Conflicts of Interest: Who's Talking the Book?

Billionaire investor George Soros comments on China's economic downturn during an interview^[1] with Bloomberg's Francine Lacqua at the World Economic Forum in Davos.

On 01/26/2016, China was reported to have “warned” hedge fund legend George Soros to “back off.”

Chinese state media has stepped up a salvo of biting commentaries against George Soros and other currency traders as the yuan comes under pressure, with the billionaire investor accused of “declaring war” on the unit.

What is interesting about China’s public warning regarding attacking their currency is not only the history – Soros is a legend for “breaking the Bank of England” and making millions betting against the British pound – but also the fact Soros didn’t exactly recommend shorting China. In fact, his trade recommendation was to short U.S. stocks!

Did Soros talk his book while he commented about China's hard landing at Davos?^[1]  We may not find out the truth until some time later.

In this article, we will discuss "conflicts of interest" which are widely observed in the financial world nowadays.

Conflicts of Interest

In the recent volatile stock market, Bert Dohmen has warned the casual investors that:^[4]

At the start of a bear market a casual investor, who is easily swayed by the opinions of others, should not listen to the opinion of any analyst with a conflict of interest. They are either with Wall Street or have investment management jobs. Both have big conflicts. None of those people can ever be candid about their opinions of the markets. 

If you want analysis and forecasts without conflicts of interest, find someone with lots of experience who doesn’t work for Wall Street, who doesn’t manage money or sell investments. You never want to guess if what you hear or read is tainted.

A Case Study

The buzz surrounding the late-afternoon bounce in stocks on 02/12/2016 revolved around the news that Jamie Dimon was buying 500,000 shares of JPMorgan Chase stock.^[5]

Was it an act of desperation in hopes of arresting the brutal slide in the bank’s shares?  Or, was it an act of confidence?  No matter what the truth may be.  Dimon's purchase timing was perfect and exactly at a key support level of BKX.^[5]

All investors do like to see a bottom has been found in the current stock market.   However, the credit market was far less impressed by Dimon's marginal purchase, and remains undeniably fearful of what may happen next.

As retail investors, we should remain vigilant.  Same as Chris Ciovacco, and John M. Mason, we should remain suspicious and treat Jamie Dimon's purchase as a case of "Talking his Book" unless it's proven different later.^[6,7]

References

1. Soros: China Hard Landing Is Practically Unavoidable
2. China Stares Down Soros, Issues Warning To Man Who “Broke The Bank of England”
3. George Soros Says The Next Financial Crisis Has Already Started
4. Why The Next Two Years Could Be Worse Than 2008
• Before the end of March, hedge funds will probably be hit with big redemptions because of poor performance. Junk bonds will take the worst hit. Debt defaults on banks loans or ‘rescheduling,’ will cause concerns about the banking system.
5. Banking On A Bounce? Jamie Dimon Vs The Credit Market
6. How Meaningful Was Friday's Stock Rally?
7. Nervousness About Banks: Don't Dismiss It
8. Recession might be in the cards, if history's a guide: Analyst
• Even main media is saying the recession might be in the cards.
• "That would simply take us to undo all of the QE, down to about 1,575 (S&P 500)," said Worth.
9. 5 things behind European bank rout:
1. Fundamental lack of profibility
2. Legacy problems - huge stock of non-performing loans
3. Negative rates
4. Faith in central banks
5. Winder economic slowdown