Last week's commodity price bloodbath signaled a potential shift in the market. A stronger dollar triggered a reversal in trends, rising 2% on the week. Meanwhile, crude oil tumbled nearly 15%, the price of gold shed 5% and silver prices led the losses, plunging 25%, all in one week. The Wall Street Journal's Greg Zuckerman, a veteran reporter covering hedge funds and top money managers, stopped by Breakout to help make sense of the unwinding commodities trade after breaking the news that Wall Street titans George Soros and John Burbank were selling their gold and silver positions. While these moves alone do not cause double-digit declines, they can be of the size and scale that exacerbate a sell-off and leave retail investors burned.
In the clip above, Zuckerman tells Breakout that the smart money is concerned the Fed's quantitative easing program really will end in June and additional stimulus, or QE3, won't happen. "There are all kinds of really smart guys that have been frustrated by this market," says Zuckerman. And this smart money has been shorting "momentum kind of stocks" such as Lululemon (LULU).
Where Is the Smart Money Moving?
Zuckerman says "a lot of people are betting against China, or trying to figure out ways to bet that China will have real deep problems. Obviously they have got too much growth right now, not too little growth." China's economy grew 9.70% in the first quarter of 2011 as compared to the same time period last year, according to China's National Bureau of Statistics. But inflation is rising, and Zuckerman adds, "betting that there's real deep problems in China is a little bit out of the box, it's not conventional wisdom."
Maybe it's not conventional wisdom, but it could just be the next big short.
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- hedge funds
- quantitative easing
- crude oil
- George Soros