George Soros

Posted by Kris | Tuesday, October 16, 2007 | | 0 comments »

George Soros speaking in Malaysia 2006

A much younger looking George Soros


Born August 12, 1930 (1930-08-12) (age 77)Budapest, Hungary
Occupation speculator, investor, philanthropist, political activist
Net worth: $8.5 billion (Forbes)
Spouse : Twice divorced (Annaliese Witschak and Susan Weber Soros)
Children : Robert, Andrea, Jonathan, Alexander, Gregory)
Spouse : Twice divorced (Annaliese Witschak and Susan Weber Soros)
Children : Robert, Andrea, Jonathan, Alexander, Gregory

George Soros, the founder of the Quantum Fund, is one of the most successful hedge fund investors ever. A $100,000 investment in his fund when he started in 1969 would've been worth $150mm by 1994. Soros's most famous investment was when he "broke the bank" in England by betting billions against the British pound on "Black Wednesday" in 1992.

Forbes has Soros ranked at 27 in its "richest in America" list with a net worth tipping the scales at $8.5bb. Soros has always fashioned himself as more of a philosopher than an investor and that his skill as an investor is simply the successful application of his philosophy that he dubbed "Reflexivity" in his book, "The Alchemy of Finance". A recent interview of Soros can be found here.

From Wikipedia: " Reflexivity is based in three main ideas:

(1) Reflexivity is best observed under special conditions where investor bias grows and spreads throughout the investment arena. Examples of factors that may give rise to this bias include (a) equity leveraging or (b) the trend following habits of speculators.

(2) Reflexivity appears intermittently since it is most likely to be revealed under certain conditions; i.e., the equilibrium process's character is best considered in terms of probabilities.

(3) Investors' observation of and participation in the capital markets may at times influence valuations AND fundamental conditions or outcomes."Basically, this means markets are at an equilibrium…until they aren't. And then speculation takes over and brings things to a feverish pitch that can't be stopped by rational theories of economics, throwing out the efficient market theory at this time.

When Soros was betting on the pound's decline he was betting that a tipping point had been reached that had made the idea of a pound's decline irresistible to the general public, to speculators, to policy makers, etc and that nothing anybody could do could prevent it, no matter how irrational it might be.

Its when he smells out this type of weakness or strength that Soros will make his biggest bets. How he "smells out weakness" though goes one step beyond philophy and into his own talent. As his own son, Jonathan Soros put it, "when my father's back hurt he knew he was in a bad trade."