In a recent article for The Street, John Persinos reported that, in the last quarter of 2015, George Soros Fund Management sold off all its shares in Chevron, Chesapeake Energy, and NRG Energy. (http://www.thestreet.com/story/13465588/1/week-ahead-in-energy-does-george-soros-know-something-we-don-t.html)
If Soros is getting rid of his oil stocks, then maybe the rest of us should give some thought to the wisdom behind this move. After all, the energy market has very recently been responding in knee-jerk fashion to geopolitical news. As Russia, Saudi Arabia, and Iran squabble over whether or not to freeze oil production, the market responds accordingly, rising and falling according to the latest news. The industry is clearly in crisis mode. In the summer of 2014, U.S. Crude was selling for $110 a barrel; on February 19, 2016, it closed at $29.64. That’s a 73% decline. The World Bank is now predicting that the average price for a barrel of oil in 2016 is going to be $37; this is seventeen dollars lower than its original prediction last autumn. As for the possibility of energy enjoying anything close to growth, there’s very little chance. Earnings reports are due from a number of energy companies before the end of February, and it doesn’t look good. Some of them, such as Chesapeake and Transocean, are expected to report very serious financial trouble.
This is disturbing news indeed, bad enough for the energy market but implying trouble as well for a much broader section of the economy. It’s estimated that the energy industry is responsible, either directly or indirectly, for over nine million jobs in the United States; a major decline in the energy market over a prolonged period of time is sure to have a deleterious effect upon much more than energy shares.
Optimists will say that George Soros jumped the gun in dumping his stocks; realists, however, may feel that he knows exactly what he’s up to. Given the fact that he’s one of the world’s richest men, George Soros is likely to be more clear-sighted than most when it comes to investing. According to his Forbes profile, Soros is currently worth nearly $25 billion. (http://www.forbes.com/profile/george-soros). A self-made man, he put himself through business school at the London School of Economics, established himself on Wall Street, opened his own hedge fund in 1969, and has since become one of the world’s most influential financiers. He’s also one of the world’s great philanthropists. George Soros has given away an astonishing amount of money to support a huge variety of causes including education, medical research, and American politics. Through his Open Society Foundation, founded in 1993 and currently with branches in thirty-seven countries, he promotes a free press, public health and education, and the defence of basic human rights around the world. (https://www.opensocietyfoundations.org/people/george-soros)