Tag Archives: greece

Here’s How George Soros’s Latest Predictions Have Played Out

Bloomberg, Jun 9, 2016


* Billionaire’s first-quarter bet on gold miners among winners
* He’s been wary of China’s debt-fueled growth for several years

George Soros, the 85-year-old billionaire who broke the Bank of England in 1992, is becoming more involved in day-to-day trading at his family office, taking a series of big, bearish bets.

Soros is best known for netting $1 billion as a hedge fund manager decades ago when he and his then-chief strategist Stan Druckenmiller wagered that the U.K. would be forced to devalue the pound. His predictions haven’t always played out so well.

Anticipating weakness in various global markets, his Soros Fund Management cut its publicly disclosed U.S. stock holdings by 37 percent in the first quarter while buying shares of gold miners and an exchange-traded fund tracking the price of the precious metal.

Since then, the S&P 500 Index has returned 3.1 percent. Barrick Gold Corp., his largest new position disclosed in the quarter, fared better, jumping 44 percent.

Here’s a look at some recent calls by Soros, whose personal fortune is estimated at $24.7 billion, and some of the other trades made by his family office in the past few years:

China Uncertainty

Soros has been worrying about China since at least 2013, expressing increasing concern that the country’s leaders might not be able to manage an economic slowdown.

Earlier this year, he compared China’s economy to the U.S. in 2007-08, pointing to debt-fueled growth that’s produced uncertainty and instability in the country’s banking system.

“Most of the money that banks are supplying is needed to keep bad debts and
loss-making enterprises alive,” Soros said on April 20 at an Asia Society event in New York.

More defaults may be looming in the nation’s corporate bond market. Bloomberg Intelligence estimated in May that 15.6 trillion yuan ($2.4 trillion) of corporate borrowing can be classified as “at risk loans” — those where the borrower doesn’t have sufficient earnings to cover interest payments. That’s equal to 23 percent of the country’s gross domestic product in 2015.

China’s Hang Seng Index has returned 10 percent over the past three years, not great, but nothing like the 37 percent slump in U.S. stocks in 2008. The index is down 22 percent from a post-financial crisis peak in April 2015, when including dividends.

Europe Crisis

At a panel discussion on Sept. 24, 2011, Soros said the Greece-born European debt crunch was “more serious than the crisis of 2008.” Last year, he said the chances of Greece leaving the euro area were 50-50.

“You can keep on pushing it back indefinitely” by making interest payments without writing down debt, Soros said in a Bloomberg Television interview that aired March 24, 2015. “But in the meantime there will be no primary surplus because Greece is going down the drain.”

There are signs that nervousness about the euro area economy is ebbing as investors increasingly focus on China. Greece and its creditors in the currency bloc may be nearing an agreement to disburse a new tranche of bailout aid that would allow it to meet debt payments this summer and also pave the way for restoring access to the European Central Bank’s regular refinancing operations.

Since Soros’s 2011 comments, the Bloomberg European 500 Index has returned 82 percent. European sovereign debt has returned about 14 percent in dollar terms.

Argentina Bonds

Soros took a personal interest in Argentina — where he’s been invested for decades — and most recently wagered successfully on the country’s defaulted bonds. From time to time, he’d meet personally with former President Cristina Fernandez de Kirchner to discuss Argentina’s economic prospects. After a U.S. court blocked payments on the nation’s bonds, his Quantum Partners fund in 2014 joined an investor group that sued bond trustee Bank of New York Mellon Corp. in London for failing to distribute interest payments on securities, claiming the ruling shouldn’t apply to notes governed by laws outside of the U.S.

While the dispute was resolved after Fernandez left office last year, Soros has still been showing interest in the country. Representatives for his fund participated in Argentina’s bond roadshow in April, according to a document obtained by Bloomberg, after which the government sold a record $16.5 billion in securities in its return to the global debt market.

Argentine bonds have returned 57 percent on average since Soros’s bet was revealed with the lawsuit in August 2014.

Soros’s family office made almost $1 billion from November 2012 to February 2013 betting that the Japanese yen would tumble with the election of Prime Minster Shinzo Abe, who pressed the Bank of Japan to introduce additional stimulus measures. A couple of months later, the billionaire warned that moves to expand monetary easing could trigger “an avalanche” in the yen as citizens shift their money abroad.

“What Japan is doing is actually quite dangerous because they’re doing it after 25 years of just simply accumulating deficits and not getting the economy going,” Soros said in an April 5, 2013, interview with CNBC. Central bank officials may not be able to stop the currency’s fall, he said.

The yen continued to fall in the wake of Soros’s comments.


Greece’s biggest foreign investor threatens to halt mines project

FT, Jan 12, 2016

Prokopis Pavlopoulos, Greece's president, right, welcomes Panagiotis Lafazanis, Greece's former energy minister and Popular Unity party leader, center, during a meeting at the presidential palace in Athens, Greece, on Thursday, Aug. 27, 2015. Pavlopoulos is expected to dissolve parliament by Friday and call the vote for Sept. 20. Photographer: Kostas Tsironis/Bloomberg *** Local Caption *** Prokopis Pavlopoulos; Panagiotis LafazanisPanayotis Lafazanis, centre, denounced the gold projects while serving as Greece’s energy minister.

A Canadian mining company that has invested $700m in gold extraction projects in northern Greece has threatened to suspend its operations because of delays in issuing licences and permits, its chief executive has announced.

The leftwing Syriza government responded by accusing Eldorado Gold, the largest foreign investor in Greece, of attempting to blackmail the Greek state.

“Our investment is being treated as a political toy,” Paul Wright, chief executive of the Vancouver-based miner, said in Athens on Tuesday. Read more…

Euro Area May Release Greek Bank Money Next Week If Pledges Met

Bloomberg, Nov 9, 2015

Greece could receive 10 billion euros ($10.8 billion) for bank recapitalization as soon as next week if it can complete its financial-sector milestones on time, euro-area finance ministers said after a meeting in Brussels Monday.

The so-called Eurogroup asked Greek authorities to finalize financial-sector measures and legislation agreed under a set of milestones this week, according to a statement. That would unlock the disbursement of 2 billion euros by the European Stability Mechanism “and a transfer of funds needed for the recapitalization of the Greek banking sector.”

ESM chief Klaus Regling said the banking sector milestones are now on track to wrap up soon, paving the way for the transfer. The banks’ 10 billion euros “can be made available to Greece relatively quickly, but only after the conditions are met,” Regling told reporters in Brussels after the meeting. “We hope that this can happen in the course of this week.”

Jeroen Dijsselbloem, the Dutch finance minister who leads the Eurogroup, said Greece was making good progress toward unlocking both the bank money and its next slice of general aid funds. He said if Greece can take the necessary steps this week, finance ministry deputies can meet next week and consider the payouts.

Household Insolvency

The two important issues to be resolved are about the governance of the banks and household insolvency, Dijsselbloem told reporters at the press conference. “That’s the process that we have outlined for the coming days, and we’re all committed to get that done in time.”

Finance ministers met Monday to review the implementation of Greece’s latest bailout program and whether the nation is meeting the milestones needed to disburse aid and recapitalize its banks. Failure to meet those requirements could put the solvency of the sovereign and of its financial system in doubt.

“There’s been some delay but most people are very pleased that we’ve done so much work so quickly in such an organized manner,” said Euclid Tsakalotos, the Greek finance minister after the meeting. “We’re a bit pressed because as you know the recapitalization is going faster than we thought, so in that sense we’re a victim of our own success because the banks need to be recapitalized a bit earlier, and so some of the issues that we could have sorted out later we have to sort out earlier.”

Greece must pass insolvency laws for the recapitalization of banks and present proposals for the creation of a privatization fund, German Finance Minister Wolfgang Schaeuble told reporters. “From the points Greece has committed to implement as a condition for the payment of the first tranche, a large part hasn’t been met yet,” Schaeuble said before the meeting began.

Housing foreclosures are “the most sticky point” because it affects social welfare and also the health of the banks, which need cash and should avoid “moral hazard” situations, Maltese Finance Minister Edward Scicluna said before the meeting.

The Greeks are seeking a system that would shield about 70 percent of homeowners from foreclosure, according to two European officials. Auditors from the International Monetary Fund, the European Commission, the European Stability Mechanism and the European Central Bank say the Greek limit is overly generous and are seeking a stricter framework that would only cover the most vulnerable.


German Manufacturing Orders Surge in Sign of Robust Growt

Bloomberg, Aug 6, 2015

Employees assemble the body shell of a Volkswagen Phaeton automobile on the production line at the Volkswagen AG factory in Dresden, Germany.

German factory orders surged in June in a sign of robust growth in Europe’s economic powerhouse.

Orders, adjusted for seasonal swings and inflation, rose 2 percent after sliding a revised 0.3 percent in May, data from the Economy Ministry in Berlin showed on Thursday. The typically volatile number compares with a median estimate of a 0.3 percent increase in a Bloomberg survey. Orders jumped 7.2 percent from a year earlier.

Germany, Europe’s largest economy, is benefiting from the lowest unemployment rates since the country’s reunification and a euro area that is being reinvigorated by European Central Bank stimulus and low oil prices. While the stand-off between Greece and its creditors caused a drag on some segments of the economy, the Bundesbank predicts “quite robust” growth for this year.

“The fundamental upward economic trend in Germany is intact,” said Andreas Rees, chief German economist at UniCredit Bank AG. “But with such a high number one must say, to be fair, that this occurred mainly because of bulk orders in the aviation sector.”

Airbus SAS, one of the world’s largest commercial aircraft manufacturers that assembles most of its single-aisle planes in Hamburg, received 135 aircraft orders in June, up from the 18 orders placed the previous month. China ordered as many as 75 A330 jets worth about $18 billion at list prices, Premier Li Keqiang announced on June 30.

Export Orders

Export orders jumped 4.8 percent in June, driven by an 8.8 percent increase in investment-goods demand from outside the euro area, the ministry said. Domestic factory orders dropped 2 percent. Total orders rose 3 percent in the second quarter from the previous three months.

The euro rose after the report was published and was up 0.1 percent at $1.0916 at 8:35 a.m. Frankfurt time.

“The trend for factory orders is clearly pointing upward,” the ministry said. “German industry should maintain its path of moderate growth in the coming months.”

Measures of optimism among German businesses improved in July as concerns eased over Greece’s crisis, and economists predict growth accelerated to 0.5 percent in the second quarter from 0.3 percent in the previous three months. In a sign that risks remain, a gauge of manufacturing indicated weaker growth as exports fell for the first time in six months.

“If you look at the fundamentals behind the German economy, they are strong,” said Aline Schuiling, senior economist at ABN Amro Bank NV in Amsterdam. “We had a sharp drop in energy prices, that will support the economy, we have a weak euro, and of course we have incredibly low interest rates.”


Morgan Stanley: Gold Could Plunge to $800 And It’s Not Because of China’s Reserves

Bloomberg, Jul 23, 2015

Here is some gold.

It’s the end of an era.

Gold’s recent dramatic descent began shortly after China revealed its gold reserves for the first time in six years.

On Sunday evening, gold plunged in thin trading to below $1,100 an ounce and has been hovering near multi-year lows ever since. While plenty of gold bugs were swift to dismiss the China report as misleading, Morgan Stanley is pointing to longer-term trends that are sending the shiny stuff lower.

Analysts led by Tom Price now say the metal could fall as low as $800 an ounce, as reported by Bloomberg News.

They figure that the era of price stability that once ruled the precious metals complex is now coming to an end. The below Morgan Stanley chart shows a rather stable line for gold, silver, palladium and co. while other commodities such as iron ore have seen more volatility.


Why the end of the era? Here’s what the analysts say:

But price stability in Precious Metals has ended. Indeed, gold and silver prices have been in trend decline since May. Why? The passing of deflation risk, anticipation of the US Federal Reserve’s first interest rate hike, another debt resolution for Greece, and the collapse in China’s equity markets (prompting loss-covering asset sales) – have all hit these prices over 8-10 weeks. So the PBoC’s announcement last week, about China’s surprisingly low official gold holdings, was really just the latest in a string of bearish events. It’s possible that the next short-term driver in metal markets will be declining oil prices (WTI & Brent down 10-16% in 4 weeks).

While the analysts expect gold will probably end up around $1,050, they do say an interest rate hike in the U.S., another correction in China’s stock market and further reserve-selling by central banks, could result in that worst case scenario of $800 (and some very grumpy gold bugs).