This “Pig” Just Made a Massive Bet on Gold

By Dan Steinhart

Stan Druckenmiller is going big on gold.

Druckenmiller is one of the world’s most successful and respected traders. As a hedge fund manager from 1986 to 2010, he generated an incredible average annual return of 30%. Druckenmiller was also George Soros’s right hand man at Quantum, Soros’s famed hedge fund. Quantum’s now legendary 1992 trade shorting the British pound was Druckenmiller’s idea. It made Quantum about $1 billion. People say the trade “broke the Bank of England.”

Most professional investors preach diversification. But Druckenmiller says he’s successful because he’s not afraid to concentrate his bets when he really believes in a trade. He calls it “being a pig.” The first thing I heard when I got in the business, not from my mentor, was bulls make money, bears make money, and pigs get slaughtered.

I’m here to tell you I was a pig. And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig. I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept everywhere.

Druckenmiller just made a $300 million bet on gold…...

Druckenmiller’s fund recently bought $300 million worth of SPDR Gold Trust (GLD), an ETF that tracks the price of gold. It’s a huge bet, even for a big time trader like Druckenmiller. He put 20% of his fund’s money into this trade, and it’s his largest position. Druckenmiller seems to like gold for the same reasons Casey Research likes gold. He has harshly criticized the Federal Reserve for creating the frothy conditions that led to the 2008 financial crisis. And he says the Fed’s policies today are more reckless today than ever.

If you look at the real root cause behind the financial crisis, we’re doubling down. Our monetary policy is so much more reckless and so much more aggressively pushing the people in this room and everybody else out the risk curve that we’re doubling down on the same policy that really put us there…..The Fed cut interest rates to nearly zero after the financial crisis. This has encouraged all kinds of bad investing and reckless speculation. When the banks pay microscopic interest rates, people get desperate and pile into junk bonds, stocks, and real estate. This drives asset prices higher and higher.....which creates a lot of danger.

It also leads to depreciating paper currencies…which will eventually lead to much higher gold prices. In just the last year, the Japanese yen has dropped 18% versus the US dollar. The euro has dropped 17%...the Australian dollar has dropped 20%...and the Canadian dollar has dropped 17%. Regular readers know this is part of the “Currency Wars.” Governments are devaluing their currencies in an attempt to stoke their economies. Politicians think that making a currency cheaper (usually by printing more currency units) will provide an economic stimulus.It doesn’t work. If devaluing currencies were the path to prosperity, countries like Zimbabwe and Venezuela would be the richest countries on Earth…instead of economic basket cases.

Gold has been struggling....…

The price of gold has fallen 41% since hitting an all time high in August 2011. Druckenmiller’s huge bet indicates that he thinks the bottom is finally in. Druckenmiller has made a career out of getting big calls like this correct. We wouldn’t want to bet against him.

If you agree that gold is near its bottom, you could buy physical gold or shares of GLD like Druckenmiller. That could easily give you a 50-to-75% gain in the coming years. If you want a chance at much bigger gains, consider investing in gold stocks. Gold stocks are highly leveraged to the price of gold. In a bull market, gold stocks rise much more than the price of gold. It’s common for the best run gold companies to increase by 20-to-1 or even 30-to-1 during a gold bull market.

International Speculator is our advisory focused on the best small gold stocks with huge upside potential. Right now, gold stocks look like they’re near the end of one of the worst bear markets in history. In fact, gold stocks are cheaper today than they’ve been in at least twenty years…as we’ll show you in a moment.
International Speculator will teach you how to position yourself in the best gold stocks before the next bull market begins. 

Click here to read more about the opportunity we have to buy gold stocks today… at prices we probably won’t see again for another twenty years once the bull gets going.

The article This “Pig” Just Made a Massive Bet on Gold was originally published at caseyresearch.com.

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Using Stock Buybacks to Mask Deep Business Problems

By Tony Sagami

Stock buybacks are always a good thing… right? That’s what the mass media has trained investors to believe, but there are times when stock buybacks are a horrible strategy.

Let’s take a look at Herbalife, which has had very visible news items as billionaires like Carl Icahn, George Soros, Daniel Loeb, and Bill Ackman publicly debate the future of the company.



Herbalife shares have lost more than half their value in 2014 because of a Federal Trade Commission investigation and a big drop in profits. 50% is a huge haircut, but I believe Herbalife is poised for even more pain.

Rapidly Disappearing Profits

Herbalife recently reported its third-quarter results and they were just awful. Herbalife earned $0.13 per share in Q3, but that was a whopping 92% decline from the $1.32 it earned last year.

That’s awful, but Herbalife says business will be even worse going forward. The Wall Street crowd expected Herbalife to grow revenues by 7% in 2015, but the company said that its revenues will fall by -1% to -2% instead.

Part of that lower guidance is from the impact of the strong US dollar. Guidance for Q4 includes an unfavorable impact of $0.31 from currency conversions. If you remember, I previously wrote that the strong dollar was going to kill the 2015 profits of companies that do lots of business overseas.

I have to admit, I am skeptical of all the multilevel marketing businesses, but Herbalife is reinforcing that preconceived notion.

FTC and FBI Investigation

The Federal Trade Commission is investigating Herbalife for what could ultimately result in charges that Herbalife is operating an illegal pyramid scheme.

In March, the FTC sent Herbalife a civil investigative demand (CID), which is a subpoena on steroids because all the evidence produced by a CID can be used by other agencies in other investigations, such as the FBI, which is also investigating Herbalife.

The FTC outcome is unknown. Heck, Herbalife could eventually be declared innocent and pure… but I wouldn’t bet on it.

Board Members Gone Bad!

When your company is in the middle of FTC and FBI investigations, the last thing you want is for your company officers to get in trouble with the law. A current Herbalife board member, Pedro Cardoso, has been charged with illegal money laundering by Brazilian prosecutors. Time will tell if the charges are true… but it looks very bad.



That’s not the only problem with the Herbalife board of directors. Longtime Herbalife Board Member Leroy Barnes announced that he is leaving. Board members leave for legitimate reasons all the time, but Barnes is the fourth Herbalife board member to leave in 2014. Talk about rats jumping the ship!

The Smoke and Mirrors of Stock Buybacks

The above issues are all serious and enough to stay away from Herbalife, but the biggest red flag I see is the abusive financial engineering that Herbalife is using to prop up its stock.

Example: In Q2, Herbalife spent over $500 million to buy back its own stock for the purpose of propping up its earnings-per-share ratio. Fewer shares translates into higher earnings per share.



The root of the problem is that Herbalife is using up all its cash AND borrowing money like mad to finance the stock buyback.



In the last year, Herbalife’s debt has exploded by over $1 billion. Herbalife is using every penny of operating cash flow and taking on new debt just to buy back its stock.



Moreover, since Herbalife’s stock has plunged by 50% this year, Herbalife wasted hundreds of millions of dollar of shareholder money by buying stock at much higher prices.

And now that revenue, profits, and free cash flow generated by operations are shrinking, Herbalife is on a collision course with insolvency.



Carl Icahn, who is certainly a much better investor than I will ever be, is a big Herbalife fan and even went as far as to call the shares undervalued. “I would tell you I do believe Herbalife is quite undervalued and it is still a good business model.”

Ahhhh… Carl… sorry, but I think you couldn’t be more wrong.

George Soros, by the way, appears to agree with me because he reduced his Herbalife holdings by 60% after the company reported those disastrous third quarter results a few weeks ago. I’m not suggesting that you rush out and buy put options on Herbalife tomorrow morning. As always, timing is everything, but I have very little doubt that Herbalife’s stock will be significantly lower a year from now.

Moreover, the real point isn’t whether Herbalife is headed higher or lower, but that good, old fashioned fundamental research can help you make money in any type of market environment.

Even during bear markets.

30-year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.

The article Connecting the Dots: Stock Manipulation 101: Using Stock Buybacks to Mask Deep Business Problems was originally published at mauldin economics

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Did George Soros Read This Book to Make a Cool Billion?

Adam Hewison, co-founder of MarketClub just returned from a fact finding mission fro China and returned more excited then ever about his time tested methods on trading these equity and currency markets and how he feels about how legendary investor George Soros made 1 billion dollars in the British pound shortly after his book on foreign exchange was published.

Coincidence? Maybe, but now you can decide and it won't cost you a dime.

20 years ago when his book "Right On The Money: The definitive guide to forecasting foreign exchange rates," was published, it was a huge hit with bank traders and the hedge fund crowd.

One legendary hedge fund trader, by the name of George Soros, may have read my book as he pulled a cool 1 billion dollars in profits from the British Pound in 1992. This huge profit attests to the fact that there are enormous profits to be made in the foreign exchange markets.

Now, for the first time he is publishing "Right on the Money" in electronic format.

In fact, many of the same principles that major hedge fund managers use today to make big profits you will learn about in his new e-book.

A KILLER PRODUCT

That's what Stocks and Commodities Magazine had to say about "Right on the Money" when they reviewed Adam's book. Now, 20 years later you will learn how "a killer product," with its many powerful trading secrets, will help keep you on the right track and ahead of the game no matter what happens to the economy.

THE ULTIMATE MARKET

Money is the ultimate market and I'm betting my reputation that his new e-book on foreign exchange can help make you money. The good news is, it won't cost you a dime.

Something for nothing? You're kidding me right?

No, I am not kidding, in fact I am very serious about wanting to make this book available to everyone who is concerned about their money in what appears to be some very unsettling times that lay ahead of us.

20 years ago my book sold for $125 to major banks and hedge funds everywhere. In today's dollars Adam tells me it would sell for double that amount, which would put it out of reach for most ordinary folks.

So why, you maybe asking yourself, is this e-book on forex available for free?

Here's the reason, Adam has been pretty lucky in the markets and have reached a stage in my life where I am very comfortable and the opportunity to make another six or seven figures is not going to change my life. His reward is going to be your feedback after you download my new e-book. We want you to see and fully understand how the foreign exchange market really works, not just for the last three to six months, but the last several decades.

AN OLD HUNGARIAN PROVERB

There is an old Hungarian proverb that I believe in, and Adam uses it in his book, "The past is the teacher of the future". Only by learning how the markets have worked in the past can you possibly be successful in the future. Nothing really changes in the world, if it did we would all be living in utopia and that is, as we all know, not the case.

THIS MAN CREATED FINANCIAL FUTURES

Leo Melamed, Chairman Emeritus of the Chicago Mercantile Exchange, now the CME Group is largely credited with creating financial futures in the United States, here is what Mr. Melamed had to say in the forword to Adam's book, "Hewison's exhaustive compilation and explanation of chart data, covering 17 years of currency market movements, is a meaningful contribution to the understanding of foreign exchange and excellent educational reference for every serious trader."

Take it from the man who helped create financial futures as we know them today and receive this new e-book while it's still available with Adam's complements.

YOU HAVE ZERO RISK

You don't have to take any financial risk to receive this new e-book. All you have to do is enroll in MarketClub for 30 days. RISK FREE. That's right you have zero risk.

If you are not 100% satisfied within the first 30 days, MarketClub will refund every dime you've paid...no questions asked. On this simple business philosophy, MarketClub has grown into one of the most respected financial websites in the world. It has everything to do with performance and integrity.

Once you enroll with us, you'll see why that's true, and you'll have taken the first step in restoring your wealth. But wait, we have two more bonuses we want you to have if you act in the next 48 hours.

* FUTURE MEMBER BONUS # 1. "17 Money Making Candlestick Formations"
Here are some of my favorite candlestick chart setups that we would like to share with you. (VALUE $35.00)

* FUTURE MEMBER BONUS # 2. "Keep It Simple" This booklet explains our market proven approach in keeping it simple.(VALUE $35.00)

Of course, you'll also receive the big member bonus which we promised you earlier.

* BIG MEMBER BONUS: "Right on the Money" is "a killer product." That's what Stocks and Commodities Magazine had to say about "Right on the Money."
(VALUE $250.00)

Our special offer and $320 in valuable bonuses today makes it easy, convenient and risk-free for you to get started.

Here's to your future "George Soros" success, and if you've read this far and are still undecided about enrolling in MarketClub, remember this, these big Soros-like returns will continue whether you join MarketClub or not. Could huge annual returns make a difference in your financial future like it did for Kevin?

"I would like to take this opportunity, to thank MarketClub's Trade Triangle and alert system, which alerted me to the recent Cable (British Pound) and Dollar trade netting me 10,000 pounds within two months, Thanks again MarketClub."
Kevin, W., Great Britain

There are thousands of other members who, like Kevin, are benefiting everyday from the MarketClub service. Best of all now you don't have to worry as you have zero financial risk.

You have our 30 day risk-free trial which will allow you to explore for yourself firsthand how MarketClub can protect your money and keep you on the right financial track in the future - no matter what this or any future government does.

Again.....if we are right, and the returns we discussed continue which as we expect, then it will be the best decision you'll make in 2010. If we are wrong, you can cancel at any time and get your money back and keep all the bonuses with my complements. What could be any fairer than that.

So make the move today to the winners circle and remember you have complete 100% control of your money at all times.

"It won't work for me" (That little voice inside your head is a killer that you must defeat to become successful. If that's what's holding you back. Give yourself a break and the benefit of the doubt, because remember I'm taking all of the risk here. You might just surprise yourself.)

Start today, and be one step closer to achieving your financial goals. You have no valid reason not to try MarketClub. Wouldn't it be nice to see a program that actually does what it says its going to do for a change.

Enroll in MarketClub today and watch several member's only videos and see how you too can bust the bank like Soros did. It is one of the secrets you'll find in "Right on the Money". Do it now while it is still fresh in you mind.


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New Video: Gold Closes Out Q2 on the Plus Side

The gold market has had a lot of publicity and been under intense scrutiny lately as investors, both conservative (Glenn Beck) and liberal (George Soros), are weighing in and recommending a position in gold.

Certainly the trend in gold remains positive, however there are some possible early chinks in the gold armor that I want to bring to your attention in this short video.

We invite you to watch this video with no strings attached and to leave us a comment on this popular market.

Watch Gold Closes Out Q2 on the Plus Side


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