George Soros - life by your own rules. Facts and myths
Four hundred seventy-three million to one. These were the chances of George Soros...
(Paul Tudor Jones II, from the preface to the book by J. Soros "The Alchemy of Finance")
The lesson I learned during the war is that sometimes you can even lose your own life if you don't take risks.
I did not accept the rules suggested by others. If I did this, I would no longer be alive.
The figure of George Soros among the financiers of the late 20th and early 21st centuries has acquired truly cosmic proportions with demonic overtones. A man who moves world markets, an interview with which immediately gets on the front pages of leading publications. His level of communication is presidents and prime ministers. His statements became quotes, books - bestsellers. With the personality of Soros, as a financial speculator, perhaps only the Wall Street legend of the 1920s is commensurate. With one major difference. The popularity of the "wunderkind" Livermore did not go beyond stockbrokers and investors. Soros gained additional wide recognition as a philanthropist, philosopher and public figure.
Soros has a large number of followers and fans who hang on his every word, copy his lifestyle and work methods. For them, he is a Guru, and not only in the economy. There is another, no less numerous "group of comrades", for whom Soros is a swindler, a swindler, an "agent of world capitalism", well, just a bad person. The name Soros has become a household name. Economists call "Soros" large speculators who "set off currency crises for profit and pleasure" (Paul Krugman, 1996).
The purpose of this material is a presentation of individual facts from the biography of the great investor. An attempt to separate fiction from reality. Legend from reality. Although the legend is an indispensable attribute of people like George Soros, the man who "revealed".
Biography of George Soros. First half of the way. 1930-1970
Childhood and adolescence 1930-1947
Very, very much is laid in everyone in childhood. At all times, the role of parents, their example is difficult to overestimate ... The future player and was no exception.
George Soros was born on August 12, 1930 to a Jewish family in Budapest. The name given to him at birth is Gyorgy, the surname is Schwartz. The father of the future financier is Tivadar Schwarz, a lawyer, and his mother is Erzebet Szucz, a representative of a wealthy family.
G. Soros, first of all, owes his father to his future fate, views and, simply, the fact that he was able to survive. Tivadar Schwartz was an extraordinary person. Specialist in the artificial language of Esperanto, Esperanto writer, founder and editor of a literary magazine. Plays a prominent role in the Jewish community of the Hungarian capital in the 1920s and 30s.
T. Schwartz lived an extraordinary life. Having volunteered for the First World War (in order not to miss such a chance - an interesting reason, right?), He is captured by Russia as a soldier of the Austro-Hungarian army. Then follows the Siberian camp and escape with a long transition to Hungary. More than risky. The chances of a successful outcome were not at all great, but Tivadar won and survived ...
By personal example, Schwartz Sr. was able to instill in Schwartz Jr., the future Soros, love and the ability to take risks. Often the risky move is the only possible one. The only option that allows you to save life, sometimes in the literal sense. The lessons of the father were perfectly learned by the son and helped him in the future. Exchange game, financial transactions are inseparable from a reasonable and calculated risk. But any, the most complex and ingenious calculation will not save a trader or investor from the need to make a choice and take risks. Again and again.
The special talent of Tivadar Schwartz to foresee the impending danger and be able to avoid it was revealed from the mid-1930s. The dictatorship of the Hungarian ruler Miklos Horthy, who made an alliance with Hitler, did not open up very bright prospects for local Jews. Not everyone understood this, but Schwartz Sr. calculated the situation very well.
In 1936, the family changed the Jewish-sounding surname Schwartz to the Hungarian Shorosh (Soros). Tivadar was very proud of his choice. In Hungarian, Shoros/Soros is "follower", and in his favorite Esperanto, the verb is "soar".
In 1944 it became quite dangerous. German troops occupied Hungary. The new administration graciously invited the Jews to register. Now everyone knows what this inevitably led to. Then it was not obvious. But not for a person who has taken a new surname. This is hard to fool. How difficult it would be to get his son on the stock exchange in thirty or forty years. Shorosh senior makes fake documents for his relatives. Moreover, they begin to live separately from each other, hoping to get lost among ordinary Christian Hungarians. The rescue operation is going well. The Soros escaped the fate of hundreds of thousands of Hungarian Jews who became victims of the Holocaust. George gets a chance: "I was lucky that my father was one of those who did not act, as people usually do."
Studying in London and work not in the specialty 1947-1953
In 1947, George Soros left Hungary, already occupied by Soviet troops, for London on fake documents. There is a legend that he made a choice between the British capital, where the Air Force is located, the wave of which the whole family “caught” during the war years, and Moscow. Intuition did not fail the future "financial tycoon" even then. Once again, Soros Jr. heeded his father's advice.
In the same year (according to other sources - in 1949) he entered the London School of Economics and Political Science, which he graduated after 3 years. The educational institution is world-famous for its teachers (including many Nobel laureates) and graduates. Among the latter are John F. Kennedy and, oddly enough, Mick Jagger of the Rolling Stones. It's funny that the English abbreviation of the London School of Economics LSE, coincides with the short name of the London Stock Exchange, to which Soros will soon be most directly related.
At the School, Soros listened to lectures and became a follower of the Austrian philosopher Karl Popper, who had a significant impact on the socio-political views of the future investor.
Graduation from the School did not open the doors of banks, investment or trust companies to its young graduate. Not at all. The future "master of the markets" had to take a full spoonful of poor life.
Here is an incomplete list of places and jobs that J. Soros occupied and performed immediately after his studies:
- haberdashery factory employee;
- a traveling salesman in the seaside towns of southern England;
- waiter;
- fruit picker;
- station porter.
According to the investor, at that time he lived on a budget of four pounds a week and even envied the cat that ate herring in front of his eyes. Another batch of legends?
But the hope for a better life did not leave young George. He persistently looked for a place as a financier and believed in his star: “I have always felt like an exceptional person”.
Some sources put forward the version that the rapid and successful employment of the young Soros was hindered by his nationality and lack of patronage. It is difficult to disagree with the latter, but the reason for refusals on a national basis (for such a profession!) Is quite controversial.
Start of financial career 1953-1970
Finally, it's done! In 1953, George was accepted into the arbitration department of Singer and Friedlander. Career of the financier started. The department's office is next to the London Stock Exchange building.
And in 1956, 26-year-old Soros, with very little money, went to conquer America. The first stage of the implementation of the next American dream. Again, as before, his father helped him. Subsequently, George Soros always emphasized what a colossal influence Schwartz/Soros Sr. had on him. And what help!
George is hired by a certain Mayer, his father's London comrade. Mayer owned a small brokerage house on Wall Street. Soros begins international arbitrage trading with a derivative (combined) financial instrument created by him personally. It combined shares, warrants (derivatives, contracts for the purchase of shares) and. Packages of securities were purchased in one country and sold in another. Already the first job in New York allowed Soros to conduct international financial transactions.
In 1959, George moved to the position of analyst at Wetheim & Co. However, in 1963, international arbitration became an unprofitable business and Soros stopped doing it. The reason is the introduction by President John F. Kennedy of a number of additional taxes and fees. Here is such a bandwagon from one graduate of the London School of Economics to another.
By 1967 George was head of the research division at Arnhold and S. Bleichroeder. The brokerage firm was engaged in trading on European stock markets.
In the United States, Soros begins to conduct the first, still "home" joint investment operations. He invested his own, as well as the funds of friends and acquaintances entrusted to him, in various financial instruments. The goal of the novice investor was to earn half a million dollars, which would allow him to leave his job as a financier and devote himself entirely to philosophy. Now that looks like a real myth.
Finally, in the same 1967, using his weight and influence in Arnhold and S. Bleichroeder, George persuades the company's management to establish the First Eagle investment fund. In 1969, Soros was assigned to run Double Eagle, a newly created hedge fund.
Further, according to one version, J. Soros left the leadership of the "Eagles" as a result of the actions of regulatory authorities and created in 1970, together with Jim Rogers (Jim Rogers), the world-famous Quantum-. According to other sources, the Quantum fund grew out of Double Eagle. Well, actually, these nuances do not really matter.
The foundation owes its name to the section of modern physics - quantum mechanics, which was created by Niels Bohr, Paul Dirac, Werner Heisenberg and a number of other outstanding scientists of the 20th century.
On this one can draw the line of the first half of the life of George Soros. For forty long years he went to his heights, which he achieved together with the Quantum Foundation. Behind were the childhood of a Jewish boy in war-torn Europe, the half-starved years in England, the first experience of working on Wall Street. Ahead is the battle with the pound and Asian currencies, the dizzying success of the Quantum Fund, fame and recognition.
Below are the most significant and famous financial events associated with the name of Soros.
Soros against the pound. "Black and White Wednesday" September 16, 1992
Of course, in the first place is the collapse of the British pound in September 1992. This is the most famous and successful operation of Soros and his foundation. Currency market legend.
Brief background of the issue
In March 1979, the Single European System (EMS) was created. Initially, it consisted of 8 states. The UK joined in 1990. The single European monetary unit ECU was introduced. On January 1, 1999, it was replaced by the euro.
If you do not go into economic details, the main thing for this story is the requirements for the mutual exchange rates of the countries participating in the European system. Fluctuations relative to the fixed (central) value on the date of entry of the country into the EMU should not exceed 2.25% in both directions (with the exception of the Italian lira). Sort of like a European. A member state of the EMU must strictly keep its currency (from falling, first of all) within the given limits.
What is the task of a currency speculator in this situation? Everything is quite simple. You need to find the currency that is overvalued relative to another. And massive sales to push the rate of a weak currency down. To force the Central Bank, the country attacked by speculators, to spend gold and foreign exchange reserves on the obviously thankless task of keeping the national currency rate within the corridor. This will be especially difficult to do if the economy is weakened and reserves are limited. An example is the situation in 2014-2015 with the Ukrainian hryvnia and the Russian ruble, which is very clear.
The main thing is to decide on the victim. It is very important not to make a mistake and bet on the right “horse”. Great Britain became such a European "weakling" in 1992 with its overvalued pound and weakened economy. Market participants recognized the German mark and the US dollar as strong currencies. The Germans worked on adapting the former GDR. The future of the economy of the united Germany looked more interesting than the British one. did not reduce the key discount rate and did not lower the attractiveness of the brand.
At the end of August 1992, the disposition was as follows. The pound/mark dropped from 2.95 (when Britain joined the EMU) over the spring and summer, first to 2.85 and then to 2.79. The lower border of the 2.778 corridor was dangerously close. Speculators "smell the smell of blood."
George Soros spoke about technical analysis (in the same Alchemy) especially dismissively: “Existing theories of price behavior in the stock market are surprisingly untenable. For the practitioner, their value is so insignificant that I am not even fully familiar with them. The fact that I managed to get by without them speaks for itself.”.
Alchemists work differently...
However, the Chief Alchemist can also find quite specific recommendations for traders.
Enter the game on small volumes. If your calculations are confirmed, increase your position.
Don't try to learn everything about the market. "stupid".
The investor must decide on the level of risk that he can accept by opening a position. Especially at the beginning.
Well, actually, there is nothing new here. All this is described in the first half of the last century. For example, Jesse Lauriston Livermore, who is rumored to have crashed on Wall Street in October 1929.
Some more Soros quotes useful for speculators.
“Obviously, life itself can be seen as a series of speculations. And to be successful in these speculations, you must balance at least six variables: the initial bet, the size of the bet, the commission, the volatility of the game itself, the exit point and the duration of the game.”
“I highly recommend using stops to protect funds from unwanted price movements. However, determining the levels of protective suspension at which to place stops is a real art.
With all his love for the theory of reflexivity and following the main principles in investment strategies, George Soros did not shy away from insider trading. At least one such fact is considered legally proven.
A Paris court in 2002 convicted Soros of using confidential information in trade. It was about operations with shares of Societe Generale bank. Soros' income from these securities amounted to $2 million. The fine to be paid by the court decision is 2.2 million euros. Later, it was reduced to 900 thousand euros. But Soros did not want to pay even this amount, or maybe he was saving his reputation, and his decision was to appeal to the European Court of Human Rights. However, this court, by four votes to three, upheld the verdict.
If you carefully analyze others, incl. and the operations described here, it seems quite likely that the success of the great investor lies in the inside. He is not the first and certainly not the last. And not everything can be tracked and proven ...
Conclusion. So who is George Soros?
It was an incredibly long and difficult path from György Schwarz, a teenager from a Jewish family, in Nazi-occupied Budapest, to George Soros, one of the largest and most successful financiers of the late twentieth century.
Soros' personal fortune as of September 2012 was estimated at $19 billion.
His figure has outgrown the framework of the "investor shop". He is a writer, philosopher, public figure, fighter against totalitarianism and philanthropist. According to Business Week, his charitable donations reach $5 billion.
But even in Soros' charity, many see nothing more than investments, which, ultimately, are aimed at personal enrichment and satisfaction of their own ambitions. In 1997, the Soros Foundation, which is engaged in the humanitarian direction in Belarus, was expelled from the country.
Soros is a black and white legend who is worshiped and hated.
Soros is a person who does not accept other people's rules. He installs them himself.
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