What is George Soros Doing?

By Twickenham Advisors on July 28, 2017

“I mean, you know [that] the reason he changes his position on the market or whatever is because his back starts killing him. It has nothing to do with reason. He literally goes into a spasm, and it’s this early warning sign.” – Robert Soros’ TIME Magazine interview about his father, George

From time to time, you’ll hear talk around the water cooler about George Soros, a well-known business giant who is considered to be one of the most successful investors in the world, selling $1 billion or so out of the stock market. Thoughts start racing through your mind as fast as the Millennium Falcon making the Kessel Run. You may think to yourself, “Ole George must know something, right? I mean, didn’t he call every one of the last market crashes with impeccable timing?” You inevitably start sweating like Shaq shooting free throws in the fourth quarter. Surely, you need to take some chips off the table.

Before you do anything though, let me give you some things to think about.

First, how can you be sure that George is actually doing what your friends told you he is doing? And, even if your sources are correct and Soros is selling some stock, what if he simply needs the cash to buy a new island or yacht? I mean, even though the man is 186-years-old, he might still like to party. Ok, maybe he’s done partying. Maybe he needs some cash to fund some kind of conspiracy-theory type political movement. The club dues for the Bilderberg Group must be expensive. Think about the year-end assessments they must charge! What if the other Bilderbergers are mean to him and make him pay more to hang out?

Second, do you even know how often Soros is right or wrong? Soros’ Quantum fund returned close to 30% annually for a while with the help of Jim Rogers and Stan Druckenmiller making big macroeconomic bets. One bet in particular against the British pound in 1992 earned his fund over $1 billion! A win like that attracts a lot of attention, money, fees, etc. If his average annual returns were suffering at the time, they were sky rocketing after a win like that. Most recently, Soros is more known for his losses. He lost over $2 billion in the Russian ruble crisis in 1998, $700 million betting against tech stocks in 1999, and $1 billion after Trump won the election. The cause for these wide swings for Soros’ fund is that his fund, like many global macro funds, uses three or four times leverage on extremely concentrated positions.

Lastly, know that Soros bets on the unexpected, low probability events in our world. He himself said, “Markets are constantly in a state of uncertainty, and flux and money are made by discounting the obvious and betting on the unexpected.” If he really is betting against markets, you can presume that a market crash is a low-probability bet. If it is a high-probability event, he wouldn’t be able to make a lot of money on it.

If you are still worried about your portfolio, take a look at your financial plan or call your advisor. You should have a well-diversified portfolio with downside risk that is comfortable for you. If you won’t need to sell during a market crash and can hang on for the recovery, history and experience teach us that you will most likely be fine. Bear markets are inevitable, and the recoveries typically follow thereafter. If you think that this time is different and that there won’t be a recovery after the next down market….well, then we have much bigger problems than our portfolios to worry about.