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Who is George Soros, the investor who almost broke the Bank of England


Mega-investor George Soros (Photo: Shutterstock)

George Soros, born in Hungary, emigrated with his family during World War II to the United Kingdom. He is one of the richest men in the world, having his fame based on his bold bets on the foreign exchange market.

In addition, Soros finances organizations that promote progressive agendas worldwide.

Soros is not only known as a big investor. In fact, most of his fame comes from conspiracy theories that accuse him of being a “globalist” that tries to subvert the sovereignty of countries, forcing the creation of a single world government with multiculturalism.

He also wrote books criticizing the free market economy after the 2008 crisis, mainly the titles: “The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means” and “Financial Turmoil in Europe and the United States: Essays ”.

Based on his knowledge of philosophy, Soros formulated his own theory of market efficiency: the Theory of Reflexivity.

Although this theory is not widely accepted in academia, especially among economists, it brings interesting insights that should be worthy of attention. His theory will be explained below.

Soros' donations to charity amount to $ 32 billion. This represents a donation of 79% of its wealth. Most of the money goes to the Open Society Foundation and other programs to combat poverty.

George Soros Net Worth

Source: Guru Focus

Money machine

Soros' fortune exceeds $ 8 billion, most of which is managed by his famous fund, the Quantum Fund, which made history in the 1990s by making $ 1 billion by placing a bet against the English currency.

Soros is what we can define as a “Macro Investor”. He doesn't focus as much on high-frequency trading strategies as the legendary Jim Simons does.

Its strategy is to analyze the economic and political situation of several countries and to bet against or in favor of the currency of a certain country. In 2010, its fund reported earnings of $ 32 billion since 1973.

Between 1969 and 1994, the fund had an average return of 35% per year, discounting taxes and fees.

The fund started in 1969 with money from wealthy families in Europe, but in 2011 began to devote itself only to managing Soros's family fortune. In 2011, the fund became a family-office and adopted a more conservative strategy.

Most of these returns come from the foreign exchange market and Soros' ability to understand the functioning of the economy and the relationship of different countries. This knowledge led him to make his biggest and best known bet: against the Pound Sterling in 1992.

Reflexivity Theory

Before commenting on his most famous bet, we should know the way George Soros thinks about the market and the economy.

Unlike many economists and fund managers, Soros believes that the market is chaotic and doubts the hypothesis that it is efficient.

That is, Soros believes that people do not always make rational decisions. On the contrary, people make many decisions based on emotion.

Since people operate in the markets, the price of shares and bonds would be only a reflection of these emotions, not of calculations and decisions made rationally.

Opportunities can be found by carefully studying the market value and prices of assets. He focuses on a “reflexivity” theory, based on the premise that individual investor bias affects market transactions and the economy.

Although another text is valid explaining only the theory, its basis must be kept in mind:

The subjective aspect of the investors' view influences the objective aspect of the sequence of events (external reality), and the sequence of events influences the view of the participants. Recalling that, there is only one external reality, but there are different subjective views.

With these biases, the distortions between the value and price of assets are present at all times, because they are not being quantified fairly.

Soros's theory was based on what Karl Popper already thought. He just perfected it to achieve his financial goals.

* Text written by Lucas Bassotto and originally published by the Investificar website.

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