(Soros Backgrounder)
I'll let Pat discuss futher financing from Soros. 5Mil here 5Mill there...
JW@KSC
Money 'god' thrives on Chaos Stephen Dabowski profiles George Soros
Have no doubt that George Soros, the man believed to behind much of the frenetic trading on world currency markets that slashed three cents off the Australian dollar last week, takes his $14 billion wealth very seriously.
Not his possessions, mind you. He must be one of the few billionaires who doesn't have his own jet. He says his $60 watch is one that ``anyone could pick up in an airport lounge''.
His second wife buys all his clothes because he'd never get around to doing it. And when he's at home in New York he drives around in a six-year-old station wagon.
But when his wealth looks endangered, he becomes wary. To the man who started out with nothing as a Hungarian immigrant in Britain after the war, and was forced as a young man to slog away as a shoe salesman in grim Blackpool, his wealth is his achievement.
Consider how clinical he is. When he got married for the second time to Susan, 25 years his junior, in 1983, the minister asked him to repeat the traditional vow: ``For better or worse. I do endow thee with all my worldly goods.''
At this point, Soros turned to his personal attorney and asked whether he could state this without being bound by the words. The attorney told him that was so. Soros, however, remained sceptical, muttering in Hungarian ``subject to any prior agreement with my heirs''.
He might not be romantic, but he has other qualities. He is possibly the world's greatest philanthropist. He claims to give away around half of his after-tax earnings.
He has certainly spent around $1 billion in Eastern Europe setting up educational facilities including a university in Prague and supporting a wide range of causes.
Consequently, he carries enormous political influence in the region, encouraging leaders to increase the pace of their libertarian economic policies.
He has also supported causes before they became trendy. As far back as 1979 he was providing scholarships for black students at the University of Cape Town.
His desire to reach as many people as possible through his wealth seems to stem from a very lonely childhood. His Jewish family only survived the German occupation of Hungary by living under assumed names.
In 1947 Soros, aged 17, escaped the communist regime and emigrated alone to London. So began a desperately lonely and poor period when he struggled with a new language, moved between odd jobs and failed to make many friends.
His most significant move was to enrol as a student at the London School of Economics, where he came across some of the social and economic theories he was to use (or, depending on your view of financial speculators, abuse) later in life. Certainly he would eventually reject textbook economic theory, based on the ordered interaction of supply and demand. Instead he embraced chaos theory.
``The major insight I bring to understanding things in general is the role that imperfect understanding plays in shaping events,'' he says.
``Traditional economics is based on theories of equilibrium, where supply and demand are equal. But if you realise what an important role our imperfect understanding plays, you realise that what you are really dealing with is disequilibrium.
``I am fascinated by chaos. That's really how I made my money: understanding the evolutionary process in financial markets. For instance the collapse of the ERM (Europe's Exchange Rate Mechanism) was a series of misconceptions and misunderstandings. And when it comes to giving money away, I think I've become involved in the revolutionary process because what we are living through in Eastern Europe is a revolution.''
Soros made the first steps towards his eventual investment career by writing a letter of introduction to every investment bank in London while working as a shoe salesman in Blackpool, on England's west coast. He landed a job as a trainee at investment bank Singer & Friedlander.
His happy ending didn't begin there, however. He wasn't an immediate success, and moved to New York in 1956, aged 26, with just $5000. The turning point came in 1963, when he was hired by Arnhold & S Bleichroder to advise the fund on European investments.
He soon convinced the company to set up two offshore funds that he would oversee, and they became huge successes. In 1973 he went out on his own and set up the Soros Fund, which in 1979 was renamed the Quantum Fund - a name which now sends fear into the hearts of central banks around the world.
It is this fund which Soros uses to speculate with his different investments. His total porfolio is put at $14 billion and is made up of almost every conceivable security traded, including a sizeable stake in Newmount Mining which brought him to the attention of Australian investors in 1992.
His recent emphasis appears to be on increasing the size of his property portfolio around the world. It was during 1985 that he rose to prominence in the United States, after he made a killing using his methods of betting against conventional wisdom.
He shunned the cyclical stocks which were being promoted on Wall Street, and embraced shares in the financial services and takeover sectors. In 1987 he predicted the crash, but thought it would be in the Japanese stockmarket.
He sold up his Japanese shares and bought more on Wall Street. Consequently when 19 October arrived he took a bath - some say he was the biggest individual loser in America on the day, with $800 million being wiped off his share portfolio in one hit. He didn't flinch. The next day he was back in buying, and ended 1987 with a 14 per cent return on his fund.
But it is what the British tabloids call the day he ``broke the Bank of England'' to which he owes most of his modern notoriety.
In 1992 he sold down his $10 billion worth of holdings in sterling because he was convinced that Britain could not stay in Europe's exchange rate mechanism. He betted on the Bank of England not being able to continually defend a falling pound.
He was proved right, and on one frantic day of trading made a profit of $1 billion. The remarkable story about that transaction was that he gave his chief dealer the order to sell the $10 billion before he went to bed. He was woken up at 7am to be told he'd made his gigantic profit. He claims he slept soundly, and was not worried about his investment.
Since then central banks around the world have taken particular notice when he claims a currency is about to rise or fall. His fund, Quantum, has the clout to make it happen.
It is not clear whether he was actively selling when the Australian dollar plunged last week, but he certainly has the financial muscle to precipitate such a fall.
At the age of 62, he shows no sign of slowing down. He has given over day-to-day control of Quantum to others, but continues to call the big shots. He admits how important being successful is to his self-esteem. As a child he thought he was God.
Now he likes to control things in other ways.
``It is a sort of a disease when you consider yourself some kind of god, the creator of everything, but I feel comfortable with that now since I begun to live it out.
Accomplishment is the answer,'' he says.
``This is something that's central to me. I lived a large part of my youth in almost total solation. I had to run an awfully long way to the top. Look at the effort I had to make to reach some kind of peace with myself. A lot of people are at peace without having to exert themselves the way I do.''
The message is clear - he's not finished yet. Central bankers around the world take note. |
