A Man Named Soros

"Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and and betting on the unexpected." - George Soros

"Once we realize that imperfect understanding is the human condition there is no shame in being wrong, only in failing to correct our mistakes." - George Soros

George Soros, the Hungarian born investor, is an industry icon.  He has called more investments correctly than incorrectly and when he wins he wins big.  This ability to invest on the right side of the market has created enormous wealth for him and his investors.  He has also given away more than $8 Billion to philanthropic organizations over the years and is still active in his company at 83 years old.

One of my friends happens to have a direct link to Soros and has commented to me that while I continue to expect the market to fall precipitously, Soros has continued to enjoy the fruits that the market is producing for him.  His thought is that as long as the central bankers of the world continue to print money unabated, the stock markets around the world will continue their upward spiral.  I happen to agree with him to a certain extent but the issue is that most investors are not as shrewd as Soros and will be taken to the cleaners when the market capitulates.

There is a famous story about Soros that occurred many years ago when at a meeting of the top 10 traders in New York each trader put forward their best trading idea.  Soros spent his time explaining in great detail why his best trade was to be long the US dollar.  Other traders put forth their ideas and the last person to go was the newest member to the group.  He was very intimidated and did not want to say what his trade was, but under duress he confessed that he was heavily short the United States dollar for the many reasons that he then described.

The next day he woke to find that the dollar was being pounded into the dust making him a lot of money.  His thoughts turned to Soros when suddenly the phone ran and it was Soros.  Expecting to hear a sob story from him he was surprised to find George in a very good mood.  Soros then explained that after listening to the trader that he realized that he was wrong so he had switched his position from long to short and was also making a fortune!

The reason for the story is that while I agree with Soros in the short term the trade is becoming more and more dangerous with every tick higher.  For the average investor who gets wedded to a position or just blindly adds to his or her mutual fund it is not the time to go all in but if you have the ability to trade the market there may still be some upside left but be very careful.