"Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality is distorted by a misconception." George Soros

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GEORGE SOROS

GSWhether you like him or not, there is no denying that George Soros will go down in history as one of the most successful investors of the 20th century. He has amassed a fortune estimated to be close to US$10 billion in a career spaning over 50 years. His first introduction to financial markets came around 1945-46 when he began trading currencies during the hyper-inflation years of his native country of Hungary. He then moved to England in 1947 where he studied for the next 5 years, graduating from the London School of Economics in 1952. It was here, under the tutelage of Karl Popper, than Soros began to shape his investment philosophies. Soros then moved to the United States in 1956, where he worked first as an arbitrage trader and then as an analyst until 1963.

Soros then spent 10 years working at Arnhold and S. Bleichroeder, eventually working his way up to the postion of vice president. It was during these years that Soros headed up his first fund, First Eagle. This was followed by a second fund being set up for Soros, the Double Eagle hedge fund. Due to the restrictions imposed on public funds, Soros left the company to set up a private investment company known as the Quantum Fund. The Quantum Fund went on to return 3,365% over the next 10 years which, when annualised, is a return of 42.5% per year… a truly astounding performance!

His most famous trade came on “Black Wednesday”, September 16, 1992. Soros and his colleagues believed there to be weakness in the pound sterling currency and as a result, sold short more than $10bn worth of pounds. Eventually, the Bank of England was forced to withdraw the currency from the European Exchange Rate Mechanism. This saw the pound depreciate dramatically and netted Soros and his collegues an estimated profit of over US$1bn. Soros was said to have “broken the Bank of England”.

His career was not without controversy however. In 1988, Soros was asked to participate in a takeover attempt of a French bank. Soros declined, but later bought shares in the company. He sold out for a profit of approximately $2m. He was then investigated by French authorities and subsequently charged with insider trading under French law. He was fined $2m (his profit from the trade) and has since proclaimed his innocence, lodging several appeals and stating that it was public knowledge at the time.

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