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Does George Soros know something we don’t about the S&P 500?

By Barbara Kollmeyer

Reuters Bucket of expensive bolts

Oh, goody. It’s 13F time, when mere mortals like us get to see how the big boys rolled the dice in the last quarter.

Among the highlights, Soros Fund Management increased a bear-call bet on the S&P 500 in a huge way. The fund lifted a put position — a bet the market will go lower — on the S&P 500 ETF /quotes/zigman/714403/delayed /quotes/nls/spy SPY to its biggest size yet, in terms of value and portfolio percentage, making a 605% leap over the previous quarter.

Bullion Baron. who has long kept a beady eye on Soros’s SPY moves, has summed up the latest dealings. He speculated that this could be  a hedge — or Soros is really worried about something. One possible something is China, which the hedge-fund titan referred to as a global uncertainty earlier in the year, notes the Baron.

Soros also lifted positions in Apple and Facebook and a portfolio loaded up with stocks, so he can’t possibly be all that gloomy. As for that China unease, WSJ’s MoneyBeat reports that China bears are entrenched and see stocks headed for a big fall. One strategist says it’s not good to see that stocks there have been rallying on both good and bad economic news.

“In [a] market frenzy, it is difficult to keep a cool head. But if things don’t add up, it will eventually fall apart,” Hao Hong, Bank of Communications international strategist, tells MoneyBeat.

Now the only problem here, says the Baron, is that if things go pear-shaped in China, that’s not great news for equity markets anywhere, especially those at overvalued levels. Just a reminder, the 13Fs are from the second quarter so for all we know Soros has changed his mind completely since then.

In the short term though, it seems global managers are willing to place their bets on Wall Street. What IG’s Chris Weston hears among some institutional funds, he says, is that with Europe pinned down by Russian worries and growth problems, most think U.S. stocks are a pretty good bet, at least for the short term – three to six months.

“From a relative-growth perspective, the U.S. is significantly outperforming Europe, corporate earnings have been good. From a geopolitical standpoint … where do you go to invest right now, with bond yields so low? The belief is that the U.S. on a relative basis, is going to outperform,” says Weston.

He says if you’d asked him three months ago what his biggest worry was, he would have said a 10% drop for the S&P 500, due to a major rise in 10-year bond yields. “That’s clearly not going to happen anytime soon,” he says.

Recent data from Bank of America Merrill Lynch data shows fund money poured out of Europe in this week, into Japan and China, with modest flows into the U.S.

Quote of the day: Mohamed El-Erian. on what to worry about. “One

is valuation matters, and at these levels of valuation for the bond market and for the equity market, they are telling you different things about the destination. And that’s the second issue. It’s not enough to bet on the journey. You need the destination to come through.”

The economy: Early data shows producer prices nudged up and the Empire state index retreated from a four-year high. Still to come, industrial production at 9:15 a.m. and consumer sentiment at 9:55 a.m. Here’s a preview. Also, Narayana Kocherlakota, Minneapolis Fed bank president, will speak at 9:45 a.m.

Earnings: Just when you think all is lost on the retail front, J.C. Penney /quotes/zigman/237947/delayed /quotes/nls/jcp JCP pulls one out of the hat. Shares are up over 2% after turning in a surprise smaller loss on a stronger sales late Thursday. Not all are completely won over. Sterne Agee says positive steps, great, but annual sales are still $6 billion below peak levels. Plus, given we’re in the early stages of this turnaround, risk remains elevated, it added.

“Net, the rubber meets the road in Q4 when the comp. bar gets harder … until then, we stay uninvolved,” says analyst Charles Grom.

Nordstrom /quotes/zigman/235890/delayed /quotes/nls/jwn JWN. meanwhile, is down nearly 4% after sales fell short of Wall Street forecasts.

Applied Materials /quotes/zigman/19895/delayed /quotes/nls/amat AMAT is up nearly 5% after posting a big jump in profit.

Shareholders who have watched shares of SeaWorld /quotes/zigman/14150718/delayed /quotes/nls/seas SEAS drop 36% so far this year would say this news is about time. The company has bowed to ‘Blackfish’ pressure .

Alibaba Pictures Group /quotes/zigman/37373101/delayed HK:1060 is delaying results after finding accounting issues. Here’s the two degrees of separation: Alibaba Group has a controlling stake in the Chinese film studio, and Alibaba itself is nearing its New York IPO debut.

Chart of the day: Four phases in the credit-equity cycle from Citi’s Rob Buckland, (original theory from Matt King) and his Global Strategy Team (h/t Business Insider, h/t FT ). The chart shows the four stages of the economic cycle and what is coming next. We’re in phase 3, he says, which is credit down, equities up…credit bull market is over, spreads start to rise as investor demand for rising leverage ebbs. But equity bull market carries on as profits and CEO risk appetite keeps going.

Phase 4 is where we’re headed: Classic bear market, where equity and credit prices fall in tandem, collapsing profits, worsening balance sheets are a hallmark, insolvency fears for credit market, profit warnings for equities.

Random reads: Save your skin and scare the children. The beach balaclava has arrived.

Chinese tourists getting the hell out of Paris.

Everything is cool when you’re part of a team. Of 1,024 small robots .

But we knew this? Ebola outbreak is worse than it looks, says WHO .

A woman in Utah is in critical condition after a restaurant worker mistakenly drops a toxic substance in her tea.

Category: Forex

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