‘Oracle’ Prefers Giving Away Millions : Finance: George Soros’ success has made him a Wall Street guru, but his bigger concerns are to help causes of freedom and democracy.
He invests, and the price of gold jumps. He bets, and the British pound tumbles. George Soros, a courtly, Hungarian-born financier with a passion for philosophy, has become an oracle to Wall Street--and a nightmare to some government bankers.
Soros, who as a Jewish teen-ager dodged the Nazis under an assumed name, today is considered the highest-paid person on Wall Street. During the recent European currency crisis, his pronouncements flashed across computer screens to rapt traders around the world.
But just try asking him about his billion-dollar bets. Instead, the former philosophy student will bend your ear with his bigger concerns--like the siege of Sarajevo. He spends most of his time giving away millions to budding Czech capitalists, penniless Russian scientists and suffering Bosnians.
“It’s something I feel emotionally--both rationally and emotionally,” he said about Sarajevo, after addressing a New York news conference on the suffering there. “It’s a reminder of my childhood experience.”
Since Europe’s currencies were battered in a trading frenzy last month, European officials have been muttering darkly about speculators like Soros. Overwhelmed by speculators’ money, European governments were forced to weaken the links binding their currencies, a blow to dreams of a unified European currency.
Soros insists he limited his speculation; he did not want to be blamed for destroying European unity.
“I don’t need to make money,” he said with a shrug. Indeed, according to Financial World magazine, he made at least $650 million last year from his fees and his stake in his investment funds.
But it’s no mystery why all eyes were on him. It was only a few months ago that he was dubbed the “Man Who Broke the Bank of England,” after he gambled about $10 billion that Britain would be forced to devalue the pound.
Faced with a wave of speculators selling pounds, the bank finally gave in and devalued. Soros walked away with an estimated $1 billion.
“I’m just playing according to the rules,” Soros said. He blames ill-advised government economic policies for causing currencies to decline. Officials, he says, want to cope by “shooting the messenger.”
At the news conference on Sarajevo, the 63-year-old Soros looked more like a courtly European uncle at a wedding than a Wall Street whiz bearing down on central banks. His starched white shirt and brown-and-white striped linen suit set off his ruddy cheeks. Bristle-brush eyebrows shield his piercing blue eyes.
In a brief interview, he waxed philosophic on the difference between perception and reality. His genius, he said, is to strike when he believes investors’ prejudices and feelings have skewed “reality”--the true value of a currency or stock.
A variation on his investing philosophy has led him to commit more than $275 million to promoting democracy in Eastern Europe and South Africa.
“Nobody has a monopoly on truth,” he said. “So you need democratic governments, market economies, and above all, the rule of law, where minority opinions are protected.”
His philosophy has proved wildly successful for his five investment funds, which have net assets of $10 billion and buy and sell stocks, bonds and currencies worldwide. Soros says the flagship Quantum fund, which is based in the Netherlands Antilles and is not open to Americans, is up 40% this year alone. Last year, it earned a 68% return.
“He may not have any peer in terms of longevity in the markets, and having made lots of money consistently in the markets,” said Jack D. Schwager, author of “The New Market Wizards,” a book about traders.
Soros, who emigrated to the United States in 1956, was so pinched for cash in his student days at the London School of Economics that he worked as a railroad porter and a beach peddler.
Now, he thinks nothing of betting billions.
His right-hand man, Stanley Druckenmiller, recalled that shortly after joining Soros in the late 1980s, he had taken a $1-billion “position,” or wager, that the dollar would strengthen against the German mark.
“You call that a position?” Soros said, according to Druckenmiller’s account in “The New Market Wizards.” Soros urged him to double it; Druckenmiller won big.
Soros’ success has made him a guru. When he predicted in June that the dollar would strengthen against the German mark, it rose, as traders jumped on his bandwagon. His funds’ investment in a mining company last April sparked a rally in gold. Copycat investors rushed to follow his recent move into British property.
But he hasn’t always had the Midas touch. In 1987, Soros foresaw the stock market crash--but predicted it would start in Japan. He is believed to have lost more than half a billion dollars.
Some analysts note Soros often jumps into a trend like rising gold or property prices after it has already taken off. The Soros name, they say, simply draws attention to the trend, and investors pile in after him.
“He’s partly a media creation,” said Marc Chandler, senior market strategist at IDEA, a financial analysis service in New York. “He helps crystallize the thinking of other people.”
Several years ago, Soros began easing up on the day-to-day management of his funds. Wealthy beyond his wildest dreams, “I had a kind of identity crisis, a regular battle between me and my investment fund,” he recalled in a speech in 1990.
“I won, and the fund lost--26% in 1981,” he said. He added that his investors were not happy, “but I did emerge a happier man.”
Soros turned to philanthropy. Building on his philosophical commitment to freedom and democracy, he began shipping photocopiers to Hungarian researchers and dissidents, providing funds to anti-Communist intellectuals in Czechoslovakia, and sending black South Africans to Capetown University.
With the collapse of the Berlin Wall, his activities accelerated. Through his 21 foundations from Albania to Ukraine, Soros has leaped into projects to rewrite Communist-era schoolbooks, set up English-language institutes, promote the region’s artists and educate its budding doctors, economists and politicians.
This past year alone, he has pledged $50 million for the suffering in Bosnia, $100 million to employ Soviet scientists and $15 million to promote human rights and pluralism in South Africa.
“He has a mission feeling,” said Ivan Berend, a history professor who once headed the Soros Foundation in Hungary. He said one reason is the totalitarian regimes Soros lived under as a child. Berend said Soros also “enjoys being powerful and influential, and in a way making history.”
