George Soros gained global recognition when he co-founded the Quantum Fund with Jim Rogers in 1970. That fund generated an average annual return of more than 30% while he was at the helm.
Soros hasn’t quit making timely market calls since: From his $10 billion bet against the British pound sterling in 1992 to his April 2008 prediction that we had not “seen the full effect” of the recession and that the situation was “more serious than the authorities admit or recognize.”
In February, Soros called the euro’s viability into question, and the currency has plunged some 10% since that time.
Now, as Europe’s fiscal woes worsen and governments are pressured to curb budget deficits, Soros says ”we have just entered Act II ” of the global financial crisis.
“The collapse of the financial system as we know it is real, and the crisis is far from over,” he told a conference in Vienna late last week. ” Indeed, we have just entered Act II of the drama, when financial markets started losing confidence in the credibility of sovereign debt.”
The world economy is “eerily reminiscent of the 1930s,” Soros said, with governments under pressure to narrow their budget deficits at a time when the economic recovery is weak.
“Keynes has taught us that budget deficits are essential for counter cyclical policies, yet many governments have to reduce them under pressure from financial markets,” he said. “This is liable to push the global economy into a double dip.”
Soros has been outspoken on his economic beliefs for decades. He feels that financial markets are unstable by nature, and that the main goal of public policy should be to stabilize markets rather than promote over-leverage and facilitate bubbles - essentially the opposite of the tactic employed by global policymakers.
According to his funds’ latest filings with the Securities and Exchange Commission (SEC), gold remains Soros’ preferred holding. Some 10% of his assets were invested in the SPDR Gold Trust (GLD: 121.30 0.00 0.00%) exchange-traded fund (ETF) as of March 31.
Soros also has been adding to his already large overweight positions in the oil & gas sector. His largest stock remains Brazilian oil giant Petroleo Brasileiro SA (PBR: 35.41 0.00 0.00%), more commonly known as Petrobras.
Additionally, Soros built upon his positions in Canadian energy producer Suncor Energy Inc. (SU: 31.94 0.00 0.00%), and Houston-based oil & natural gas producer Petrohawk Energy Co. (HK: 19.08 0.00 0.00%). All told, Soros has about 30% of his long investments in the oil & gas sector - more than twice the weighting of the Standard & Poor’s 500 Index.
Smaller positions that saw buying during the first quarter include Apple Inc.(AAPL: 269.00 0.00 0.00%), The Goodyear Tire & Rubber Co. (GT: 11.61 0.00 0.00%), Lawson Software Inc. (LWSN: 7.84 0.00 0.00%), CVS Caremark Corp.(CVS: 30.79 0.00 0.00%) and DirecTV (DTV: 36.01 0.00 0.00%).
Consumer stocks remain the lowest weighted sector in Soros’ holdings, but Wal-Mart Stores Inc. (WMT: 50.03 0.00 0.00%), Best Buy Co., Inc. (BBY: 35.74 0.00 0.00%), Amazon.com Inc. (AMZN: 118.33 0.00 0.00%) and True Religion Apparel, Inc. (TRLG: 24.20 0.00 0.00%) all made the cut.
Ultimately, Soros’ holdings paint the picture of someone who sees a future with weaker currencies, higher inflation, and higher energy prices - something Money Morning has been warning readers of for months, if not years.