Billionaire George Soros has warns investors to be cautious because current global trade halts indicate a possible repeat of 2008. Furthermore, Bloomberg reports that the devaluation of the Chinese yuan has brought on multiple economic problems.
When mentioning global trade problems in China, Soros says that China is having a major adjustment problem. As the value of the yuan plummets, this country is spreading its financial struggles to the rest of the world. For instance, trading in this country stopped twice in one week. Furthermore, The Daily Mail reports that the January 7, 2015 Dow Jones Industrial Average dropped 392 points within 24 hours. Chinese stocks also took a huge hit on the same day, and other Asian markets were also negatively affected.
Some investors might be surprised by Mr. Soros’ decision to warn everyone to not make hasty stock purchasing decisions. After all, he took a huge risk in 1992 when he bet that the UK would be forced to devalue its currency before he made a $1 billion profit from it. However, Soros has a longstanding reputation for helping people make the most educated financial decisions. With his company netting at about $27.3 billion within the past few years, people are inclined to listen to his predictions.
On the other hand, The Economist reports that mainstream forecasters are not yet predicting a recession. In fact, evidence of economic growth is reported in various locations. For instance, the United States service industries seem to be doing quite well at an ISM indicator of about 55.3 as of December. Furthermore, German new orders were up 1.5%.
However, there is a fear that the Chinese yuan devaluation could reduce currency competitiveness. Therefore, other Asian countries might end up following suit. This could lead to financial problems because some Asian companies had borrowed from banks in dollars. However, much of the current scares could be speculation.
Investors might take the advice George Soros gives if they want to avoid a personal financial catastrophe. However, Soros is said to have warned before of financial crises before as ones that parallel the Recession of 2008. For instance, the Greek economic crisis was a concern to him. Therefore, hearing that there might be another recession is considered to not be new information for many people.
Still, it seems that the only way a world can avoid spending mistakes is to study the past. George Soros might be onto something when telling people to be careful how they invest their money.