November 24, 2017, 12:00 pm EST

BR caricatureAs we head into the Thanksgiving day weekend, let’s talk about oil and Saudi Arabia.

On Thanksgiving night three years ago oil was trading around $73, when the Saudis blocked a vote on an OPEC production cut. Oil dropped 10% that night, and that set off a massive oil price bust that ultimately bottomed out early last year at $26.

The goal of the Saudis was to put the emerging, competitive U.S. shale industry out of business–to force oil prices lower so that these shale companies couldn’t product profitably. The plan: They go away, and Saudi Arabia retains its power on global oil. It nearly worked. Shale companies started dropping like flies, with more than 100 bankruptcies between 2015 and 2016.

But cheap oil had broader implications for the global economy, following the Great Recession. It exposed the global banks that had lent the shale industry hundreds of billions of dollars.

Additionally, collapsing oil prices directly weighed on inflation measures and the inflation expectations. That was bad news for the central banks that had committed trillions of dollars to avert a deflationary spiral and promote a normalization of inflation. High inflation is bad. Deflation is worse. Once a deflationary mindset takes hold, it feeds into more deflation. Central banks can raise rates to kill inflation. They have few tools to fight deflation (especially after the financial crisis).

So cheap oil became bad news for the fragile global economic recovery. With that, central banks stepped in early last year and responded with coordinated easing (which included direct asset purchases, which likely included outright oil and oil-related ETFs). Oil bottomed the day the Bank of Japan intervened in the currency market, and prices jumped 50% in a month as other major central banks followed with intervention.

Now, the other piece of this story: cheap oil damaged the shale industry and the global economy, but it also damaged the same folks that set the collapse into motion–Saudi Arabia and other oil producing countries. These countries, which are heavily reliant on oil revenues, have seen their budget deficits balloon. So, with all of the above in mind, in November of last year, the oil producing countries (led by Saudi Arabia) reversed course on their plan, by promising the first production cuts since 2008.

Oil prices have now recovered to the mid-$50s. And since OPEC announced production cuts last year at this time, U.S. petroleum supply has drawn down 5%. Meanwhile, global demand is running far hotter than forecasts of last year. Yet, OPEC is extending their production cuts into this market and may get even bolder next week at their November meeting. Why? Because now it suits them. Remember, Saudi Arabia’s next king has been cleaning house over the past two weeks, in the process of seizing hundreds of billions of dollars from his political foes. Higher oil prices help his efforts to reshape the Saudi economy.

As liquidity dries up into the end of year and holidays, we may see oil find its way back up toward those November 2014 levels (low $70s)–where the whole price-bust debacle started.

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December 13, 2016, 4:00pm EST

Last week we talked about how a visit to Trump Tower was becoming a good predictor of a success for your stock.

Goldman continues to build representation in the Trump administration with the latest addition, Gary Cohn (current COO and President of Goldman Sachs) as the National Economic Council Director.  And hedge funder Anthony Scaramucci, a Goldman Sachs alum and current member of the Trump transition team, is rumored to be in the running for a role in the administration.  Goldman’s stock continues to rise, as the best performer in the Dow Jones Industrial average since Election Day (up 31%).

And remember, we talked about the visit last week of Masayoshi Son, the Japanese billionaire and majority stake holder in Sprint.  Sprint is up 32% since election day.

So now we have the latest, and one of the most important cabinet appointments, Rex Tillerson, who will be Secretary of State. He’s the Chairman and CEO of Exxon Mobil, the biggest energy company in the country and one of the largest publicly traded companies. Exxon was up 2% today, and is up 9% since the election — better than the broader market, but not quite as good as the stocks of some other Trump Tower visitors.

This is a very interesting pick.  Given that the President-elect has openly talked about using oil as an economic weapon (on Iraq… “we should have taken the oil”). We now have one of the world’s most respected experts in oil, and in negotiating around oil, charged with stabilizing the middle east and relations with Russia (to name a few). And given that the hot spot of global instability surrounds countries (or regimes) that are highly dependendent on oil revenue (funded by oil revenue), we have a guy that could credibly utilize leverage emerging U.S. supply, and global demand of the developed world, as a bargaining chip.   His appointment/presence may also end up yielding a stable oil price environment going forward (tempering the manipulation of price extremes by OPEC).

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September 6, 2016, 3:30pm EST

As we headed into the holiday weekend, stocks were sitting near record highs, yields were hanging around near record lows, and oil had been sinking back toward the danger zone (which is sub $40).

In examining the relationship of those three markets, each has a way of influencing the outcome and direction of the others.

First, the negative scenarios: A continued slide in oil would soon sink stocks again, and send yields (the interest rate outlook) falling farther. Cheap oil, in this environment, has dire implications for the energy business, which has a cascading effect, starting with banks, which effects credit and the dominos fall from there.

What about stocks?  When stocks are falling, in this environment, it’s self-reinforcing.  Lower stocks, equals souring sentiment, equals lower stocks.

What about yields?  As we’ve seen, lower yields are supposed to promote spending and borrowing.  But, in this environment, it comes with trepidation.  Lower yields, especially when much of the world’s government bond markets are in negative yield territory, is having a stifling effect on economic activity, as many see it as a signal of another recession coming, or worse.

Now, for the positive scenarios.  Most likely, they all come with intervention. That shouldn’t be surprising.

We’ve already seen the kitchen sink thrown at the stock market.  From a monetary policy standpoint, the persistent Fed jockeying through much of the past seven years has now been handed over to Japan and Europe.  QE in Europe and Japan continues to promote stability, which incentivizes the flow of capital into stocks (the only liquid alternative for return in a zero and negative interest rate world).

And we’ve seen them influence oil prices as well, through easing, currency market intervention, and likely the covert buying of oil back in February/March of this year (through China, ETFs via the BOJ or an intermediary Japanese bank).  Still, OPEC still swings the big ax in the oil market, and it’s been OPEC intervention that has rigged oil prices to cheap levels, and it looks increasingly likely that they will send oil prices higher through a policy move.  The news that Russian and Saudi Arabian might coordinate to promote higher oil prices, sent crude 5% higher on Monday.

As for yields, this is where the Fed is having a tough time.  They want yields to slowly climb, to slowly follow their policy guidance.  But the world hasn’t been buying it.  When they hiked for the first time in December, the U.S. 10 year yield went from 2.25%, to 2.30% (for a cup of coffee) and has since printed new record lows and continues to hang closer to those levels than not (at 1.53% today).  Lower yields makes it even harder for them to hike because it’s in the face of weaker sentiment.

Last week, we looked at the U.S. 10 year yield. It was trading in this ever narrowing wedge, looking like a big break was coming, one way or the other, following the jobs report on Friday.  It looks like we may have seen the break today (lower), following the week ISM data this morning.

What could swing it all in the positive direction?  Fiscal intervention.

As we discussed on Friday, the G20 met over the weekend.  With world government leaders all in the same room, we know the geopolitical tensions have been rising, relationships have been dividing, but first and foremost priority for everyone at the table, is the economy.

Even those opportunistically posturing for influence and power (i.e. Russia, China), without a stable and recovery global economy, the political and domestic economic outlook is bleak.  So we thought heading into the G20 that we could get some broader calls for government spending stimulus was in order.

The G20 statement did indeed focus heavily on the economy. They said, “Our growth must be shored up by well-designed and coordinated policies. We are determined to use all policy tools – monetary, fiscal and structural – individually and collectively to achieve our goal of strong, sustainable, balanced and inclusive growth. Monetary policy will continue to support economic activity and ensure price stability, consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth. Underscoring the essential role of structural reforms, we emphasize that our fiscal strategies are equally important to supporting our common growth objectives.”

Keep an ear open for some foreshadowing out of Europe to promote fiscal stimulus – the spot it’s most needed. That would be a huge catalyst for “risk assets” (i.e. commodities, stocks, foreign currencies) and would probably finally signal the top in the bond market.

After a fairly quiet August, we have a full docket of central meetings in the weeks ahead, starting this week.  The European Central Bank meets on Thursday.

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September 2, 2016, 12:00pm EST

This time last month, the famed oil trader—and oil bull—Andy Hall was dealing with a sub-$40 oil market again. And he was again explaining losses to investors in his multi-billion dollar hedge fund.

A guy that has made a career, and hundreds of millions of dollar in personal wealth, picking tops and bottoms in oil, had entered 2016 coming off his worst year ever. And 2016 started even worse.

I’ve talked about the oil price bust extensively, at the depths of the decline in January and February. While most were glorifying the benefits of a few extra bucks in the pockets of consumers from low gas prices, we walked through the ugly outcome of persistently low oil prices. It would be another global financial crisis, as failing energy companies and defaulting oil producing countries would crush banks, and the dominos would fall from there. Unfortunately, the central banks don’t have the ammunition to pull the world back from the edge of disaster for a second time.

With that, central banks stepped in with more easing in the face of the oil price threat, and oil bounced sharply.

Hall’s fund bounced sharply too, running up nearly 25% for the year, by the end of June. But he gave a lot of it back by the time July ended. And now, again, oil is closer to $40 than $50. Thanks to a report yesterday, that oil supplies were bigger than expected, the price of crude has fallen 10% since Friday of last week.

Hall was the Citigroup C +0.13% oil trader who made billions of dollars for the bank energy trading arm, Phibro, in the early-to mid-2000s. He was one of the first to load up on oil futures in 2002, when oil was sub-$30, on the thesis that a boom in demand was coming from China.

He reportedly made $800 million in profits for Citi in 2005 from his original bullish bet. He then made more than $1 billion in 2008 for the bank, as oil prices soared to $147 a barrel and then abruptly crashed. He profited handsomely from both sides, earning a payout from Citi of more than $100 million.

So he’s a guy that has been very right about turning points, and big trends. And he’s been pounding the table for much higher oil prices. He thinks oil prices are in for a “violent reversal” (higher). With an important OPEC meeting scheduled for later this month, Hall, in a past investor letter, reminded people how powerful an OPEC policy shift can be. In 1986, the mere hint of an OPEC policy move sent oil up 50% in just 24 hours.

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Oil has surged to open the week. If you’ve been reading our daily pieces over the past few weeks, you’ll know how important oil is for global markets at this stage. With that, strong oil today has translated into higher stocks, higher broad commodities, a slight bump higher in interest rates and better investor sentiment in general.

It was just fourteen days ago that Chesapeake Energy, one of the largest producers of oil and natural gas was rumored to be choosing the path of bankruptcy. That rumor was immediately denied by the company. And soon thereafter, the reality set in for markets that a scenario like that would conjure up post-Lehman like outcomes. Oil has since put in a bottom and bounced more than 25%. Chesapeake has now bounced 46% from the lows just the last six trading days.

It’s at extremes in markets where the biggest and best investors have historically made their money – running into risk, when everyone else is running away.

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With that, today we want to take a look at a few stocks with the biggest upside, and an important “risk buffer” in what is a high risk sector at the moment (energy). This risk buffer? Each stock has the presence of a big-time billionaire investor.

Self-made billionaire energy trader Boone Pickens has said he expects oil to return to $70 this year. On his $70 prediction, he’s also said that if he misses it will be because oil is “over $70, not under $70.” If Pickens is right about oil prices, each of these stocks below have huge upside:

1) Oasis Petroleum (OAS) – Billionaire hedge fund manager John Paulson owns nearly 4% of this stock. The activist hedge fund SPO Advisory owns 14% and has been buying the stock on almost every dip. When oil was last $70, OAS was trading $25 or 500% higher than current levels.

2) Chesapeake Energy (CHK) – Billionaire investor Carl Icahn owns 11% of CHK and recently added to his position around $13. The last time oil was $70, Chesapeake was $25. That would be more than a 1000% return from its price today.

3) EXCO Resources (XCO) – Billionaire investors Wilbur Ross and Howard Marks own more than 30% of this energy stock. The last time oil was $70, EXCO was $3.30. That would be almost a 330% return from its price today.

4) Consol Energy (CNX) – Billionaire David Einhorn owns 12.9% of this stock. When oil was last $70, Consol traded for $40 or almost 500% higher than current levels.

5) Williams Companies (WMB) – Carl Icahn Protégé, Keith Meister of the activist hedge fund Corvex Management, owns $1.1 billion worth of WMB. The last time oil was $70, WMB traded for $50 – more than 300% higher than its current levels.

As we’ve said, persistently cheap oil (at these prices) has become the new “too big to fail” — it’s a systemic risk. It’s hard to imagine central banks will sit back and watch an OPEC-rigged price war put the global economy back into an ugly downward spiral. And time is the worst enemy to those vulnerable first dominoes (the energy industry and weak oil producing countries).

The best investors like to go where the biggest risks are — that’s where the biggest returns can follow. And they’ve been getting aggressive in energy and commodities.

Without question, energy stocks have been beaten up and left for dead. If indeed Chesapeake is a leading indicator that it’s all backing away from the edge, there will be big money to be made in these stocks.

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It’s unimaginable that governments and central banks that have coordinated and committed trillions of dollars in guarantees, backstops, commitments and outright bailouts will stand by and let weak oil prices (rigged by OPEC) undo everything they’ve done over the past seven years to create stability and manufacture a global economic recovery.

Oil represents a systemic threat to the global economy. Just as housing created a cascade of trouble, through the global financial system, then through countries, the oil price crash can do the same.

When you see forecasts of $20 oil or lower, and some of it is coming from Wall Street, these people should also follow by telling you to buy guns and build a bunker, because that’s what you would need if oil went there and stayed there.

Not to mention, if they believe in that forecast, they should be formulating a plan for what they will do to make a living going forward, because their employers will likely go bust in that scenario.

The persistence of lower oil, especially less than or equal to $20 oil, would financially ruin the U.S. energy sector. Oil producing countries would be next, starting with Russia (and ultimately reaching the big OPEC nations). A default in Russia would create tremors in countries that hold Russia sovereign debt and rely on trade with Russia. Remember the fallout from the Asian Crisis? A default in Russia was the catalyst. Oil driven sovereign defaults would create a massive flight of global capital to safety and global credit/liquidity would dry up, again. All of this would put the world’s banks back on the brink of failure, just as we experienced in 2008. The only problem is, this time around, the global economy cannot absorb another 2008. Governments and central banks have fired their bullets and have nothing left to fend off another near global economic apocalypse.

With that, we have to believe that this crash in oil prices will not persist, especially when it’s being rigged by OPEC. Intervention now (or soon) is easy (relatively speaking) and returns the world to the recovery path. Intervention too late will require more resources than are available.

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What’s the solution? An OPEC cut in production has a way of swinging oil in the other direction dramatically. Back in 1986, just a hint of an OPEC cut swung oil by 50% in just 24 hours. This assumes that the pressure builds on OPEC and they realize that the game of chicken that they are playing with U.S. producers has put themselves, also, precariously close to an endpoint.

Alternatively, we made the case last week that either China, the Bank of Japan or the European Central Bank could step in and outright buy commodities as a policy response to their ailing economies. Both the ECB and the BOJ in the past two weeks have said that there are “no limits” to what they can buy as part of their respective QE programs. That would immediately put a floor under crude, and likely global stocks, commodities and put in a top in sovereign bonds. Remember, when China stepped in, bought up and hoarded dirt cheap commodities in 2009, oil went from $32 to above $100 again.

So what’s the latest on oil?


This morning, the threat intensified. Oil dropped 5%, trading below the very key level of $30 per barrel. It was driven by an earnings report from the huge oil and gas company, BP. It reported a $6.5 billion loss. The company followed with an announcement of 7,000 job cuts by the end of 2017. Shares of BP stock are now trading back to 2010 levels, when the company was facing the prospects of bankruptcy after the fall–out from its gulf oil spill. This is one of the largest oil and gas companies in the world trading at levels last seen when people were speculating on its demise.

With the move in oil this morning, global stocks took another hit. Commodities were hit and sovereign debt yields were hit (with U.S. 10–year yields falling below 1.9%).

While there is a lot of talk about China and concerns there, clearly oil is what is dictating markets right now.

Take a look at this chart of oil vs. the S&P 500…

You can see the significant correlation historically in the price of oil and stocks. And you can see where oil and stocks came unhinged back in July 2014. The dramatic disconnect started in November 2014 (Thanksgiving Day) when an OPEC meeting concluded. The poorer members of OPEC called for production cuts. Saudi Arabia blocked the requests. That set off the plunge in oil prices.

You can see clearly in this chart where the price of oil is projecting the S&P. And stocks at those levels suggest the scenario we described above (global apocalypse round 2).

Again, a capitulation from OPEC is probably less likely. More likely, a central bank steps in to become an outright buyer of commodities (especially cheap oil). For those that have been shorting oil (and remain heavily short), either scenario would put them out of business quickly.

At this stage, OPEC is not just in a price war with U.S. shale producers, but it’s playing a game of chicken with the global economy. We’ve had plenty of events over the past seven years that have shaken confidence and have given markets a shakeup – European sovereign debt, Greece potentially leaving the euro, among them. In Europe, we clearly saw the solution. It was intervention. Oil prices are creating every bit as big a threat as Europe was; it’s reasonable to expect intervention will be the solution this time as well.

Bryan Rich is co-founder of Billionaire’s Portfolio, a subscription-based service that empowers average investors to invest alongside the world’s best billionaire investors. To follow the stock picks of the world’s best billionaire investors, subscribe at Billionaire’s Portfolio.



The Fed met today—and they made no change to policy. As we all know, their words will be parsed endlessly. But the fact is, the Fed, at this point, is a side show. It’s two other central banks (BOJ and ECB), and likely policy makers in China that will dictate what stocks do, what commodities do and what the global economy does for the next year (or few).

With that, the real event is tomorrow night. The Bank of Japan will decide on their next move. And the BOJ holds many, if not all of the cards for the U.S. stock market and the global economy. Today we’re going to talk about why that’s the case.

As we said yesterday, the consensus view is that the BOJ will do nothing this week. That sets up for a surprise, which Japanese policymakers like and want. It gives their policy actions more potency.

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We talked yesterday about the role central banks have played in the long and slow global recovery. To put it simply, central banks have manufactured the global economic recovery. Without the intervention, there would have been a global economic collapse and blood in the streets, still. It was all led by the Fed. They slashed interest rates to zero. They rolled out the unprecedented bond buying program that pinned down mortgage rates (putting a bottom in the housing market), and helped to recapitalize the big banks that were drowning in defaulted debt, withering deposits and an evaporation of loan demand. They opened up currency swap lines (access to U.S. dollars) with global central banks so that those central banks could fend off collapse in their respective banking sectors.

Most importantly, with all of the intervention, and after spending and committing trillions of dollars in guarantees, backstops and bailouts, the Fed clearly communicated to the public, by their actions, that they would not let another shock event destabilize the world economy. Europe was next to step up, to do the same.

When the weak members of the European Monetary Union were spiraling toward default, which would have destroyed the euro and Europe all together, the leading euro zone nations stepped in with a bailout package.

Still, a year later, bigger trouble was brewing, as big countries like Italy and Spain were on the precipice of default. That’s when the European Central Bank (ECB) went “all–in”, effectively guaranteeing the debt of Italy and Spain by saying they would do “whatever it takes” to save the euro (and the euro zone).

Those were the magic words: “whatever it takes.”

That statement meant that the central bank would buy the debt of those countries, if need be, to keep them solvent, for as much and as long as needed…”whatever it takes.” That was the line in the sand. If you bought European stocks that day, you’ve doubled your money will little–to–no pain.

Similarly, Japan read from Draghi’s script a few months ago (late September of 2015) when global stocks were falling sharply and threatening to destabilize the world again. Japan’s Prime Minister Abe was in New York, and in a prepared speech, said they would do “whatever it takes” to return Japan to robust sustainable growth. Once again, the magic words put a bottom in global stocks and led to a sharp rebound.

“Whatever it takes” means, if need be, they print more money, they will support government debt markets, they will outright buy stocks, they will devalue currencies, they will do whatever it takes to promote growth and to prevent a shock that would derail the global economy. Why? Because they know the alternative scenario/the negative scenario is catastrophic.

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Not surprisingly, in the past six days, with global stocks in turmoil, Draghi stepped in again. This time, he conjured up some new magic words. He said there are no limits to what the ECB can buy (as part of their QE program). Guess who followed his lead? The head of the BOJ sat in front of a camera the next day and said the exact same thing. This tells me stocks are fair game. We already know that’s the case for the BOJ. They are already outright buying stocks. But it also tells me commodities are fair game. And high yield corporate debt. Anything that is threatening to destabilize global markets and threatening to knock the global economic recovery off path—it’s fair game for the ECB and BOJ to put a floor under (i.e. by buying up assets with freshly printed currency).

What does it all mean? It means the ECB and the BOJ are now at the wheel. They relieved pressure from the Fed, allowing the Fed to begin the path of removing the emergency policies (albeit very slowly) of the past nine years. The Fed only makes this move because they believe the U.S. economy is robust enough to handle it. And, more importantly, they only start this path because they know that two other major central banks in the world will continue to provide fuel for the global economy and defend against shocks through their aggressive policies.

Now, within this monetary policy dominated world, where everyone is all–in, the policy actions have simply kept the global economy alive and breathing, they have done nothing to address the major structural problems the world is enduring: Massive debt and slow–to–no growth.

What’s the solution? There hasn’t been one. Until Japan unveiled their massive stimulus program in 2013. The potential solution: A massive devaluation of the Japanese yen.

Japan, unlike many other major central banks (including the Fed), has all of the right ingredients to achieve its inflation goal via the printing press—it has the biggest debt load in the world (which can be inflated away by yen printing), it has persistent deflation (which can be reversed by printing), and it has decades of economic stagnation (which can be reversed with hyper easy money and improvements in the global economy).

In short, they can do all of the things that other powerful central banks/economies can’t do—and it can result in a huge benefit not just in Japan but for fueling a recovery in the global economy (as capital pours out of Japan). In a world with few antidotes to the structural economic problems, this is a potential solution for everyone. So perhaps the most important ingredient for a successful campaign in Japan°they have the full support/hope/wishes of the major global economic powers (US, Europe, UK).

The Bank of Japan is targeting to run their aggressive QE program at full tilt until they can produce a target of 2% inflation in their economy. Their latest inflation data is closer to zero than 1% (still very far from 2%). So they still have a lot of work to do. They completed two years of their big, bold plan—and two years was the timeline they projected to achieve their goal. Clearly, they haven’t met the inflation goal. And they have since, as we’ve said, committed to do whatever it takes to do it, and for as long as it takes. With that, we expect more expansion to their QE program (possibly this week). And, importantly, a huge part of their success is (and will be) dependent upon higher Japanese stocks, and a weaker yen. They have explicitly said so. It’s part of their game plan.

Japan’s Prime Minister Abe was elected on his aggressive plan to end deflation. That was, and is, his priority. He hand-selected the Bank of Japan governor to carry out his plan.

Here’s the quick and dirty summary: With free–falling oil and depressed commodity prices threatening widespread defaults across the energy sector, which would soon be followed by sovereign debt defaults from oil producing nations (like Russia), don’t be surprised if we see the BOJ (and maybe the ECB) step in and gobble up dirt cheap commodities as a policy initiative. It would put a floor under stocks, commodities, and promote stability and growth.

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The legendary billionaire investor, Warren Buffett, lost 12.3% in 2015. That was his worst year since 2008.

Meanwhile, the average hedge fund lost 3%. The average mutual fund lost 2.7%. And stocks broadly finished the year down too (before dividends), for the first time since 2008. Even most of the biggest and best known professional investors had a bad 2015. Still, one of the lesser known, but one of the best in the world, defied the gravity of stocks and posted an 8.3% gain for the year.

It was billionaire Andreas Halvorsen. He runs Viking Global, the ninth largest hedge fund in the world at $31 billion in assets under management.

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Halvorsen started his fund in 1999, after training under the legendary billionaire investor Julian Robertson. He’s a former Norwegian Navy Seal and a Stanford MBA.

Halvorsen extracted more than $2.5 billion from the markets in 2015, as a stock investor, in one of the more difficult stock picking environments in a long time. And last year was not an anomaly. Viking has one of the best track records of any hedge fund over the past 16 years. Since inception in 1999, the fund has returned 23% annualized (before fees) vs. a 4% annualized return for the S&P 500.

Halvorsen’s stock picking abilities have produced returns at a factor of 3.5 times better than Buffett’s since he’s been at the helm of Viking. And he’s done it with much smaller drawdowns. In fact, Viking has only had two losing years since 1999. The fund lost 0.9% in 2003 and lost just 0.9% in 2008, a year when almost all stock investors were crushed. Buffett lost 31.5% that year.

The following are Viking’s top positions: Allergan (AGN), Walgreen’s (WBA), Google/Alphabet (GOOGL), Amazon (AMZN) and Broadcom (BRCM).

In addition, in Halvorsen’s most recent investor letter, he said his fund had doubled down (added more) on a very controversial stock in their portfolio. At Billionaire’s Portfolio we curate a portfolio of the best stock picks of the world’s best billionaire investors – our subscribers follow along. To find out what stock Viking Global is adding to after a big decline, subscribe today.

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At Billionaire’s Portfolio we study the buying patterns of the world’s greatest billionaire investors and hedge funds. So when two of greatest billionaire investors in the world, Carl Icahn and Warren Buffett, are adding more to their large, beaten down stakes in energy companies, we pay close attention.

We know two things about Buffett and Icahn: 1) they have made billions throughout their careers buying when everyone else is selling, and 2) they have a knack for picking the winners, the stocks and sectors, and marking the bottom when they enter.

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Their respective records are especially remarkable in times when widespread fear and doubt is in the air. For example, Icahn marked the bottom in technology stocks in the fall of 2012 with his 10% position in Netflix. He made $2 billion in profits on the trade, a nearly 1,000% return. Buffett marked the bottom in bank stocks in the fall of 2011 when he initiated a $5 billion position in Bank of America. That investment has almost tripled in price since, producing nearly $10 billion in open profits for Buffett.

Now, it’s typical in market environments like this to hear from experts that warn against picking tops and bottoms. But contrary to the Wall Street adages against market timing, the two best investors of all-time have amassed two of the largest personal fortunes in the world by (as Buffett says) “being greedy while others are fearful.” And they are using the new lows in oil and energy markets to add more to their stakes. Historically, that tends to be a profitable signal. There is a Harvard study that shows when hedge funds “double down” on losing positions, on average those tend to be their biggest winners.

Let’s look at the investments from this billionaire duo where they have been adding to their losers:

1) Phillips 66 (PSX) – Buffett revealed last September he had taken a $4.5 billon position in the energy stock Phillips 66. This is a typical Buffett stock. It sells for just 9 times earnings, a huge discount to the S&P 500’s P/E of 21, and the stock pays nearly 3% in a dividend. Furthermore, the company has a pristine balance sheet, with very little debt – a classic Buffett stock, cheap and safe. Buffett has added another $700 million to this stock just in the past two weeks. He’s the largest shareholder.

2) Chesapeake Energy (CHK) – Carl Icahn owns doubled his stake last spring when he bought 6.6 million shares of CHK for about $14. Icahn now owns 11% of Chesapeake. If the stock returns to the price where Icahn doubled down it would represent an almost 300% return for today’s levels. With the sharp fall in the stock price this past week, I wouldn’t be surprised if we find in the coming days that Icahn added more into the recent slide.

3) Cheniere Energy (LNG) – Carl Icahn also initiated a $1.3 billion position in energy stock LNG in August of last year, taking an 8% ownership in the company. Cheniere is on track to become the first U.S. company able to export liquefied natural gas. This makes LNG a classic “wide moat” (no competition) stock. Icahn has already secured two board seats on Cheniere’s board. Icahn’s “board seat effect” has proven to be a huge predictor of success for the legendary activist. According to an essay Icahn penned last year, when he gets a board seat in a company, his stock returns averages 27.5%. Since his initial stake in August, Icahn has added to his stake several times into the end of the year. He now owns 13.8% of LNG — the largest shareholder.

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The best billionaire investors in the world have amassed their fortunes by being in the right place at the right time, and betting big.

Billionaires are billionaires because they think differently than the average person. They tend to see opportunities well before anyone else knows they are opportunities. They tend to go where some of the biggest risks are, because that’s also where the biggest returns can be found. They like to invest in situations only when they have an advantage. And when they have high conviction, they bet big.

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Here’s a glimpse at these 8 big opportunities for the New Year:

Surprise Prediction #1: China – China’s slowdown this year, will turn into global economic fuel next year. (The Trade: iShares China Large-Cap ETF, symbol FXI)

China’s economic slowdown and stock market boom and bust has been one of the dominant themes of 2015. Multiple billionaires have taken the opportunity to load up.

Over the past 15-years, stocks have returned just 4.5% annualized. Meanwhile, Chase Coleman of Tiger Global has returned 21% annualized (gross of fees) on his long positions and became a billionaire in the most difficult stock market in our lifetimes. Coleman holds over 20% of his hedge fund in Chinese stocks. Billionaire Stephen Mandel, another top hedge fund manager, also has a huge chunk of his portfolio in Chinese stocks. And another billionaire, an astute macro investor, and one of the best performing investors in 2015, has one of his top positions in China.

Additionally, billionaire David Tepper thinks next year could be a boom for Chinese stocks and the economy, as he thinks the Chinese central bank could ease more aggressively than anyone thinks is possible. That positive fuel for the global economy could be the antidote for a global demand rebound.

Surprise Prediction #2: Stocks – The comfortable ride on the S&P train for the past six years is over. It’s a stock pickers market. (The Trade: iShares S&P 500 Value ETF, symbol IVE)

Billionaires have mixed views on the broad stock market. Bill Ackman and Leon Cooperman think stocks are a good value. Tepper has been uber bullish for much the past five years, but is more neutral now. Legendary billionaire investor Carl Icahn thinks there’s danger in high yield bond markets that could affect stocks.

More broadly speaking, the consensus view among the best investors in the world is that the broad stock market indicies won’t give you the easy returns we’ve had for the better part of 2009 to 2014. There will be more volatility, and it will be a stock pickers market! That’s when billionaire investors and hedge funds thrive. The winners will be the ones that can strategically identify the right stocks to own. A momentum driven market has favored index buying through this global economic recovery period, and now there is an over-due cyclical shift toward value. With billionaire investors and hedge funds primed to take advantage, the time to join our Billionaire’s Portfolio service couldn’t be better.

Surprise Prediction #3: Fed – The Fed could be forced to raise rates far more aggressively than they have planned. (The Trade: ProShares Short 20+ Year Treasury, symbol TBF)

As we said in the above, billionaire David Tepper thinks that China could ease more aggressively than anyone thinks is possible. If that happens, and it does indeed fuel a pop in global demand, the result could be quicker growth in the U.S. and quicker inflation than what is anticipated by the Fed. With that, the Fed could be forced to raise rates faster than expected.

For the past year the chatter among market participants has been about the potential for more a return to QE for the Fed (i.e. QE4). No one is talking about the Fed potentially being behind the curve on inflation, as they were for much of 2011-2013. This sets up the market for a surprise, which can result in sharp moves as people scurry from one side of the ship to the other.

Surprise Prediction #4: Commodities – Commodities are bottoming. (The Trade: DB Commodity Index Tracking Fund, symbol DBC)

Stanley Druckenmiller, billionaire and legendary macro trader, made his career picking tops and bottoms. He is taking a stab at bottom ticking commodities, loading up on gold, which is the top position in his family office fund. His former boss, George Soros has been scooping up coal and energy stocks. And in the most recent quarter, these macro trading legends have welcomed a lot of their fellow billionaires to the bottom fishing pond, as billionaire investors like Carl Icahn have been building stakes in stocks across the energy sector.

Surprise Prediction #5: Oil – Oil bounces to $70. (Energy Select SPDR, symbol XLE)

The self-made billionaire energy trader, Boone Pickens, has recently called for $70 oil in six months. He’s not the only oil bull. Another famous and very wealthy energy trader has called a bottom in oil too, and is looking for much higher prices. His name is Andy Hall.

He was one of the first energy traders to load up on oil futures in 2002, when oil was sub-$30, on the thesis that a boom in demand was coming from China.

In a recent letter to investors, he laid out an extensive fundamental case for higher oil prices and suggested a cut from OPEC could be coming as well. On that front, he noted that merely a hint of an OPEC policy change in August of 1986 spiked oil prices by 50% in just 24-hours.

So we have two of the greatest and wealthiest oil traders in the world that are long oil and have called for a return to much higher prices sooner rather than later.

Surprise Prediction #6: Bonds –Treasury bonds have topped, corporate bonds will fall hard. (ProShares Short High Yield, symbol SJB)

Everyone agrees treasury bonds are a top – though it’s claimed a lot of victims, including Bill Gross. Perhaps the most dangerous area in the bond market though, is high yield bonds. Companies have been borrowing cheap money and buying back stock at an aggressive rate. Billionaires from Icahn to Druckenmiller think the music has stopped, and the high yield bonds will continue to sink, while weak companies that have been in the business of pumping up share prices through share buybacks will fall.

Surprise Prediction #7: Biotech – Biotech and healthcare stocks have a big year. (The Trade: Nasdaq Biotechnology ETF, symbol IBB)

Biotech has been volatile over the past year and a half as it is a stock pickers market in the biotech sector – sparked by a very rare statement from the sitting Fed Chairman about biotech stock valuations, and most recently because of the political backlash associated with soaring drug costs. When average investors run out of the store, when stocks go on sale, the world’s best investors go on a shopping spree. Biotech and Healthcare stocks are where the big additions have been made in the past quarter in billionaire portfolios. No surprise, with share prices beaten down, M&A in the sector is at a record pace.

Surprise Prediction #8: Technology – New technology keeps booming! (The Trade: DJ Internet Index Fund, symbol FDN)

The Silicon Valley VC, Bill Gurley, has been sounding the alarm about a tech bust. But the reining godfather of the Silicon Valley VC, Marc Andreesen, says we’re not in a bubble, we are working our way out of a 15-year bust (i.e. big innovation is in the early stages). If Andreesen is right, and the technological revolution is closer to the bottom of a cycle than the top, expect more game changing companies to emerge.

The common theme of all of these billionaire surprise predictions is that strategic investing is returning, and riding the Fed-induced rising tide in the broad stock market indices is over. Between 2000 and 2010, when the S&P 500 returned zero, the billionaire investors and hedge funds we follow in the Billionaire’s Portfolio had some of their best performance ever, with some returning 30% to 40% a year over that period.

That type of outperformance comes from being in places where they see an opportunity before anyone else thinks it’s an opportunity. While the ETFs offer a way to play it, the big returns will come from being in select stocks that these billionaires are buying to capitalize on a market that is broadly wrong-footed on many of these predictions.

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The goal of the Billionaire’s Portfolio is simple: to provide retail investors with the same plain-vanilla stock investments that the world’s greatest billionaire investors and hedge funds own. And our subscribers can invest alongside these billionaires without the typical $5 million minimum investments and paying big hedge fund management and performance fees. Instead, they get access to our best of the best portfolio of billionaire owned stocks for just $297 a quarter.