Two Bears Are Growling

Mario Drahi and George Soros are dinging stocks and giving bond traders a reason to dip below a key level.

In speaking at an economic forum, European Central Bank president Mario Draghi said the European economy is at risk of suffering lasting economic damage without an improvement in output. Draghi implored the leaders of the EU to undertake fiscal action as monetary policy had done all it can do. Draghi basically admitted he can save the euro but he can’t save the European economy. That’s not a big secret to anyone who has seen what puny results have come from years of extraordinary central bank interventions.

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Draghi is the first bear.

The second roaring bear is billionaire investor George Soros. According to The Wall Street Journal, Soros is getting actively involved in investing decisions again after being mostly a supervisor for a few years. Soros has been placing big bearish bets. It’s not known exactly what he has done except for shorting the SP and buying gold. He shorted stocks in the first quarter, which was not great timing, but he also bought gold, which was a good move.

According to sources, Soros believes China is the catalyst that will drive the world economy into recession. I can only guess his play on gold must reflect his belief that central bank actions will undermine the faith in currency.

The two bears are dinging stocks on this Thursday morning and giving bond traders a reason to break below the key level of 1.69-1.70%. Bond traders tried several times yesterday to break that level on their own but failed. The 10-year note yield broke that level this morning and is at 1.67%. That’s not a significant break yet, and traders will need to see some follow-through, but the stage is set for a charthead rally.

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June 9, 2016

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