Soros: "ended the year almost meeting my target of 10 per cent minimum return"

Discussion in 'Wall St. News' started by NZDSPeCIALISt, Feb 1, 2009.

  1. excerpt from his FT article where he talks about the trades he made in 2008:

    Positions I took were too big for ever more volatile markets

    Although I positioned myself reasonably well for what was coming last year, one thing I got wrong cost me dearly: there was no decoupling between markets of the developed and developing worlds.

    Indian and Chinese stocks were hit even harder than those in the US and Europe. Since we did not reduce our exposure, we lost more money in India than we had made the year before. Our Chinese manager did better by his stock selection; we were also helped by the appreciation of the renminbi.

    I had to push very hard in my macro-account to offset both these losses and those incurred by our external managers. This had its own drawback: I overtraded. The positions I took were too large for the increasingly volatile markets and, in order to manage my risk, I could not go against the market in a big way. I had to try to catch minor moves.

    That made it difficult to maintain short positions. Although I am an experienced short-seller, I got caught several times and largely missed the biggest down-draught, in October and November.

    On the long side, where I stuck to my guns, I lost an enormous amount of money. I was impressed by the potential in the new deep-water oilfield in Brazil and bought a large strategic position in Petrobras, only to see it decline by 75 per cent at one point in time. We also got caught in the developing petrochemical industry in the Gulf.

    We did get out of our strategic long position in CVRD, the Brazilian iron ore producer, in time for the end of the commodity bubble and shorted the other big iron ore groups. But we missed an opportunity in the commodities themselves – partly because I knew from experience how difficult it is to trade them.

    I was also slow to recognise the reversal of fortune for the dollar and gave back a large portion of our profits. Under the direction of my new chief investment officer, we did make money in the UK, where we bet that short-term interest rates would decline and shorted sterling against the euro. We also made good money by going long on the credit markets after their collapse.

    Eventually I understood that the strength of the dollar was due not to people choosing to hold dollars but to their inability to maintain or roll over their dollar obligations. In a very real sense the strength of the dollar, like the fever associated with sickness, was a measure of the disruption of the financial system. This insight helped me to anticipate the downturn of the dollar at the end of 2008. As a result, we ended the year almost meeting my target of 10 per cent minimum return, after spending most of the year in the red.

    FT article by George Soros in full:

    In it he raises a few interesting points about how authorities handled events that led up to and transpired in the market plunge of 2008 and also talks about some possible steps that can be taken to address the situation.
    "How could Lehman have been left to go under? The bankruptcy of Lehman might have been avoided but what would have happened to the asset super-bubble?"
    "What would have happened if the uptick rule on shorting shares had been kept, in effect, but “naked” short-selling (where the vendor has not borrowed the stock in advance) and speculating in CDS had both been outlawed?"
    "I believe they (CDS) are toxic and should be used only by prescription."
    "In a deflationary environment, the weight of accumulated debt can sink the banking system and push the economy into depression. That is what needs to be prevented at all costs.
    It can be done – by creating money to offset the contraction of credit, recapitalising the banking system and writing off or down the accumulated debt in an orderly manner. They require radical and unorthodox policy measures. For best results, the three processes should be combined."
    "Alternative energy and developments that produce energy savings could serve as a new motor, but only if the price of conventional fuels is kept high enough to justify investing in those activities. That would involve putting a floor under the price of fossil fuels by imposing a price on carbon emissions and import duties on oil to keep the domestic price above, say, $70 per barrel."
  2. Daal


    Good to know I'm not the only one who left money on the table in Oct and Nov when the market crashed. It seems that the only people who caught it are the ones who are too inexperienced to realize how rare such action is
  3. What about those who were "experienced" enough to catch it? Plenty of people did. And they weren't dummies either.
  4. I don't understand, "inability to maintain or roll over their dollar ogligations"?
  5. Bootsie


    I didn't realize the magnitude of the move until the morning of that bounce in mid Oct... the market tried to fill that first gap down but couldn't and then faded. So I dumped all my longs... some luck but I would have done the same had the ES came up 250 points or 25 points in 3 days... but the move was ridiculous.

  6. debts that otherwise would have just been financed so that only the interest was necessary were not being renewed, basically calling them in and people had to come up with dollars to pay them off.
  7. Daal


    Unless you are talking about daytraders I disagree. When the VIX hits 50 to stay short is to bet on very unlikely events, there was plenty of fakeouts and false rallies so even the trend followers would have gotten out. Those who stayed short are a lucky amateurs
  8. You are clearly delusional though not surprising given the place. Perhaps you should open your mind and try to learn something instead of talk out of your ass so that next time you are not caught off guard by "unlikely" events. What you consider luck, some people view as skill.
  9. Daal


    What I'm saying is pretty much statistical facts. A system that trades the SP500 based on historical paterns was screaming buy during late sep and a beggining of oct, then nov and thats from a guy that I know who computes the price action daily and makes a killing off historical data. Anyone who stayed short after a vix 50 and caught the worst week EVER got lucky, its just that simple, unless they knew before hand, which begs the question, where is the evidence