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John,
Soros and Paul Tudor Jones are in fact not great traders, at least not in
any traditional sense of the word. Their risk-adjusted returns over the
last decade are inferior to buy and hold the S&P 500 cash index. Their
performance is also inferior to that of many mutual funds and CTAs.
Soros' British pound trade had nothing to do with "feel." Soros met with
the head of the Bundesbank who said that he would not defend other Euro
currencies (ie, the Bundesbank would not lower interest rates) if they were
attacked. Soros and the other elite traders at this meeting took this as
carte blanche to attack the weaker currencies and so they first took out the
lira and then they took out the pound. I know this because this is what
Soros writes in his book Soros on Soros. Barron's published a letter of
mine on this topic in their November 13, 1995 issue. I've reproduced it
below.
Cheers,
Michael de la Maza
Redfire Capital Management Group
Of Soros, Kings, Queens and Pawns
Barron's / November 13, 1995
Barron's is the latest publication to join the chorus line of sycophants
trumpeting the prowess of George Soros. Why is it that no one has sought to
dig beneath the fortune-cookie slogans that his admirers use to explain his
success?
Fortunately, his near pathological need to talk about himself provides us
with greater insight into his methods than his acolytes do. In Soros on
Soros, he writes that in 1992 he attended a "prestigious meeting" at which
the head of the Bundesbank, President Schlesinger, said that the Italian
lira was "not too sound," that "investors were making a mistake when they
thought of the ECU as a fixed basket of currencies" (emphasis mine) and that
he "would have preferred if [the ECU] were called the mark." Soros writes:
"I got the message." He proceeded to short the lira and then the pound,
reaping Brobgingnagnian profits on both positions.
"I got the message" is what lackeys says when their bosses tell them to
jump. Soros made a killing on the dismemberment of the ECU, not because he
possesses blinding insight into the financial markets, but because
Schlesinger told him that the Bundesbank wouldn't defend the weaker
currencies. Only on Wall Street would this fail to be recognized as the
morally repugnant and intellectually dishonest behavior that it is. The
brutal fact of the matter is that much of Soros's genius lies in his ability
to exploit the lax regulations that govern world financial markets, not in
his ability to divine the future, as his supporters would have us believe.
Michael de la Maza
Redfire Capital Management Group
-----Original Message-----
From: john anderson [mailto:johnarmit@xxxxxxxxxxx]
Sent: Tuesday, February 23, 1999 3:58 AM
To: omega-list@xxxxxxxxxx
Subject: Re Crap Gen - Response to felixty
Hi,
I agree that some outstanding traders (PTJ, Soros et al) make more
'structured' traders look a bit ordinary. Just as some people possess a
gift for varios things things such as sport, some men (eg Rupert Murdoch
and probably many great trades) have an acute ability to sense the will
of the people and make a ton of cash from it.
The problem is that such unstructured methods do little to advance
knowledge in any western empirical scientific way. Such 'feel' traders
(particularlt Soros during the GBP play) are not readily able to
quantify their science and learn empirically from mistakes. Had Soros
blown up during that, what lessons could truly have been taken from that
punt? Don't mess with a Central Bank again?
Academics can often only try to do things in a scientific way, so that
when things work they can be readily replicated, and when things bum
out, it can be used as a lesson to encourage the same mistakes to be
avoided. It all reminds me of a footer I once saw to a Professor of
econometrics' email...
"If we new what we were doing it wouldn't be called research"
Cheers...
John
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