May 29, 2024

Soros Sells Gold But Also Bought Lehman Brothers and Countrywide Right Before Their Collapse

Countrywide Financial Corp

The $28 billion Soros Fund Management disclosed in SEC filings that it had sold virtually all of its holdings in the SPDR Gold Trust (GLD). At the end of the March, the Soros Fund, run by renown George Soros, owned only 49,400 shares of GLD after selling 4.7 million shares in the first quarter.

Rumors of GLD liquidation by Soros has been public for weeks now and may have contributed to the recent decline in the price of gold.

George Soros is one of the world’s most prominent hedge fund investors with a great track record, but like any investor, some of his stock picks have been disastrous. In late 2007, as financial stocks were swooning due to disclosures of huge mortgage loan losses, Soros acquired shares of Countrywide Financial. In the quarter ending September 30, 2007, the Soros fund picked up 1.8 million shares of Countrywide, acquired at an estimated average price of $25. As financial markets collapsed in 2008, Countrywide’s price plunged and it was ultimately acquired by Bank of America at $7 per share.

As markets plunged in 2008, Soros apparently could not comprehend the severity of the financial crisis. During the quarter ending June 30, 2008, Soros increased his stake in Lehman Brothers to almost 9.5 million shares from only 10,000 at the end of March. By mid August 2008, Lehman Brothers stock had plunged 80% on the year as losses on toxic debt holdings climbed into the billions. Shortly thereafter, when the Fed refused to bail out Lehman Brothers, they collapsed on September 15, 2008.

Time will tell if the decision by Soros to liquidate his gold position turns out to be another disastrously ill timed move.

Meanwhile, hedge fund manager John Paulson, who made billions during the financial crisis by shorting subprime mortgages has not reduced his massive $4.4 billion investment in the SPDR Gold Trust.

Soros may be playing the role of a short term trader while Paulson waits for the big payoff as he did with his bets on subprime mortgages.   Trader sentiment in both commodities and precious metals had become massively bullish  and with markets vulnerable to a sell off, perhaps Soros simply decided to take some profits short term.

Ultimately, market fundamentals suggest much higher gold prices and it would not be surprising to see the Soros Fund reestablish gold positions at some later date.