Do What Soros Does, Not What He Says

By Greg Hunter  Feb 19 2010 10:21AM usawatchdog.com

The Federal Reserve raised the discount rate yesterday to 3/4% from 1/2%. That’s the interest rate the Fed charges banks in an emergency. The Fed insisted that rates for consumers and companies would not rise. So why did the Fed raise rates?  Some say this is an interest rate hike warning shot across the bow. It could also be because the Fed is looking straight down a double-barreled shotgun of trouble?  In one barrel, it sees a huge amount of debt it must sell this year (as much as $5,000 billion in new and old debt). In the other barrel, it sees rising inflation. Could that combination blow the brains out of the economy? Yes! 

Other big financial players are seeing trouble too–that’s why they are buying gold.  John Paulson, the hedge fund manager who made billions shorting the housing sector just as the subprime mortgage crisis got underway, started a gold fund late last year.  David Einhorn, another investment guru who made a mint shorting Lehman Brothers long before it went under, bought thousands of ounces of physical gold for his fund early last year.    

So, when I heard George Soros, a hedge fund manager with a net worth exceeding $9 billion, say, “The ultimate asset bubble is gold,” I took notice. After all, Soros is the ultimate investor who almost broke the Bank of England in the early 90’s.  Soros is so respected he is invited every year to the World Economic Forum in Davos, Switzerland. While in Davos, Soros also said, “stimulus could not be removed too early”;  otherwise, we risk a double-dip recession in the world, especially in the U.S. 

 When I heard that, I thought to myself, “Wouldn’t stimulus be positive for gold?” The money all governments are using for “stimulus” is just printed out of thin air, and that is the very definition of inflation.  Inflation is gold positive.  What was Soros thinking? Yesterday, I found out when the following story broke from Bloomberg: “Soros More Than Doubled Gold ETF Stake in 4th Quarter.”  (Click here for the complete story.)   

Gold is now the single largest investment in the multi-billion dollar fund George Soros runs. Why was Soros trashing gold when he just bought more of the yellow metal?  I don’t know, but if you want to buy more of something, you don’t talk the price up, do you? Soros is supposed to be one of the world’s financial leaders, so why make public statements that are the exact opposite of what he is doing?  The financial press should ask him about his conflicting utterances, but it seems hard questions are not being asked any more. That is bad for relationships and advertising. So, what is the moral of this story?  “Do What Soros Does, Not What He Says,” because he is worried about something, and you should be too.

Greg Hunter

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Hunter joined ABC News in 1999 from WTSP-TV in Tampa. He has earned a “National Headliner Award," an International “Freddie Award” for health and medical reporting, as well as investigative reporting awards from both the “Society of Professional Journalists” and the “Radio Television News Directors Association.”