appreciate its stock price from the IPO level of $33 despite being handed a pristine balance sheet following the 2010 bankruptcy. In addition, in my opinion, there is no compelling reason to believe GM's stock price can or will outperform the S&P 500 as GM's current environment — afforded mostly by rising truck penetration and a 17.5 million US vehicle market — is probably as good as it's going to get! Your thoughts on these observations would be appreciated." – Paid-up subscriber Arturo E.
Porter comment: Arturo, I mean no disrespect, but... Do you know the history of GM Financial's predecessor, GMAC?
Do you know how GM tried to offload these debts during the last crisis? Do you know what the company was paid for the business from private equity firm Cerberus? Do you know how much money GM's shareholders lost as that financial business collapsed and GM was forced to make good on the losses to Cerberus?
My point? Yes, I knew that most of this capital was underwritten by GM Financial. But that doesn't change anything about the risks GM's shareholders are taking by borrowing tens of billions to lend the buyers of its cars.
"I like what you write, it makes more sense to me than what I read in other articles. The fact that Warren Buffett and David Einhorn own [GM] shares interests me and also raises the question, why? In time, maybe we will learn..." – Paid-up subscriber John H.
Porter comment: John, I remember one time, not too long ago, I ended up on the other side of a big trade opposite Carl Icahn, an investor I respect enormously.
I got some phone calls from well-connected investors. "Porter, what are you doing? Don't you know Icahn has been buying a huge position in that company?"
So, I checked my work. And I checked it again. I simply knew something Carl didn't know – yet. And, we were rewarded in a very big way.
That's how the market works. Nobody is right every time.
That's why you always have to do your own work. And... be constantly willing to change your mind if the facts change.
"Please stop saying 'there is no such thing as teaching.' It is not a true statement and most people including Stansberry subscribers don't like being lied to. Do you think the hundreds of thousands of teachers are actually doing nothing? Come on. Grow up." – Paid-up subscriber Marty
Porter comment: Marty, it always cracks me up that some subscribers get so bent out of shape about my catchphrase.
Perhaps you've heard another, similar saying: "When the student is ready, the teacher will appear"? That one is often attributed to Buddha or Confucius.
I think my statement "There's no such thing as teaching, there's only learning" is simply a fact, not a philosophy. I've been around teachers my entire life. My mom was an award-winning elementary school teacher and my dad was a college professor. I've had plenty of great coaches and mentors, too – none better than my friend Bill Bonner.
But I've never, in my entire life, ever had anyone teach me something I wasn't willing to learn.
Maybe you'll get it, when you're ready.
Regards,
Justin Brill
Baltimore, Maryland
May 30, 2018