Thursday

George Soros Trades and Prediction

1 Comment October 7, 2010 – 8:45 am |   | Permalink |  Print This Post |

We just finished listening to George Soros’ “The Crash of 2008 and What it Means”. Date of publication : March 2009.

A summary of our interpretation of George Soros conclusions (our thoughts in brackets):

1. May climb out of deep hole by end of 2009 if there is global cooperation - even with the best cooperation, it is going to be volatile. (so the worst is over?)
2. “Inverted square root” recovery - deepest part reached in 2009. (so this reinforces point 1 ie the worst is over)
3. USD: under pressure - strengthening of USD in 2008 due to difficulty in borrowing USD - European and peripheral countries had to buy USD to repay debt.
4. Wild currency fluctuations ahead
5. Financial sector will shrink - growth industry since 1972- trend to reverse with increase regulation. Finance constituted 23% at its peak-preGFC -expects this to go down much lower in the future. (note: Spains IBEX has >33% on financials alone! We are looking to analyse the banks in IBEX and to short the IBEX once the trend turns)
6. Bullish on emerging markets, less on developed markets.
7. End of an era and emergence of a new order- transition of power from US to China. Historically, the transition of power has seldom been peaceful (exception British to US - but both have common language and approach)
8. No reason to expect global recession due to expansionary forces in emerging markets

Another interesting observation - even great traders get their timing VERY wrong. Success is not measured in days or months but years. In early 2008, George Soros was:

• long emerging markets - underwater until October 2009 - NIFTY recovered and surpassed March 2008 level.

• short western markets - markets are still below March 2008 level, assuming shorts are not covered. Pretty certain it was covered. George Soros made reference in the book that he thought early 2009 was probably the deepest part.

George Soros 2010

• short treasury bonds - this is still underwater. We inverted the chart for Treasury Yield below - red is 10 Yr Treasury, the candle chart is 30 Y Treasury.

George Soros Treasury Short

• short USD - definitely profitable.

We know that it went exactly the opposite from 2008-2009, ie

• emerging markets dropped > developed markets
• treasury bonds shot up (price)
• USD went up

Come 2010, his calls have mostly been spot on! Many emerging markets have broken 2007 highs whilst developed markets are still far from 2007 highs. The USD is dead as we speak.