George Soros interviews are becoming rarer (I think) and when he does them they tend to focus on politics, and/or philanthropy, so it was exciting to see a semi recent new one on investing. Soros reveals some of the secrets to his success including buying bubbles – he uses gold as one example and although he did not catch the bottom Soros did sell near the very top, which unfortunately for Al Qaida, Osama Bin Laden neglected to do. He also made a killing on the once popular hedge fund bet short Yuan See the latest from Soros below.
Not only does Soros caution against battling the herd, he sometimes likes to join it, even if it means jumping on to an economically unjustifiable trend.
“When I see a bubble forming, I rush in to buy, adding fuel to the fire,” he said in 2009. “That is not irrational.”
In August, Mohnish Pabrai took part in Brown University's Value Investing Speaker Series, answering a series of questions from students. Q3 2021 hedge fund letters, conferences and more One of the topics he covered was the issue of finding cheap equities, a process the value investor has plenty of experience with. Cheap Stocks In the Read More
One such example is gold, which he described as the “ultimate asset bubble” in early 2010. Gold had soared 40 per cent the previous year and many commentators took his words to mean he believed the precious metal was set to fall.
However, Soros was actually buying gold, which was then trading at about $1,200, the reasoning being that buying into bubbles can be very profitable, if one gets out in time.
Soros did just that, selling most of his holdings in early 2011, some six months before the bubble burst after prices topped out above $1,900.
Never dependent on rising markets, Soros has long been a skilled exponent of short selling, where traders profit by betting on market declines. Although most equity markets went nowhere in the 1970s, Soros’s market-neutral trades helped fuel returns of more than 4,000 per cent during that difficult decade.
His most famous bet was in September 1992, when Soros’s shorting of sterling forced the Bank of England to devalue the currency and leave the European Exchange Rate Mechanism (ERM).
That trade earned Soros an estimated £1 billion and ensured he will forever be remembered as the man who “broke” the Bank of England.
Alarmed by the deteriorating global economy, he netted returns of 32 per cent after coming out of retirement in 2007 and even profited amid the chaos of 2008, a disastrous year for most investors.
Last year, Soros’s main fund earned an estimated $1 billion by shorting the Japanese yen.
Full interview here