The man who ‘broke the bank of England’ has taken aim at the US stock market. From Marketwatch:

Within Friday’s 13F filings news was the revelation that the firm, founded by legendary investor George Soros, increased a put position on the S&P 500 ETF SPY by a whopping 154% in the fourth quarter, compared with the third. (A put or short position basically gives the owner the right to sell a security at a set price for a limited time, and in making such a bet, an investor generally believes the security is going to decline.) The value of that holding, the biggest position in the fund, has risen to $1.3 billion from around $470 million. It now makes up a 11.13% chunk of all reported holdings.

It’s not clear whether Soros is using the put options as a hedge or a bet on an outright decline in stocks. My guess is it’s probably a combination of both.

He did write an op-ed recently about his worries over China:

The major uncertainty facing the world today is not the euro but the future direction of China. The growth model responsible for its rapid rise has run out of steam… There are some eerie resemblances with the financial conditions that prevailed in the US in the years preceding the crash of 2008.

Should China experience a bust along the lines of what our country went through five years ago it would have major implications for the world economy. And we’re beginning to see signs of the massive debt cycle in China turn south.

I linked this story in my Friday post. It details the growing problem with defaulted “trust products” in the China and it is precisely the type of catalyst that could kick off a larger crisis.

Last month, China’s banking sector dodged a potential catastrophe when a mystery group stepped in at the 11th hour to pay investors in the now-infamous “Credit Equals Gold #1, a defaulted $495-million trust product. Barely two weeks have passed and now another trust product has failed to pay back investors. This product—known as “Songhua River #77 Shanxi Opulent Blessing Project”—is unlikely to cause more than a minor scare. But episodes like Credit Equals Gold and Opulent Blessing Project are just the beginning, says Mike Werner, senior analyst at Bernstein Research, in a note today. One reason is that more than 43% of the 10.9 trillion yuan ($1.8 trillion) worth of outstanding trust products come due in 2014… Rising rates will make it hard for bankrupt companies to find the cash to pay back investors, he says.

Of course all of this is just speculation on my part. Soros obviously has his own reasons for putting the trade on. But the clues are all pointing in the same direction.