This is the part 2 of the article “George Soros: Life on the Line”. Read the Part 1.
Since a young age Soros has been fond of philosophy of economy. He is the author of “theory of reflexivity“, which he successfully applied in the stock market gambling. According to this theory, traders make decisions on purchases and sales of securities on the basis of price expectations in the future, and since expectations are a psychological category, they can be influenced by information.
However the people, who worked closely with him, argue that making investment solutions, he rather relies on his intuition and flair of financial foresight than his philosophy. His son Robert says: “He buys when his back starts to hurt and sells when the pain goes away”.
From all the financial transactions that Soros made, the best known is his currency speculation. On “Black Wednesday” September 16, 1992, Soros opened a short position on the pound sterling worth more than $ 10 billion, earning more than $ 1.1 billion in one day. As a result of Soros’s operations the Bank of England was forced to make a massive currency intervention and, ultimately, to withdraw the pound from the regulation mechanism of currency exchange rates of the European countries, which led to an immediate drop in the pound against the major currencies. Since that moment, Soros has been referred to as “The Man Who Broke the Bank of England ” in the press.
George Soros conducted risky operations using credits, acting unusually for the market, preferring more reliable methods. But, apparently, Soros was particularly pleased by the excitement of the stock exchange and an opportunity to be a winner in a difficult situation, which he himself created. George Soros, like his father, loves danger and risk. As he admits that the best year of his life was 1944, when he and his family were in mortal danger.
In 1979, George Soros got actively involved in charity. In New York, he founded his first fund – “Open Society”. Currently, the network of charitable organizations founded by Soros operates in more than 50 countries. Located mainly in Central and Eastern Europe as well as in Africa, Latin America, Asia and the United States, these funds are intended to build and maintain the infrastructure and institutions of an open society.
George Soros made his fortune in times of crisis, if we use the brokerage term, he is a classic “bear”, i.e. a speculator who sells in anticipation of falling prices to make a profit on repurchase. In addition, Soros is not involved in long-term investments, his transactions are short term and are speculative in nature. Besides, Soros heavily uses borrowed funds for his operations, which also indicates a large speculative component.
One of his advantages Soros believes the absence of any particular style of investing. In each situation he seeks to adjust to the market situation.