George Soros has been buying SPDR Gold Trust, the exchange-traded fund for gold (GLD, quote) and selling Potash Corp. of Saskatchewan (POT, quote) and Ralph Lauren (RL, quote), definite indicators on his view of global growth.
Perhaps bizarrely to extremely bearish traders, many high end retailers are still ramping up, particularly for sales in Asia. Both earnings and sales are higher for RL on a quarter-by-quarter basis.
If there is a global slowdown, these sales will not hold up well, but recent quarterly results have been strong, despite economic uncertainty around the world.
RL is up more than 30% for 2011. Its earnings per share are around 20 — about the average for the Standard & Poor’s 500, and much lower than those for other lifestyle retailers such as Lululemon (LULU, quote).
Debt is modest and the profit margin is decent at just over 10%. There is a short float of over 5%, which is just on the edge of troubling.
The real question is why Soros is dumping potash — the key ingredient in ensuring that the emerging world’s billions remain fed — and buying gold.
His retail positions indicate a sense that the world as we know it is not going to end any time soon. Otherwise, those shares of Ralph Lauren would be worthless.
But an allocation to gold signifies a more bearish position on the dollar as a universal safe haven. That could happen if inflation gets out of control due to the Federal Reserve’s relaxed policies or some other factor, including renewed growth in China.
However, out-of-control inflation in China is not on his plate here. The first thing China would buy in that scenario is grain, which would be bullish for potash.
Soros is betting on QE3.