George Soros: selfish speculator or market prophet?

published 6 February 2009

No doomster was more feted at Davos this year than George Soros, who has been grimly predicting financial apocalypse for decades. "After the boy cried wolf three times, the wolf finally came," he told The Wall Street Journal last year. Reviled and distrusted for years as The Man Who Broke the Bank of England, even Soros's most trenchant critics seemed happy to glance over reports that his Quantum Fund has been shorting the pound again to concentrate on his new role as a prophet.

Soros, now 78, is surely "the greatest speculator of the age", says the Evening Standard. His punt against the pound in 1992 earned him £1bn. But it was the follow-up bet against the Thai baht in 1997 that secured the most death threats. Soros has lived under the threat of physical attack ever since and not just from burned-out Asian Tigers. His high-profile campaign to stop the re-election of George W Bush in 2004 made him a hate figure among the US far right, who accuse him of "wrecking civilisation for profit". He is "the face of evil", noted one blogger. "Why the hell hasn't this asshole been assassinated yet?" Much of the invective boils down to a rehash of cod Jewish conspiracy theories. But Soros has been demonised so effectively in the States, says the FT, that "he kept fairly quiet about his support for Obama, lest the association hurt his candidate".

Critics also claim that Soros's predictions of doom are self-serving. When rumours circulated last summer that a fund run by his nephew was taking big bets against the FTSE, the index duly crashed. That may have been on the cards anyway. But there seems little doubt that Soros retains his ability, if not to buck markets, then to at least give them a good nudge, says The Daily Telegraph. When it emerged he'd closed his position against sterling last week, the pound immediately bounced.

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But the year with the most resonance for Soros is 1944, "when as a 13 year-old in Nazi-occupied Budapest, he eluded the Holocaust", living apart from his parents under a false name, says the FT. "It was high adventure," he later wrote. "Like living through Raiders of the Lost Ark." He escaped communism after the war to study at the London School of Economics under the philosopher Karl Popper, who became a profound influence (see below). It was a grim period during which he "discovered loneliness". He left for New York in 1956 and toiled anonymously for years, before eventually gaining recognition as one of Wall Street's shrewdest traders and "the father of modern hedge funds".

Soros says he came out of semi-retirement in 2007 to preserve his wealth. He achieved his aim, ending 2008 up almost 10%. But he is "disdainful of a life lived purely to accumulate more chips", says the FT. He has more than enough to live comfortably with his art historian wife Susan, commuting between a mansion in upstate New York and his Pall Mall office. The real prize for this lifelong outsider is that, in his twilight years, he has come in from the cold. His ideas have achieved the recognition he craved, his business is on a solid footing and his candidate is US president. He may well reflect, as he hands round the wine at one of his many social gatherings, that for him at least, Camelot has finally arrived.

Secret of success: be as moody as the markets

George Soros has begun to take the full measure of his legacy, says The Globe & Mail (Canada). "Gazillions of dollars? Check. Respect from powerful peers and world leaders? Check and check. Philanthropic renown for his work promoting democracy in Eastern Europe? Big check." And yet what Soros wants to be remembered for is his work as a philosopher. The core idea he took from Karl Popper was the Open Society, in which the rivalries and conflicts of nations become irrelevant. But he was frustrated for years that his own pet theory of "reflexivity" essentially a demolition of the theory of efficient markets gained so little recognition. Now it is all the rage.

But Soros is his own worst enemy, says the US National Review. He might be a charming conversationalist and a master of disaster soundbites, but his books can be hard going. Even champions, such as the former Fed chairman Paul Volcker, mix praise for Soros's "brilliant ideas about how markets function or dysfunction" with the observation that they "are not always expressed as clearly ... as I might like". Indeed, readers of

The New Paradigm for Financial Markets

should skip straight to his diary as a hedge-fund manager, advises Bloomberg. His talent for spotting "game-changing" moments isn't infallible (he lost $2bn betting the wrong way on Russia in 1998), but his observations on market psychology are fascinating. Soros's success has often been attributed to his lack of emotion, notes the FT. He maintains the opposite. "I am as moody as the market," he says. So much so that "he treats psychosomatic ailments, especially backaches ... as valuable investment tips".