George Soros Philosophy of Trading

Summary

In this insightful interview, the speaker reflects on the challenges and comebacks in the financial world, particularly during the mid-90s. They discuss the importance of managing stress and leveraging profits over principal in investment strategies. The conversation also delves into macro investing, the significance of management in equity investments, and the current state of global capitalism, highlighting the potential instability due to the lack of a global security system and the United Nations' failure to maintain international order.

Takeaways

• 📈 The speaker discusses a comeback in investment performance during the mid-90s, highlighting the importance of context when evaluating performance over time.
• 🔢 The average performance over nearly two decades is mentioned as around thirty-five percent, but it's emphasized that this average is made up of years with varying returns, from as low as five percent to as high as one hundred percent.
• 🏆 The speaker acknowledges a strong performance in the early 90s, with a dip in 1994, and a challenging first half of 1995, indicating the cyclical nature of market success.
• 🤔 There is a reflection on the challenges faced during a rough patch, with the speaker admitting to not having the market right and the importance of getting the strategy to 'hang together' again.
• 💡 The speaker has a young team handling the work, which allows them to be immune to the stress of managing money, positioning themselves as a supportive coach rather than being directly on the line.
• 💼 The speaker emphasizes the importance of never risking the principal, and leveraging only when in a good position, which contributes to their strong track record.
• 🌍 The discussion of the 'Sterling crisis' reveals a high-reward, low-risk strategy that put the company's equity at risk but with a limited potential loss, leading to significant profits.
• 🧐 A change in investment philosophy is mentioned, with a shift towards focusing more on individual stocks to diversify risk, rather than solely on macroeconomic bets.
• 🏭 The speaker believes that the current era is one of high capitalism, where management is more attentive to shareholder interests, and identifying changes in management can be rewarding.
• 🌟 The speaker refers to the current period as a 'golden age of capitalism,' but expresses skepticism about its longevity due to perceived false foundations.
• 🕊️ The speaker discusses the need for an international security system, criticizing the failure of the United Nations at a time when it is most needed, and reflecting on America's role in global leadership.

Q & A

When did the individual's comeback in performance begin?

The comeback began during the early part of 1995, after a period of average performance and a particularly challenging first half of the year.

What is the average performance percentage mentioned in the script?

The average performance over a period of 26 years is stated to be around thirty-five percent.

How does the individual describe the variability in their performance over the years?

The performance is described as having years with returns as low as five percent or eight percent and other years with returns as high as sixty percent or one hundred percent.

What was the individual's strategy during the rough patch in the first half of the year?

The strategy involved retrenching when the market was down, ensuring not to risk the principal, and leveraging only when they were in a profitable position.

How does the individual feel about the stress of managing money?

The individual claims to be immune to the stress because they have a young team handling the work, and they act more as a coach than directly managing the money.

What was the individual's approach during the Sterling crisis?

During the Sterling crisis, the individual put their entire equity at risk, but the potential loss was limited to a small percentage due to the high-reward, low-risk nature of the bet.

What was the outcome of the Sterling crisis bet?

The individual made more than a billion dollars, but the potential loss was acceptable, estimated to be a few hundred million, which would have been a small percentage of their equity.

Did the individual change their philosophy about investing during the rough patch?

No, the individual did not change their overall philosophy about investing, but they did re-examine each of their positions and decided to focus more on individual stocks rather than just macro investing.

What is the individual's view on the current era of capitalism?

The individual views it as a golden age of capitalism, where the interests of shareholders are prioritized by management, leading to potential rewards for identifying companies with such attitudes.

What does the individual believe about the sustainability of the current golden age of capitalism?

The individual is skeptical about its sustainability, believing it is built on false foundations and comparing it to a similar period at the end of the last century that did not last.

What is the individual's opinion on the role of the United States and the United Nations in global stability?

The individual believes that the United States, as the sole superpower, is not the main beneficiary of the global trading system and cannot afford to be the world's policeman. They also express disappointment in the United Nations' failure, especially in situations like Bosnia, and argue that an international security system is needed.