This week’s Guru Outlook takes a look inside the mind of George Soros – one of the original masters of the global macro hedge fund universe.   Soros, of course, became famous for breaking the Bank of England.  Soros made a spectacularly leveraged bet against the British Pound which netted him over $1B in a day.

Soros rose to recent notoriety for predicting the financial crisis.  He was far more bearish than most others and appeared to have a crystal ball with a play-by-play for each step of the crisis.  Like some of the guru’s we’ve spoken of lately, he wasn’t bearish all the way up.  Soros saw the decline in markets as a buying opportunity and has taken the liberty to make billions for his investors on both the way down and the way up.

Although Soros has turned more bullish over the course of the last 6 months he has not lost sight of the forest for the trees.  Much like Jeremy Grantham, Soros believes we are confronted with massive structural long-term problems – particularly in the United States. He believes U.S. consumers are in the middle of a long-term deleveraging process and earlier this month he described the U.S. banking system as “bankrupt”.  He sees very weak consumer spending and a drag from the banking sector holding down global growth for years to come.

In a recent interview, he said the market is now very overextended and at substantial risk of another downturn.   But that doesn’t mean the market will turn down immediately.  Soros says the market is likely to remain buoyant throughout the remainder of 2009 and will likely face its reality of weak global growth in 2010.  He says the rally has been driven by the government stimulus and little else.  Soros says the recent uptick in bank earnings is essentially a fraud:

“Those earnings are not the achievement of risk-takers.  These are gifts, hidden gifts, from the government.”

Soros recently said the move down in the dollar was unsustainable (he obviously reads too much TPC) and that its link to the Renminbi would reduce the overall decline.  Despite this, Soros is betting big on all things “real”.   In particular, Soros is betting big on oil related names.  Soros has over 33% of his funds invested in energy related names.  He recently announced large positions in Interoil (IOC) and Headwaters (HW).  Soros’ largest positions remain PetroBasiliero (PBR) and Hess (HES) which both represent over 5% of his portfolio.

Soros was also a heavy investor in convertible bonds in recent quarters.  Of particular interest were semiconductor names.  Soros bought large bond stakes in RF Micro Devices (RFMD), LSI, and Linear Tech (LLTC).

You can see his latest 13-f filing here for more details on specific positions.


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Guy Macher

    Soros is not smart enough to be the brains behind his money making machine. “He was far more bearish than most others and appeared to have a crystal ball with a play-by-play for each step of the crisis.” His crystal ball is connected to some central bank–probably in a communist country.

  • kbob

    Soros makes a key point when he says that just because the market is overextended doesn’t mean it can’t go up further. Irrationality seems to be in fashion these days. I guess we can never underestimate the power of government crack cocaine and heroin…oops I mean “stimulus”.

  • bckwht


  • TPC

    Settle down. This isn’t about politics…..

  • prescient11

    Soros is a goofball, and he is an enemy of this country. Funny story from mad hedge fund trader with him and the 1987 crash.

    Where did that Bill Gross article go TPC? Articles seem to disappear from your site all the time like that, it was just up from last night and now I can’t find it.

  • TPC

    Might be on the second page.

    I have to physically move the headline article every day. That’s why it disappears. Very annoying. It’s time for someone else to start running the tech side of TPC….

  • prescient11

    Thanks my friend. Rob is a good commenter. Interest rates will remain low for some time out, so yes, I agree with Rob that asset prices will remain overvalued probably until 2010, but by then perhaps the inflation we all fear coming will finally catch up to put a floor under the bubble, so to speak.

    It is very dangerous times when IN A YEAR we are essentially adding 20% to the entire national debt of this country.

  • Henry

    Above is the prime example of why I don’t like marketwatch. That place swarmed with them, the Clueless rambling parrots

  • TPC

    Have you moved to an inflationary standpoint?

  • TPC

    Everyone loves to mix their personal beliefs and politics with investing. I think it’s a large reason why most people are horrible investors. They are always swayed by their personal beliefs rather than where the money is going….

    Soros is an incredible mind and an even better investor. I could care less what his beliefs on abortion are. In fact, I give less than a damn about his political beliefs.

  • prescient11

    I have moved to an inflationary standpoint only from the POV of a currency crisis. Meaning I believe that gold is going to be an indicator of the crisis to come, not really as an inflation indicator.

    Inflation is a tricky definition because I think that rather than pure inflation we are going to see the general weakening of our economic standing. Our consumers have less money and housing overhang will kill any price recovery for at least 4-5 years.

    Unless you can think of how significant sums of money are going to be given directly to the consumer I don’t see major inflation.

    However, I do believe that we will see a beggar thy neighbor currency war that will significantly affect the prices of commodities to the upside. I am big into REEs (currently down – but it’s a three year position and adding on every dip) and select gold miners, PGD.TO looks interesting. I am also big into green technology such as China’s car manufacturers.

    I am looking at areas where there are growing populations, low regulation and very little entitlement programs. I am very sad to see our country in such a state. Looks like we may be muddling through for many years to come. A zombie walk while these banks “earn” their way out of this mess. Currency markets are going to become much more volatile I believe, wish there was a vix on that market.

    But anyway, not true inflation, just devaluing currencies to service debt and prop up markets, a weird sort of stagflation where the consumer is the only one not really getting any help, so they are forced to get their personal balance sheets in line and certain commodities/food rise fairly high. Gold I will hold (or select gold miners) as a hedge on credit risks because I believe we will not be out of the woods business/balance sheet wise for another two years.

  • TPC

    Nice perspective. Thanks.

  • prescient11

    TPC, whenever you get a chance, I would like to get your perspective on the rare earth space. After conducting some research on it, it does look as compelling as Dines represents.

    And, unlike the Uranium plays, the REEs are not as abundant in mineable deposits, so I don’t think we are going to see tons of new players jump on board.

    Whenever GS IPOs Molycorp then I think that may be the top of the market for a while. I’m accumulating and holding until then.

    VERY INTERESTING TIDBIT, the block of the Chinese purchase of Unocal also blocked their acquisition of Mountain Pass – Molycorp’s mine. This will become a huge deal going forward. By 2012, if not earlier, China (the country that exports 99% of this crap) will be a NET IMPORTER to meet its goals, especially considering its infrastructure plans and move towards green technology.

    Very interested to hear your thoughts and any cautionary flags as well. Thanks TPC.

  • prescient11

    Oh sweet Jesus TPC, I just wrote you a huge comment. Bottom line, curious to get your thoughts on the rare earth space. It’s a three year play, but I’m just as excited about Dines here.

  • prescient11

    Sorry to clog up your comments, I thought my long one above was lost in the ether. thanks

  • TPC

    You’ve been around since the beginning and that gives you free reign in the comment section. Clog away!

  • Annihilator

    Surprised you didn’t turn short last week. Would have been a wise move as opposed to your cash position.

  • prescient11

    Thanks buddy.

  • http://yahoo jack

    Why do you have a problem with Soros? He is one of the greatest investors of all time and a great American. He is a true republican (similar to a Libertarian) and socialist, my kind of American, not a communist. I can tell from your writing, you don’t know what a communist is and have never read, A Communist Manifesto, by Karl Marx.

  • Neil in Dallas

    Funny how he has no problem making billions in the capital markets for himself yet wants to turn us to serfs in socialist land.

  • Henry

    Any takers on Goldman Hatzius new prediction?
    “We estimate that real GDP grew 2.7% (annualized) in the third quarter. Our number is below the Bloomberg consensus of 3.2%, probably because our estimate of the pace of inventory liquidation is more aggressive than that of other forecasters.” – Goldman Sachs

    It is erie how he changed the number last time within 24hours

  • JACK

    My playbook for the rest of 2009 and into 2010:

    1. we are in a rough patch now but like TPC, i think market rebounds and makes one final hurrah just short of the highs we’ve already seen. I’ll be waiting for this sell-off to complete, then go long, then short aggressively near previous highs.

    2. in 2010 this market rolls over hard.

    my reasons for short-term bullish and rebound:

    1. unemployment is intractable so no risk of surprise rate hikes no matter how far dollar falls and oil prices rise. Higher oil prices MAY kill the recovery, but the FED knows that higher interest rates WILL kill the recovery. b/c of unemployment problem, I think the FED is willing to take its chances with higher oil prices and a weak dollar.

    2. company’s are producing good earnings from cost-cutting and have no incentive to hire. This will reinforce point #1.

    3. still lots of money in cash earning nothing. Incentive to buy dips and chase performance is still high.

    4. I think everyone in washington believes that the economy will double dip as soon as stimulus is withdrawn (probably a true assumption). There’s not enough public or political opposition to deficits so for now, expect more of the same. This puts a strong floor on the macroeconomic data points.

  • Steve

    How does buying Aussie dollars as a hedge against commodity inflation sound?

  • Kbob

    bckwht you goof, take your nonsense to a political smear forum. The words you spew make me sick

  • Russ Smith

    To Whit:

    Isn’t it nice when we can speak our minds here; while the hoards of the unemployed are still Americas’ “fogotten men/women”? Sure, they can dip their toes into the entitlement funds they’ve prepaid as unemployment insurance and, when the plague of the unemployment dragons hits anyone of them, how interested are they in what place in the international currency markets plays the role of the US $ against whatever currencies? None can look forward to being paid in Swiss Franks can they as a hedge play in their lives, whenever the US $ is in a decline mode, with their unemployment checks pluss everyone knows unemployment is a survival check; not extra resources creating risk capitalization towards speculations people here post about their lifes’ interests. Now that the unemployed have the time to read such posts as ours; instead of working, making good money pluss stimulating our economy with their overall spending habits, they can sit at home there wherever they live and eat cake along with our comments. In substitution for their stimulalting our economy through production, we posters can now sit it out allowing the Fed. to stimulate the markets with rising monetary aggregates which eventually we will need to pay out as debt repayments towards absolving the Feds.’ stimulas packages (bailouts or whatever). So, therefore, either way and no matter what, we should prepare ourselves to pay off the debts due us via this latest rally and beyound indefinitely and help/assist the Fed. to kill our overall economy encluding geting those unemployed boys/gals their entitlements $’s, so we can continue to increase the numbers who will sit at home reading our posts here, while they in ever increasing numbers consume larger volumes of more cake?
    What a great nation of cake eaters we’re becoming….huh?
    Perhaps by come queer action of chance we will never again need those unemployed guys/gals to help stimulate OUR economy, as they are from this point forward in time predestined to always and foever eat greater volumes of cake? Only the successful, professional speculators will be left over to stimulate our overall economic recovery? If that angle doesn’t pan out though; even they may be foreced someday too to eak cake with the rest of the unemployed?
    In the meantime, please pass the cake!!!

    Russ Smith, California

  • Ken

    Soros is not an American. He is Euro-trash posing as an American. A dangerous progressive that invests in “big-oil” while playing the “go-green” card.

    Stop enabling the hypocrites!

  • Michael

    Soros had the UK central bankers in his pocket when he drove the Pound into the ground. I was there and worked for a major NY bank when he did it. These guys are bright enough to pay off people. Take a look at the Galleon story, that is just the tip of the iceberg.

  • Amazed@stupidity

    Why has this mans funds not been frozen ? He is Helping in all kinds of ways to destroy America . Yes he has invested moneys to help pull off the frauds that got the fraud man sitting in as Potus
    Conspiracys for Corruptions of all kinds Charges and imprisonment should be the life for greedy ignorances of this kind !
    Why does he get to run as a free Man when he shoulfd be behind bars and the Goverments Should have his moneys for the People because they are the ones that have suffered from his illegal acts ! France, Now America Who all in between ?
    The Men like this one all need to be taken down and put in thier Proper places !
    Prisons for life for Treaon frauds conspiracies and many charges that would allow the Goverments the moneys were stolen from could help the People of thier own Countrys live a bit more at ease !

  • billybob

    Then don’t read it asshole!

  • anish poojara

    It is disheartening to read the comments so far. Even after the collapse of the great American Empire the intelligent US citizen (readers of this article as well as the commentrators)seem to be in some other world. Chinese might was created by Americans. Communism would have died out of hunger. But American greed and short sightedness has made China the number one nation in the world. Imagine closing down your own factories so that the Chinese are gainfully employed. Just so that you could save a few dollars on stuffed toys. Now all those who probably purchased those Chinese goods are jobless. Chinese Locks which sell in India for US$ 1/- are sold in US for US$ 10/-. The loot is split between the Chinese and importers like Walmart. The Waltons became rich out of sheer American stupidity.

    George Soros has done well for himself. Forget the timing. No one is right most of the times. One of the readers has commented that Soros can’t be the brain behing his fortune. In that case who is the brain? George W. Bush II.

    I pray for you Americans that you do not get a george W. Bush III.

    Anish Poojara, India

  • Paul

    So you’re the one who gets to say who’s a “real” American. If I were the president, I’d keep Soros and throw you out.

  • Paul

    hey billybob. Go bob your billy somewhere else!

  • Rudy Haugeneder

    Nature is likely to correct what the stock market assumes won’t occur — natural disasters such as those that devastated the Philippines during the past month that may soon hit North America: a repeat of Katrina but on a much larger scale and in many locations across the continent.
    Science has shown it happens regularly but is unable to specify when — other than warning that such a storm period lasting several years, is likely near.
    Although it is prudent to factor in such disasters when investing, we generally don’t because day-to-day financial roulette is too exciting and causes us to ignore how Nature . .